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Comment on Financial Reform Implementation


September 11, 2010

I’m a Certified Residential Real Estate Appraiser with 9.5 years experience. Please see that the Bureau considers these suggestions in the writing of the new Interim Final Regulations for the Dodd-Frank Law:

Appraiser Independence -
I fully believe appraisers need to be free to do our work without being influenced by anyone with a financial interest in the property. At the same time, we are the only profession hamstrung by being unable to work directly with some clients. With the new licensing of mortgage brokers and loan officers, it will be easy to track all parties connected to a mortgage loan. MB’s and LO’s should be required to sign an Ethics Statement on the appraisal order at the time of ordering an appraisal directly from the appraiser that they have not in any way influenced the appraiser in establishing or pre-setting a particular appraised value to make the loan. This statement should be similar to the Ethics provisions in USPAP that appraisers are bound to uphold. A Violations Reporting Agency should be immediately implemented in the Interim Final Regulations, and MB’s/LO’s should be told that they will be reported immediately if any attempt to coerce the appraiser is apparent at any point in the appraisal report process.

The above should also apply to any entity who acts as an appraiser management or assignment placement service on behalf of any lender.

AMC issues -
It is my contention, based on years of experience of AMC vendor work, that most AMC’s are in violation of RESPA because they have been paying their own overhead out of what normally would be paid to the appraiser by the Lender that the AMC is working for. Even now, after the implementation of the Dodd-Frank law on July 22, 2010, AMC’s are still dictating the fee they will pay to the appraiser, instead of allowing the appraiser to state and negotiate an acceptable fee based on the property characteristics and complexity. The practice of ‘stealing’ a portion of the appraiser’s customary and reasonable fee by AMC’s has to end immediately. If the lenders are going to use an AMC for appraiser management, then the lender must compensate the AMC directly, and this needs to be incorporated into the Interim Final Regulations. AMC’s are also adding report requirements that the lenders themselves don’t have as policy, and when the AMC does this there seldom is any additional fee paid for the extra ‘required’ work. That’s like forcing an employee to work overtime without compensation—a clear violation of labor law. The lender should be the one to establish appraisal requirements supplemental to FannieMae and FreddieMac, not AMC’s because AMC’s do not underwrite the loan.

There is a pervasive tendency for AMC’s to only provide assignments to the lowest fee appraisers, and require very short report completion turn times. Both of these aspects compromise the integrity of the appraisal process in that minimal quality reports are being done at a time when we need well documented appraisal reports. Cheap and Fast cannot be tolerated as acceptable appraisal policy. Many appraisers are cutting corners in their reports as a result of lender and AMC low fee and speed requirements. This has the tendency to devalue the appraisal process which should be done by experienced and competent appraisers who produce quality reports.

The Interim Final Regulations should address adequate report completion time, determined by the appraiser.

C&R Fees -
There presently is a giant misunderstanding about the Dodd-Frank law and appraiser fees.

Nowhere in the law does it state that Customary and Reasonable fees charged by appraisers have to be delayed for 90 days. The 90 day window applies to appraiser independence regulations only. Appraisers have always been able to charge appropriate fees for their service. Those fees are well known among appraisers in every geographic region in the US. Most local lenders and even national banks are aware of what most appraisers charge for non-complex property appraisal assignments.

Only with the extraordinary increase in AMC’s has this become a major issue. The AMC’s have been given the C&R fee the lender would normally pay directly to the appraiser, but the AMC’s have stripped out egregious amounts before the appraiser is compensated. AMC’s are third-party providers to the lenders, and thus are covered under the RESPA law which prevents siphoning of appraiser fees to pay appraisal ordering overhead expenses.

Despite the distortions of these facts by TAVMA, a trade organization representing AMC’s, there is an existing national independent fee survey available to anyone for FREE, and VA also has their own fee tables for different states. Other independent surveys are being promoted by several other entities involved with appraisers, but these do not presently have the validity the other independent fee survey and VA fee tables demonstrate.

Appraisers around the country are attempting to comply with the Dodd-Frank law by raising their fees back up to what would normally be Customary and Reasonable. But appraiser’s primary clients, in the case of AMC’s, are resisting this effort and in many cases are beginning to blacklist appraisers who attempt to be fairly paid.

A governmental agency or AMC should not determine what appraisers should be paid; that’s the appraiser’s responsibility based on the appraiser’s own circumstances and property characteristics.

The Interim Final Regulations should mandate that the appraiser establish Customary and Reasonable Fees for various appraisal services, and those fees should be honored by the AMC’s.

The Regulations should also state that the lender must compensate the AMC for their services, not the appraiser who is hired to complete the appraisal assignment.

Dave Towne
Washington State




Last Updated 9/23/2010 FinReformComments@fdic.gov