An optimistic pessimist, or a pessimistic optimist?
I’m not sure which I really am, although I tend to lean in the optimistic direction whenever possible. This relates to the brand new, hot off the presses after a year+ of vigorous debate, Dodd-Frank financial recovery bill just signed by President Obama. This bill (now a law) has a major section devoted to appraisers and appraisals, our pay for service, but not appraisal ordering. Bear with me – I’ll get to those points in a moment.
Is this new bill really anything different than what transpired in the past? Actually, not really. I’m a relative greenhorn in this business, having entered in 2001 with the help of my outstanding mentor. So I was not around the biz in the late 80’s when, in 1989, during the Savings and Loan Crisis FIRREA was enacted in much the same way the Dodd-Frank bill was done. Crisis’s always lead Congress to ‘do something.’
I enjoy talking with ‘more ancient’ appraisers who help me understand the history of things. Today Woody dropped a kernel into my noggin, which I confirmed by research. Guess what folks … FIRREA actually mandated what the too often maligned HVCC enforced, 20 years later. A key provision of FIRREA was that no person connected to loan production, i.e., the loan officers, would be permitted to directly order an appraisal from their favorite appraiser. What does the HVCC say? Read that preceding sentence again … the one about loan officers.
So what happened? Simply put: lack of enforcement of FIRREA, regulated banks getting out of the direct mortgage lending and appraisal ordering business, abdication of loan production regulation to non-bank personnel, and a breakdown of ethics through all facets of the mortgage lending industry. So in reality, the HVCC was the giant enforcer many years after FIRREA was enacted. It took a second national and worldwide crisis to enforce provisions mandated during the first crisis.
That brings us current, 21 years after FIRREA and 14 months after the HVCC, with the ‘new bill’ that is supposedly going to make our life better. Optimist? Pessimist? I wish I could say for sure!
Pay for service: the bill says appraisers should be paid ‘usual and customary’ fees for appraisal service. There is much gnashing of teeth over this provision. AMC’s say (and may initially demand) that the “U&C” fee is what they offer to pay, not what you desire to charge. Some appraisers buy into that argument. Most skilled appraisers know that AMC fees paid are generally not fair compared to the amount of work involved to produce a quality report, especially for appraisers working in small urban, or suburban and rural areas.
The bill also says that the “U&C” fee cannot be mandated by what the AMC chooses to pay, but must be determined by independent surveys or fee tables from governmental agencies. But the rub is this: if you are a ‘contracted’ vendor independent appraiser working for an AMC with a fee table you have agreed to, you may be stuck. It may take a few court cases to get this resolved, and the AMC’s will fight hard against appraisers.
If you’re not ‘contracted’ and the one-hit-wonder AMC calls out of the blue to ask about ‘fee and turn time’, stand your ground with the fee you charge. The more appraisers do this, the better we all will be paid for the complex work we do.
What’s a “U&C” fee in your area? Most appraisers seem to agree that it would be what would be charged for a non-complex, non-FHA, non-VA, non-AMC full appraisal assignment that you would request from a local bank, attorney, CPA, private homeowner, etc. Per ‘the bill’ you can consult a independent fee survey for your state and county, like the one produced by alamode software company, or utilize the VA fee table for your area – although that governmental agency has more rigorous reporting requirements than typical mortgage lending assignments, so their fees are higher in some areas.
Talk to your neighbor appraisers – one on one. C’mon folks, quit being so independent from and against each other. Your peers are actually pretty nice people. Pick up the phone. Meet for breakfast or lunch, or a brewski. Join a national or state association. One on one chats about fees are perfectly fine. Find out, and share, the ‘floor’ amount that seems reasonable for your area. But when three or more of us are in a room together, ‘the weather’ might be a more appropriate topic to avoid potential accusations of price fixing or collusion. In time the word will get around. And the optimistic part of my noggin says that ultimately the AMC fee issue will be resolved in our favor.
Appraisal ordering: ‘the bill’ does not have any mention of how appraisals will be ordered. That is left up to the regulators who are right now drafting the new interim regulations that will be implemented within 90 days of the bill’s effective date on 7/21/2010. At first I was optimistic that we as an industry might be able to lobby the regulators to allow highly regulated ordering direct from the loan officers. Personally, I’d still like to see that so that the prior business (commerce) relationships could resume. But the pessimistic side of the gray matter is seeing how FIRREA and the HVCC prohibitions about this may continue unless we as an industry lobby to allow regulated ordering procedures.
It is my contention that with the new LO national licensing requirements, the infraction reporting procedures built into ‘the bill’, the ability to track appraisers and LO’s connected to the loan via the soon to be implemented MISMO function, and the heightened awareness and bill wording about appraiser independence, then direct relationships can be resumed.
You can help this happen by being an optimist about a pesky pessimistic situation. Send your comments about this to the regulators today.
And let’s be optimistic that the ‘new bill’ will be better enforced than FIRREA. Maybe prior history will actually teach us something. Wait…that sounds too pessimistic!
Mount Vernon, WA