Along with new oversight of the reverse mortgage industry, passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R. 4173) brings new appraisal independence requirements and grant funding for state oversight and enforcement of the regulations.
“This bill will mean good news for consumers because they should see more reliable home appraisals,” said Leslie Sellers, President of the Appraisal Institute. “It will encourage the use of highly trained and competent real estate appraisers and will provide much-needed resources for oversight and enforcement.”
H.R. 4173 creates the Bureau of Consumer Financial Protection and is charged with drafting new regulations that define acts or practices that violate the bill’s appraisal independence requirements. The regulations are to be drafted within 90 days of President Obama signing the bill and will supersede the Home Valuation Code of Conduct (HVCC) rules adopted by Fannie Mae and Freddie Mac in 2009.
Under the new law, Appraisal Management Companies (AMC) must register with state agencies and stipulate that both lenders and AMCs pay “reasonable and customary” fees to appraisers. Lenders must establish what’s reasonable and customary by citing objective third-party information, such as government agency fee schedules, academic studies, and independent private-sector surveys. But fee studies can’t include assignments ordered by AMCs.
Mortgage brokers complain the growth of appraisal management companies has increased the costs of appraisals, while individual appraisers say they’re being paid less since the HVCC was implemented. According to the bill, reasonable and customary fees will reflect what the appraiser would typically be paid for the assignment absent the involvement of an AMC.
“We encourage AMCs to justify the legitimate services they are providing to lenders by charging for those services, rather than penalizing highly trained and competent appraisers, whom they should be seeking to do business with,” said Sellers.
The new law may help with the quality of appraisals, but the use of AMCs in the reverse mortgage industry is here to stay unless the Federal Housing Administration changes its policy. According to FHA guidelines, mortgage brokers and commission based lender staff are prohibited from ordering appraisals, but they are not required to use AMC’s or other third party providers.
However, since FHA requires lenders take responsibility to assure appraiser independence, the use of AMCs throughout the reverse mortgage industry is common practice and odds are will not be changing.
In a letter to clients, the law firm K&L Gates said it best, “While the HVCC may be fading into the sunset, don’t expect the same fate for AMCs, AVMs, and BPOs.”
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This is a good move in some ways. It does not solve the problem completely. The question I have, which I do not see completely addressed, is? Will appraisal fees increase to the borrower. We know the appraisers must be paid a reasonable fee and should not be penalized. However, will the the increase fee to the appraiser be passed on to the borrower and industry.rnrnThis is one area that needs to be addressed in a form of a mandate, not a suggestion to hold fees to the industry reasonable, it needs to be stated the increase will not be passed on!rnrnthank you,rnrnJohn A. Smaldone
The appraisal process is now just a fee generator…..quality reports are incidental to the process of taking the customer’s money.
Well, I am still not impressed, it may be a start but the end may wind up being the start?rnrnJohn A. Smaldone
This is such a shame. The use of AMCs benefits nobody but the AMC. It hurts lenders, brokers, borrowers, appraisers, and the economy as a whole. AMCs are destroying us.
Bring back comp searches!
Who knows how this will end up, but ending HVCC is a great start. What a complete disaster!
Who knows how this will end up, but ending HVCC is a great start. What a complete disaster!
Bring back comp searches!
This is such a shame. The use of AMCs benefits nobody but the AMC. It hurts lenders, brokers, borrowers, appraisers, and the economy as a whole. AMCs are destroying us.
Well, I am still not impressed, it may be a start but the end may wind up being the start?
John A. Smaldone
The appraisal process is now just a fee generator…..quality reports are incidental to the process of taking the customer's money.
The appraisal process is now just a fee generator…..quality reports are incidental to the process of taking the customer’s money.
This is a good move in some ways. It does not solve the problem completely. The question I have, which I do not see completely addressed, is? Will appraisal fees increase to the borrower. We know the appraisers must be paid a reasonable fee and should not be penalized. However, will the the increase fee to the appraiser be passed on to the borrower and industry.rnrnThis is one area that needs to be addressed in a form of a mandate, not a suggestion to hold fees to the industry reasonable, it needs to be stated the increase will not be passed on!rnrnthank you,rnrnJohn A. Smaldone