I just received a copy of a letter issued by the Alabama Appraisal Board to several Appraisal Management Companies. Click here to read a redacted copy.
I’ve opined in earlier Appraisal Buzz articles that I have been quite surprised that neither an AMC or a Lender has been legally challenged on the C&R component of Dodd Frank. The regulator, as I understand it, is a State’s Attorney General until such time the Consumer Finance Protection Bureau has instituted final rules. The penalties for violating the law are $10,000 per day. Both the Lender and the AMC are liable.
Many lenders assume they can pass this risk onto their AMCs. I think the law is clear on that. Both are responsible. It is never a good plan to gamble on compliance issues. There are all sorts of risks associated with the appraisal process. This one is easy to implement; not so easy for lenders who have been enjoying the benefits of free appraisal management services.
Bill Matchneer with Consumer Finance Protection Bureau spoke to the Collateral Risk Network in New Orleans a few weeks ago. He mentioned that there are a number of rule making efforts underway. Unfortunately the C&R issue has no impending deadline so it will be highly unlikely it will be addressed this calendar year.
Could Alabama may be the “mouse that roared”? I gave the Alabama Appraisal Board Executive Director, Lisa Brooks, and their counsel, Neva Conway a call. The letter was initiated due to all of the complaints coming from appraisers, Neva explained. At this time Alabama does not know what they will do with the responses they receive.
Contacted for a statement regarding the Alabama Board’s request for methodology used to determine customary and reasonable fees, Don Kelly, Executive Director for the Real Estate valuation Advocacy Association commented:
“While REVAA appreciates the efforts by the Alabama Board to pursue its responsibilities for AMC registration, we believe the request for AMCs to supply the Board with the methodology for determining customary and reasonable fees is beyond the Board’s statutory authority. The Dodd-Frank Act requires AMCs to pay appraisers a customary and reasonable rate and the Federal Reserve Board has issued a definitive regulation on the matter. Neither the Dodd-Frank Act, federal regulation or Alabama law authorize the Appraisal Board to seek such proprietary information. We urge the Board to forego its request.”
I would urge that appraisers remain “noisy” on this topic. The consumers of appraisals are exclaiming very loudly that the quality of appraisal reports continues to decline. Ok folks this isn’t “rocket surgery”. As long as we have misaligned incentives in place to engage the cheapest appraiser we wont solve the quality issue. I listen, impatiently mind you, when Lenders and AMCs tell me that fee and quality are not correlated. Common sense is not only uncommon it is your freaking super power. Appraisers, you really are making a difference. Many appraisers are busy, fees are going up, and the leverage on the fee issue you thought you lost is slipping away. Smart lenders and AMCs know that. Identify them, perform your due diligence, be professional, and soar.