"In the first part of this article, I brought forward some questions and opinions regarding AMCs. In this, the final part, we get into some bigger questions and I ask for some help from good ole Uncle Sam" - Woody Fincham
Money Driven, Ethics be Damned
A
MCs don’t allow appraisers to charge their own established fees; they force them to reduce them so the AMCs can add their fees on top of the appraiser’s fee. In order to keep the report price attractive the only give they can get is from the appraiser. Why should the appraisers pay for the services the lender needs? Just considering the cost of petrol appreciation over the last 5 years, the cost of appraisal services should be going up as well, but here we are needing specially trained, college educated, licensed professionals, but the exact opposite is happening.
The training, continuing education expense, and time needed to properly do appraisals (not to mention the overhead to run the business part of it) requires professionals that do this full time and are career minded people. The day of the person who saw opportunity in the housing boom to do something to make more money is gone. The country needs better appraisers than that, we need long term professionals that appraise because it’s in their blood, not to pad the wallet.
"You have to also look very closely at this important fact: AMCs are not regulated on any level by the States or the Federal Government. They are offering a solution that will give the lender what they want, but without much cost, if any, to the lender."
The volume of work that a large lender like Countrywide, Wells Fargo and other big lenders have really offsets fair market competition. Considering the sheer volume of work each of these companies need a month, they go out into the real world where appraisers are small business (most of the time they have less than 4 people in the company) and talk them down on their prices. I read a report the other day that stated 3 out of 4 jobs are because of small businesses. I guess its ok for overly paid executives at these large AMCs, and the lenders that higher them, to ruin an industry so long as it suits their needs. I have spoken with my Congressman, Randy Forbes, and I am still waiting on the man to get back to me. Congress doesn’t care about this specifically; they are too removed from the issues to see how it all works. (All I can do is to refuse to vote for the man, and refuse I will on every position he ever runs for.)
They are using the volume carrot to attract appraisers. For a well respected appraiser who is designated and having been in business for a decade or two to accept this kind of work is almost comical. Many established firms will simply decline the ridiculous fee amounts, and can afford to do so because they have plenty of other work to do. So that leaves the AMCs to troll for the appraisers that are not well established. Being established does not make one appraiser more ethical than another one, but when you have so many new people to the industry, shouldn’t the quality of the work be the primary concern for these companies?
What’s worse than negotiating down an appraiser, is that when a lender first goes on board with an AMC, the AMC often times will not give the appraiser any choice. The mentality is simply to completely disregard the ethical relationship the lender had with a competent appraiser and tell them you will either accept the new fee or else you will be removed from use for the lender. Here are a few examples:
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