AMCs and Appraisers: Be on Your Best Fee Behavior
Appraisal management companies are an essential element in a fully compliant mortgage industry. While many appraisers currently chafe at the idea of sharing revenue with these firms, many of the same appraisers were calling for help when appraiser pressure was making it difficult for them to fulfill their responsibilities. There are many reasons for the existence of the AMC. I'm not here to debate that.
Having established that AMCs perform an essential task, we should agree that they deserve to be paid. I'm not here to advocate for one business model over another. There are a number of ways it can be done, but if they perform a useful function, as we must agree that they do, the AMC deserves to be paid.
The question at hand is how much AMCs should be paid.
This isn't the first time this question has been asked. As the CEO of an AMC, I've fielded this question many times over the years. In every case, the question has come to me from working appraisers who are eager to keep more of their fee. I respect that. We have, as a company, supported the efforts of the various states to set minimum fees for working appraisers, and expect to see more states do so in the future.
This question is more interesting, however, from the perspective of the home loan borrower. The lender places the order and is the true client of the AMC and the appraiser, but the Consumer Financial Protection Bureau's TILA-RESPA integrated disclosures rule has put the appraisal report into the hands of the borrower. The cost has always been passed on to the borrower, which is why lenders don't often pressure the industry for lower appraisal fees.
If an AMC can convince an appraiser to work for a lower fee, either through the promise of future work or by threatening to take future work away, should those savings be passed back through to the party that actually pays this fee? Is the AMC doing more work to deliver an accurate and fully compliant appraisal report to the lender? If not, how can the AMC justify pocketing those savings?
AMCs were not established as a mechanism to enable some parties to profit from arbitrage on a service the consumer is forced to pay for without the benefit of vendor selection.
I don't know the reasonable amount for an AMC to earn on an appraisal report, but if we don't find a way to prevent certain bad actors from bilking both appraisers and borrowers out of money, a legislator or regulator will be happy to step in and do exactly that for all of us.
Frank Danna is the co-founder and CEO of the appraisal management company Appraisal Logistic Solutions