Today I'm starting a new category on Appraisal Scoop called - Speak Up! I'll use this category to re-blog (with permission) the best of comments, forum posts, and "Letters To The Editor" that I find. If you come across (or have written) a particularly newsworthy story, please drop me a note at [email protected]
The first post in this series is by Linda Morgenroth or Alliance Appraisals on Ken Harney's LA Times article Fannie Mae and Freddie Mac's new rules are raising appraisal costs, critics say on 5/17/09
I enjoyed Mr. Harney's well-written article. I only wish he had an appraiser respond to Mr. Kuegler's comment that the appraiser can make up the AMC fee cut through "a steady stream of work, training and support."
"As to appraisers' complaints about fees, Kuegler said, his firm offers them "the ability to have a steady stream of work, training and support." In other words, appraisers can expect to make up in overall volume what they're sacrificing per assignment. "
My response would be:
A) What if you already had all of the volume you could possibly handle at full fees prior to the HVCC? How then does the appraiser benefit from the fee cut?
B) Exactly what kind of training do they purport to provide, given the myriad of classes, CE, exams and supervision already mandated? Does it actually have value to the appraiser in the marketplace or is it self-serving to benefit the AMC? Or perhaps he means their appraisers require training because the appraisers they can attract with the typical AMC fee schedule are completely inexperienced?
C) I would like Mr. Kuegler to elaborate on the "support" his company provides. I suspect their definition of support actually has more to do with emailing the appraiser twice a day asking: "Has it been inspected? We need the report asap. It's been 48 hours since we ordered it. Tardy reports will result in termination of your services." Or perhaps they offer helpful suggestions about how you can greatly increase the volume of work they will send you if you will lower your fees down to $175 or $200. That is akin to suggesting to GM that they could solve their financial woes if only they cut the price of each automobile by 50%.
I don't know the actual answers to these questions as I am not willing to contract with a low-paying AMC to find out. I didn't spend four years at Northwestern University and many more building a successful, ethical appraisal practice to be suddenly become the de facto employee of an AMC. I have chosen instead to tailor my business plan to clients not affected by the HVCC. Additionally, I work with lenders who have chosen to create HVCC-compliant departments to coordinate their appraisals. These lenders have created a carefully selected panel of appraisers assigned by a department not compensated for loan production. They generally ask for reasonable turn times of 5-7 days and pay the appraisers standard full fees.
As referenced in your excellent article, the most qualified, best-educated, most experienced appraisers will not be the ones willing to accept the cut-rate fees, 48-hour turn-around times and net 30 payment terms offered by the as-yet unregulated AMCs. More likely than not, it will spawn appraiser "trainee mills" run by unscrupulous appraisers. They send trainee appraisers out to inspect the property and write the report (passing themselves off as the licensed appraiser, even sometimes wearing the appraiser's name tag). The licensed appraiser then reviews and signs the report, fraudulently asserting that they personally inspected the property. This type of fraud was rampant during the last boom and will very likely become common again in this AMC scenario.
Appraiser independence is crucial. However, how can we expect to achieve this by handing the power over to AMC's often wholly-owned by the banks who will benefit financially by the loan closing successfully. Aren't we just creating a new source of pressure on appraisers? Doesn't this sound more than vaguely similar to the Wamu-EAppraiseIt scandal that prompted Mr. Cuomo's initial investigation?
The increased hit to the consumer's wallet, the decrease in quality of mortgage appraisals and the delayed recovery of the real estate industry are the three biggest unintended casualties of this ill-advised plan. The harm caused to tens of thousands of small appraisal firms is additional collateral damage that remains unaddressed.
Best regards,
Linda Morgenroth, Alliance Appraisals
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