The following is a letter sent to the Legislature here in CO wherein a debate is on-going as to the regulation of AMC's. This does not address solutions at this time but rather merely provides some reasons.
Being a conservative republican, it is with great remorse that I feel additional regulation may be in order with respect to AMC's. The market should self-adjust to find the sweet point of balance with respect to quality of appraisal, competency of appraiser, reasonable turn times, and, an appropriate fee for the provision of these.
However, letting the market adjust itself will simply not happen when the appraisal ordering market has been skewed by the great white elephant - the AMC's. Appraisers individually simply are being bullied into low fees and fast turn times that are not market driven but rather are the result of "Economic Coercion" whereby the choice is do it quick and cheap or go out of business.
The need for regulation is a counter measure of too much regulatory interference already - a re-leveling of the playing field so that quality appraisers can do a quality job for a reasonable fee - without economic coercion.
A comment on fees in general is necessary also. The HVCC as well as current FNMA and Freddy Mac rules lay some guidelines and rules on the backs of lenders. The fees to administrate and provide for observance of those rules should then be borne by those for whom they are meant -- and that is NOT the appraisal profession. We are forced to provide for their administration and ordering AS WELL AS being an integral part of their profit generating machine. AMC's in general are not necessarily the thorn so much as is the resulting skewing of the market to further their profit maximization. Once again, profit is good but stealing from the appraiser for providing what is mandated of the lender is simply not acceptable and needs to be changed.
I work mostly for regional sized banks with internal ordering departments. These banks know the benefits of the good appraiser and are willing to pay a full fee which is a reasonable return on cost for them. I also work for a variety of AMC's at what I consider to be the bottom of my price range for preparing an appraisal. I lose many many jobs from many AMC's who want to pay only a stipend to maximize their profit line as they are locked into regional and/or national appraisal prices and cannot bend without cutting their profit. They then find an economically strapped appraiser who will go anywhere and do anything for that small stipend, quality and/or competency be damned. Not all of these "bottom-feeders" are incompetent but the point is that the only relevent parameters of the AMC's search for an appraiser is 1) Fee and 2) turn-time. And the consumer didn't save a dime. He just gave half of the fee he thought was going to an appraiser to an AMC. Sort of like giving your hard earned money to a charity only to find out 90% of it went to salaries for "adminstrative costs". The consumer's money is gone either way but the feeling it was wasted does not go away.
I also work for some AMC's who are merely facilitators of the appraisal process and to these entities I say thanks - but with appropriate reservations of course. These AMC's find appraisers of good quality and turn times and pay close to full appraisal fee. The difference is that they then charge the lender a stipend of say $50 over and above to cover their costs and profit. This seems reasonable. Whether they pass this along to the consumer is a business decision on their part but it was their fee to pay to begin with and NOT that of the appraiser. This business model seems to work in my opinion.
Having set appraisal fees that don't bounce all over is important too, especially in light of the new GFE requirements which allow for only a 10% variance on the appraisal fee. So having good quality appraisers that know how to analyze their OWN market (geographic competency) is important to help stabilize the likely appraisal fee necessary to match the GFE requirements of those taking the consumer's application.
Thank you for your ear and hopefully we can bring this back to a position where market can once again dictate the fees, appraiser, appraisal quality, turn time, etc.
Gary W. GranthamCertified General AppraiserCañon City, CO
Well - what has 2008 brought us all? I'm almost scared to look back as when I do, I see a huge void where much of my retirement account was. I see the nation realizing the cold hard truths about mortgage and appraisal fraud that so many of us harped about since 2005. I see business models change as appraisers scramble for fewer assignments.
But out of all of this, I see an upward movement in appraiser competence as well as the efforts put into providing more thought out reports. This is a good thing. Sort of the appraiser equivalent to "Scared Straight". We have lost some appraisers to the economic downturn - both good and bad ones.
Here's to the good appraisers we lost - may your new year find a new career that leads you to where you hope to go. As to the bad appraisers that lost their jobs, good riddance. The profession is happy to see you go.
With the new yeear coming closer, will the HVCC take effect? Will it's threat and scare cause essentially the same thing? Wells Fargo is demanding that all brokers use 1 of 4 AMC's or they will not buy/underwrite the loan. That is complete garbage. They're using this as an exuse to force more appraisers into their little web which lowers appraisal fees, raises their profits and utimately lowers appraisal independance due simply to economic extorsion. Only those appraisers willing to be bullied will work for them. Is this who we want to do the appraisals out there? NOOOOO.
As a disclaimer, some appraisers go through AMC's at low fees but do a good job. They are the minority. they are NOT of whom I refer.
God help the indipendant ethical appraiser.
I can't believe the monster e-appraiseIT is sueing Pam Crowley for he mortgage fraud web site. Click on this link to go to a good blog post on this. All appraisers need to be on top of this.
Interesting move on the part of Ohio to sue these real estate entities. Check out this link.
This is just to bring to light the fact that friends are still going over-seas for their country. A good friend of mine is doing just that - leaves on the 13th of April. Here's to his safety.
Ok, here is my newest venture. Blogging has now come to GranthamAppraisal.net and will be awaiting your many responses.