With Appraisal Fee Uncertainties, Lender Tensions Rise

An American Banker article addresses rising tensions between mortgage lenders and home appraisers in light of new regulation under Dodd-Frank.

With lenders being required to pay customary and reasonable fees under the new regulation, the article states, appraisers and appraisal management companies are now saying lenders have lowered their fees and are demanding more work for the same pay.

“The lender wants more and more things in the appraisal for the same price,” Thomas Kirchmeyer, president of Kirchmeyer & Associates Inc., told American Banker. The article cites an example of increased scope of work in some lenders asking for the appraisal to be based on two current or pending listings in addition to three comparable sales.


Interim federal guidance allows a bank to look at the fees it has been paid in the past year to determine what is “customary and reasonable,” American Banker writes, so many banks have been holding their fees steady.

While in the past, AMCs have taken a piece of the fees for the appraisals they managed, several banks today are operating under a new model that separates the AMC fees from the appraisal fees, according to the article. That includes some having capped the AMC fees at $125.

Another way lenders are determining fees that are “customary and reasonable” is by consulting a third-party market survey that does not include AMC fees.

Some appraisers and some AMCs, on the flip side, have interpreted the rule as prohibiting the use of AMC fees as the basis for determining what is “customary and reasonable,” the article says.

Lender concerns are rising over the Dodd-Frank imposed civil penalties of $10,000 per day for appraisal independence violations (with subsequent offenses costing violators $20,000 per day), with so many questions outstanding.

“The problem is, there is no standard of what an appraisal is, what is customary and reasonable and what the lender should pay an AMC,” Joanna Conde, president of the Arizona Association of Real Estate Appraisers, told American Banker.

Read the American Banker article.

Written by Elizabeth Ecker

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  • If the mortgage industry were a person it would diagnosed as a paranoid schizophrenic. Without guidance from the feds on the interpretation and implementation of the new laws and regulations nothing will change. The language in much of the Dodd-Frank legislation is so ambiguous that lenders are erroring on the side of caution with more stringent overlays than originally called for.  The appraisal debacle is the epitome of what is happening in all of the mortgage industry. Dodd-Frank calls for pay that is customary and reasonable under the new regulation for appraisers and my favorite piece of legislation aimed at loan officers, “The Ability to Pay”.  What does all of this mean? The problem is no one is really sure and the feds aren’t telling leaving the mortgage industry guessing. As you can see from the appraisal debacle this is not a good solution.
    The feds need to take the bull by the horn and provide the guidance the mortgage industry so desperately needs. If they do not the lenders will be forced to continue making loans even more restrictive to protect themselves and everyone in Washington will be scratching their heads wondering why the housing industry is still in the tank.

  • I grumbled that HVCC made the same appraisal that we had formerly negotiated with trusted appraisers for $350 would now cost more because we had a new middleman inserted in the process by fiat from the NY Attorney General and subsequently HUD. And “Yes”, there are some incompetent price-driven AMCs that should be driven out of the business ASAP because only the most desperate appraisers who can’t get work elsewhere will agree to work for their lower post-HVCC payments that they force. The result is substandard work, numerous appraisal-related underwriting conditions, and unhappy borrowers, LO, processors, and lenders. 

    I have also come to appreciate the professional AMCs who provide some welcome standardization of the process, centralized communication, documentation of compliance, access to under-served geographic areas, and great service. Especially for multi-state originators or larger one-state operations, a good AMC is a highly valued 3rd party vendor.

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