AUTHOR: Jeff Schurman is the executive director of Leading Causes LLC ( www.leadingcauses.com ), a leadership and business development advisory firm that helps mortgage lenders and third-party service providers to assess strategic, operations, reputation, reporting, and compliance risks that accompany sourcing of real estate mortgage settlement services. He is the editor of the Mortgage Third Party Risk Blog (www.mortgagethirdpartyriskblog.com ), and the former executive director of the Title Appraisal Vendor Management Association.
From Jeff Schurman's white paper: Download The AMC Full-Fee Hypothesis - Jeff Schurman
"In this section, we propose that there are at least 20 self-serving benefits to the AMC industry by paying appraisers their full-retail fees. We rely extensively on research we and others have conducted, our extensive combined interactions with appraisers and AMC industry leaders, and basic economic principles, chief among them supply and demand. Most of our observations are grounded in free market behaviors among buyers and sellers of settlement services. Significantly, much of the rationale is grounded in the discipline generally known as systems thinking."
Paying appraisers their full (or retail) fees…
1. Removes the single-largest barrier to acceptance of AMC as legitimate business partners.
2. Increases the supply of appraisers willing to work with AMCs.
3. Encourages new appraisers to enter the appraisal profession.
4. Leads to better control of appraisal quality.
5. Lowers costs for recruiting, quality control, and rework.
6. Enables AMCs to gain market share.
7. Provides AMCs rationale to charge lenders for the actual value the AMC brings to the transaction.
8. Enables AMCs to provide clients quantifiable means with which to compare AMC alternatives.
9. Reduces third-party risks described in numerous FFIEC Financial Institution Letters and agency guidelines.
10. Promotes less contentious treatment of AMCs.
11. Takes the subjective “customary and reasonable” fee requirement in the Dodd-Frank bill off the table.
12. Paves the way for nationalizing AMC regulation.
13. Provides clients better overall service quality.
14. Preempts external efforts of factions to force AMCs to pay up.
15. Is the most ethical thing to do in a fair and equitable society.
16. Allows for significantly improved vendor relations between the AMC and the appraiser.
17. Reduces the risk that disgruntled appraisers will draw the attention of federal regulators.
18. Provides joint marketing opportunities because appraisers will see the AMC as worth promoting.
19. Opens the door to a better borrower experience because the appraiser doesn’t enter the home angry.
20. Opens the door for joint publicity efforts because appraisers will feel like partners.