Wednesday, October 27, 2010

C2C AMC - "Watch out for these jerks!!"

I got this message from a colleague back east, and am passing it along to all of you as yet another caveat about yet another clueless AMC:

"There is an AMC by the name of C2C from California that ordered an FHA appraisal from us last evening at a $350 fee.

"We wrote them back a decline with the fee we would accept. They reordered that appraisal this morning and less than 2 hours later they wrote they assigned to another 'vendor'. Well you should see their stips…..4 closed sales, 1 listing, 1 pending, complete the cost approach, 1004 MC form, etc. , etc., etc.

"You guys know me…I called California…got their phone monkey who said I would have to speak to his 'manager'. Well this clown sounded all of 18 years old.

"I informed him that they may have broken Virginia law…..I informed them of reasonable and customary fees….They are even so stupid as to put on the order a fee that was within $5 of our fee. I asked why they reassigned and the answer was they found another vendor who was cheaper at the R & C fee. I told them to take us off of their list…….NOW!

"Keep in mind I had already called the agent and set up the appointment. I cannot wait to find out who takes this assignment….and believe me, I will. The agent is an OLD friend of mine.

"This young punk said oh no we are not breaking any law….I said well we will just see about it….our Attorney General will get this….and we will now cost you more than you could ever save on cheap ass appraisal fees. Then this REAL HIGHLY TRAINED PROFESSIONAL hung up on me!


P. E. Turner (Pat), Jr., SRPA, SRA
P. E. Turner & Co., LTD.
Henrico, VA"

Tuesday, October 19, 2010

"Customary and Reasonable" fee regulations

Dave Biggers, Chairman of alamode has written an op-ed that might be of interest to all of you. This is an excerpted version:

As many of you may know, the Federal Reserve issued 132 pages of “interim final regulations” yesterday on the hot-button issue of “customary and reasonable” fees – and more – as mandated by the Dodd-Frank Act. Since I was preparing a broader memo on a wide variety of other timely topics anyway, I decided to combine a first look at the new regs with the other information, and so here you have it all together. It's a little long as a result, but there's a lot to cover, so bear with me.

First Look at the Dodd-Frank Act (or “DFA”) Regs

There's one bombshell hidden in here aside from what we expected. Everyone knew that the HVCC was being eliminated and that the issue of customary and reasonable fees would be covered, but I for one wasn't expecting the Fed to take the position that even though the DFA refers to “appraiser” and “appraisal”, the logical approach is to make the regulations include any person performing “valuations” and make them subject to the same rules.

So, under the new regs, BPOs and agents are subject to the same restrictions regarding coercion and direct or indirect interests as appraisals and appraisers. It doesn't mean agents have to abide by USPAP, but it does mean that incenting them with a shot at a listing (real or implied) when doing a BPO would be a violation, as would telling them to hit predetermined numbers.

Among the other issues that stand out:

• The big one, customary and reasonable fees, is a mixed bag. On the one hand, it seems that they bowed to AMC pressure and essentially made it “customary OR reasonable” fees, not customary AND reasonable. On the other hand, they seemed to signal to the legal community that there was more safety in advising lenders to follow a third party reasonable standard than just hide behind customary AMC fees.

• The crux of the fee issue comes down to allowing AMCs to include their own fees (seemingly in contradiction to the DFA's intent) in their determination of what are the recent market fees being paid to appraisers, and to have that be one of the two separate and alternative presumptions of compliance, so long as the AMC did not engage in anticompetitive behavior as defined by the Sherman Antitrust Act.

• The second presumption of compliance, using third party data, provides more shelter to the lender – avoiding $10,000 per day fines – than does the first, which the regulators signal by expressly defining what sort of evidence would not be sufficient to overcome the presumption of compliance. In other words, a lender using third party studies which eliminate the AMC fees will almost always win in court if someone challenges them and will almost never be fined, because simply using the fee studies or surveys is considered de facto compliance with the law. Trotting out a different third party study showing higher fees isn't enough on its own to overturn the fact that the lender used sufficient best efforts by relying on non-AMC third party data in the first place. That's great, and will provide the necessary added protection for many risk-averse lenders to refuse to allow AMC-tainted fees to be the basis of their customary and reasonable legal strategy.

• The HVCC is eliminated as expected. However, realize that the firewall restrictions of the HVCC are not eliminated, because they were nearly identically encoded in the 2008 Appraisal Independence Rules (often referred to as the “Interagency Rules”), and the interim final rule enshrines the Interagency Rules virtually unmodified as part of the new law. The chief distinction is that the Interagency Rules do not bar particular people (mortgage brokers, agents, etc.) from expressly engaging in the process of engaging or communicating with appraisers as the HVCC did in blanket fashion, but rather bar anyone – regardless of their position – from influencing the appraiser in a manner intended to materially mischaracterize the value of the consumer's residence.

• The Fed invalidated the fee stipulations that many AMCs have demanded appraisers sign, exactly as we've argued. In crystal clear language, they showed that one appraiser being forced to agree to a fee does not mean that appraiser has abdicated protection under the statute, nor has the appraiser given safe harbor to the AMC, since the appraiser cannot attest on his or her own as to what a customary and reasonable fee would be under the statute: “the Board understands that some AMCs have begun requiring fee appraisers to agree that the fee is customary and reasonable as a condition of obtaining the appraisal assignment. In these situations, the Board believes that an appraiser’s agreement that a fee is customary and reasonable is an unreliable measure of whether the fee in fact meets the statutory standard.”

This is just the quick summary. Meanwhile, you can and should read the regulations yourself at:

Monday, October 18, 2010

Appraisal Port and FNC Oral Arguments

Appraisal Port and FNC are being sued due to their “alleged” misrepresentation to appraisers regarding the skimming of information from appraisal reports. The FNC oral argument was recorded and is available for download.

The link is

It is Docket No. 09-60804.

(Thanks to Richard Hagar SRA)