I wanted to give everyone a little update on what happened at the last appraiser lunch with the AMC regulation topic on the table. About 10 people showed up out of the 75 or so people on my email list. Hopefully there are more people than that interested in what will happen with AMC regulation. Debbie Conrad, the appraiser advocate from the realtors association joined us. She is the one that was working with the Wisconsin Coalition of Appraisers and has been attending all of the state appraiser meetings. Since there are so few appraisers in the state, we will need the help of WRA to get good changes into law. Without appraiser input into the topic, we will again be regulated by people who really know nothing about the appraisal process or the issues that have been destroying our profession. According to Debbie, the AMC’s have already sent some lobbyists to the state and one way or another AMC regulation is going to happen. The question of whether or not we need AMC regulation or not may not be an option. Do you want it to be influenced by appraisers or AMC’s?
The WCA had adopted the Appraisal Institutes draft of AMC regulation, which is what Debbie has been working with. The draft is attached to this email thanks to Jim Coutts, who sent me a copy and brought a copy to lunch. The Policy Advisor for the DSPS, Jeffrey Grothman, who is just starting to research the topic to advise the state on how to proceed with legislation, is also using it as a basis for AMC regulation research. I think the federal AMC regulations will also have an influence. Debbie is interested in finding out what appraisers think about the draft and what other things should be in it. We talked about creating a survey to send to appraisers to find out what is important to them. I know everyone is busy right now but I would like everyone to read through the draft and let me know what other things we should try to include in it. Send this email to any other appraisers or legislators that you may know. Your input is important to help shape legislation that will help our appraisal industry thrive. I have also included numerous links below incase some one has more interest in reading about AMC’s and regulation.
I went through it and the following are some items for review that I thought could use more work to help us out they are at the end of the email. Can you think or anything else that needs to be addressed?
Send me your input for a survey to be sent to all appraisers
A few other things that I would like to be added are:
The elimination of a 48 hour turn around time by AMC’s, which reduces the quality of an appraisal.
Broadcast Emails looking for the cheapest appraiser, which is in search of the least qualified appraiser.
Canned engagement letters longer than 2 pages that are a trap to get an appraiser to do more work than is normal for less pay.
Multiple background checks required by AMC’s.
Unpaid Scope Creep.
Properly training AMC employees with required education similar to USPAP as well as USPAP training if they are not appraisers.
The Real Estate Appraisers Board meeting is scheduled for Thursday May 5th at 9:30 am in room 121A. The following is a list of the board members. If you know any of the members, give them your input. The agenda has not been published, but here may be an opportunity for public comments. Plan to attend. The agenda page link is http://dsps.wi.gov/Boards-Councils/Board-Pages/Real-Estate-Appraisers-Board-Main-Page/
DSPS Real Estate Appraisers Board-Roster
||Board Member Type
||Certified General Appraiser Member
|Clementi, Carl N.
||Licensed Appraiser Member
|Miner, Steven A.
|Coates, Jennifer M.
||Certified General Appraiser Member
|Simon, Henry F.
|* Board members whose terms have expired may continue to serve until their successor is confirmed by the Senate.
Definitions 2-2, 2-5, The Draft includes definitions of items, which may need more clarification, particularly in reference to the difference between an AMC and an appraisal firm. I know there has been some debate on the difference.
Exemptions to AMC regulations
A6 states that an appraisal management company that is owned or controlled by a financial institution is exempt from state regulation. I think that Lender owned AMC are the worst and should be made to abide by our laws.
Registration B11 requires an “Irrevocable Uniform Consent to Service of Process”. I think that a definition of that may be required.
Appraiser Competency 12
There is a requirement that before assigning an appraisal assignment to an appraiser the AMC has to verify that the appraiser is competent to do the appraisal. Since an appraiser is required to be competent or disclose incompetency under USPAP, it would seem that this requirement may be beyond the AMC’s knowledge and should be worded to say that they will not assign an order to an appraiser who is known to be incompetent without informing the client who has to agree to it. That leaves room for the appraiser to become competent, as per USPAP.
Appraisal Review 13
I think this needs some elaboration on what constitutes a review. I think that if some one is calling for more comparables to bracket items or for any other reason, they should meet the criteria for a review appraiser. If they are doing anything other than checking spelling or names, they should be qualified to analyze an appraisal. It has been my experience that the check box monkeys that are reviewing our appraisals and sending lengthy revision requests from AMC’s rarely have the experience to know a good appraisal when they see one and are not qualified to review our appraisals. Having appraisals reviewed by real appraisers would also help the appraisal industry by providing jobs for appraisers.
