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With Appraisal Fee Uncertainties, Lender Tensions Rise

An American Banker article addresses rising tensions between mortgage lenders and home appraisers in light of new regulation under Dodd-Frank.

With lenders being required to pay customary and reasonable fees under the new regulation, the article states, appraisers and appraisal management companies are now saying lenders have lowered their fees and are demanding more work for the same pay.

“The lender wants more and more things in the appraisal for the same price,” Thomas Kirchmeyer, president of Kirchmeyer & Associates Inc., told American Banker. The article cites an example of increased scope of work in some lenders asking for the appraisal to be based on two current or pending listings in addition to three comparable sales.

Interim federal guidance allows a bank to look at the fees it has been paid in the past year to determine what is “customary and reasonable,” American Banker writes, so many banks have been holding their fees steady.

While in the past, AMCs have taken a piece of the fees for the appraisals they managed, several banks today are operating under a new model that separates the AMC fees from the appraisal fees, according to the article. That includes some having capped the AMC fees at $125.

Another way lenders are determining fees that are “customary and reasonable” is by consulting a third-party market survey that does not include AMC fees.

Some appraisers and some AMCs, on the flip side, have interpreted the rule as prohibiting the use of AMC fees as the basis for determining what is “customary and reasonable,” the article says.

Lender concerns are rising over the Dodd-Frank imposed civil penalties of $10,000 per day for appraisal independence violations (with subsequent offenses costing violators $20,000 per day), with so many questions outstanding.

“The problem is, there is no standard of what an appraisal is, what is customary and reasonable and what the lender should pay an AMC,” Joanna Conde, president of the Arizona Association of Real Estate Appraisers, told American Banker.

Read the American Banker article.

Written by Elizabeth Ecker

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