Record Keeping 16
I think that each individual record should also be made available, upon request, to the appraiser that completed the report.
Compensation of Appraisers 17
This is the most important part of any appraisal related legislation and there needs to be more information on what constitutes a reasonable fee, otherwise the AMC will just pay what they are used to paying. I think this should also address scope creep with lengthy time consuming revision requests, which many AMC’s tack on after the appraisal is completed and are rarely paid for.
Statement of Fees 18
This section requires the AMC to separate the fee paid to the appraiser and charged by the AMC, when charging the client. It allows the appraiser to show the appraisal fee on the appraisal. This is a good disclosure as it adds transparency to the borrower, who is paying for the appraisal, what exactly they are paying for. I think that the AMC should be required to show their fee with the appraisal they submit, though the lender may not include it, since the new TRID rules did not require the separation on the closing documents.
Surety Bonds 19
This requires the AMC to have a bond that can pay up to 150% of there previous year billings. This sounds sufficient to cover debts to appraisers, when an AMC folds. A little more info on how an appraiser would collect on that debt would be good. You have to collect your money with in 1 year of when the AMC does not pay.
Prohibited Practices 20
1 Says that the AMC may not cause or attempt to cause the results of the performance of an appraisal service to be based on any factor other than the independent judgment of the appraiser. From my experience almost every revision request from an AMC violates this portion and there needs to be a more detailed description of what an AMC can ask for without causing the appraisal service to be based on any factor other than the independent judgment of the appraiser.
5 talks about predetermined valuations including providing comparables before the completion of an appraisal. I think This should also include providing comparables after completion of the appraisal and requesting that sale prices be bracketed, which is a common practice of AMC’s.
18 B does not prohibit an AMC from charging an appraiser for the cost of discretionary services provided to the appraiser. I don’t know what service an AMC is going to provide an appraiser, but they do want us to pay their technology fees, which we do not need to deliver an appraisal. I think they should be prohibited from charging us to send them an appraisal. They should pay their own costs.
Mandatory Reporting Requirement 21
Requires an AMC to report an appraiser to the board if they think that they may have made a USPAP violation. I do not think that this should be a requirement. It should be at the AMC’s discretion. Our numbers are already limited and everyone makes an occasional mistake or may omit a new USPAP requirement if they have not taken a USPAP class to learn it.
How did AMC’s mess things up?
In 2009 the Home Valuation Code of Conduct and in 2011 the Dodd Frank Act effectively turned over the Appraisal Industry to AMC’s by requiring a firewall between Appraisers and those benefitting from the appraisal product. (The loan officer). It was successful in eliminating most of the pressure from the lender to hit a predetermined value. However, one of the most important provisions in the bill has been ignored for the last 5 years. The requirement for customary and reasonable fees. Because the business model of the AMC was to make a profit without increasing the cost of the appraisal to the consumer in order to compete with the appraiser. In order to accomplish this and make a profit the AMC’s cut the fee paid to the appraiser by as much as 50%. At the same time the AMC’s and lenders began making more and more requirements of the appraiser doubling the amount of work that goes into an appraisal making it harder and harder to make a living as an appraiser. As the years have passed by, the fees have slowly increased and are comparable and possibly higher than they were 6 years ago, but the amount of time and work has now doubled and the cost of living has also increased significantly. The supply and demand relationship between appraisers and lenders has been virtually eliminated by a middle man, which does not contribute to the appraisal service. If AMC’s paid a reasonable fee, working with them would be financially feasible. Some AMC’s are better than others. Some get better and some get worse. There seems to be a constant cry for an increase in what goes into an appraisal and with many, the requirements have made them comparable with a narrative appraisal. The standard 1004 is almost to the level of a condemnation appraisal that general garners a fee of $2,500 to $5,500, but the AMC pays only 10% of that. It seems to be a monkey see, monkey do type of business, and how it looks is as important as what is in it.
The Federal Register Rules and Regulations on AMC Regulation.
Enacted State AMC Laws
State AMC Laws & Regulations
Links to AMC Articles
Housing Wire AMC Articles
News Day Article
Appraisal Buzz Appraiser Surveys
Appraisal Buzz AMC Regulation Articles
Appraisal Buzz Appraisal Management Articles
Working RE AMC articles
Real Estate Appraisers United
The National Real Estate Post
First American has acquired Forsythe Appraisals
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Appraisal Website: http://www.dsmithappraisals.com