Homecomplaint › Banks are overcharging consumers/borrowers for the appraisal fee for a home loan....

Consumer Complaint

Banks are overcharging consumers/borrowers for the appraisal fee for a home loan....

Companies Involved: 
Wells Fargo, Bank of America, Citi Bank and more
Issue Area: 
Other

Regarding appraisal fees charged to a borrower for a home loan and the quality of the appraisal itself: Originally an loan officer at a bank would call an appraiser and ask for an appraisal on a property for some type of bank loan (purchase, refinance, equity line). Due to a good bit of pressure on the appraisers to "hit" a certain value on the appraisal a middle company was introduced. Appraisal management companies (AMCs) were brought in by some to randomly order appraisals needed by a bank. This way an loan officer would not know who is doing the appraisal until it is completed. There have been AMCs around for over a decade but they ordered a small percentage of appraisals nationwide. Most banks would have their own in house appraisal ordering dept which would cause the same separation between originator and appraiser. Around 2008 attorney general Andrew Cuomo investigated the lending practices of Washington Mutual, as well as Fannie Mae and Freddie Mac. Instead of pursuing legal action they all came to an "agreement" called the HVCC (Home valuation code of conduct). Although this agreement did not force banks to use an AMC the wording scared many banks to AMCs or to open their own. There would have been severe penalties for appraiser coercion after the HVCC agreement. Although this seems like a noble act by Cuomo I believe he was sitting on the board of a large AMC when the HVCC was passed. Since 2008 many new AMCs popped up. The banks have opened their own AMCs as they could smell blood in the water. The one HUGE fact that has not been stated yet is the AMCs do not charge the bank for their services. They take their service fee out of the appraiser's fee. They have also taken control of approximately 90% of appraisal ordering. What has happened over the last few years is: -many lenders are using AMCs. -some lenders own AMCs -lenders are making money off the loan. They are also making money off the AMCs. Millions of dollars every year. -lenders have found that AMCs are money making machines. They have been found to be deliberately searching for the cheapest appraiser. This is regardless of the appraiser's experience, knowledge of a particular market, etc. -AMCs, over time, have whittled down their approved appraiser list to the appraisers that are the cheapest. There is no free market anymore. If you want to do work for some AMCs just underbid the other guy. Sometimes the other guy may be from a different county or even state. -Some banks are now charging more to the borrower for the appraisal fee ONLY to make more profit. There are instances of appraisal fees being $500-$600 with the appraiser only making $250-300. Not only are the banks charging more for an appraisal than an appraiser would charge the borrower if directly contacted, they are charging more and paying the appraiser less. -appraisal quality has suffered dramatically over the last few years. This is due to the loss of many good and experienced appraisers who cannot and will not work for the fees AMCs push on them. Geographic competency is very important for an appraiser to do a good job. Many appraisals are now being done by the cheapest appraiser found who many times does not know the area he/she is appraising in. -The non-bank owned AMCs compete with each other when soliciting potential clients that don't own their own AMC. To prove they are more valuable to a lender than their competing AMC they will tell the client they will have the appraiser put more information in the report, or get it back quicker than the other AMCs appraisers, or take more pictures, etc, etc, etc. This is more pressure on the appraiser which causes quality issues. Some force any appraiser that works for them to deliver appraisals within a certain time frame, even if the deadline falls on a Sunday. This makes no sense as the bank would never need a completed appraisal on Sunday. *There are many more stories and much more to tell if someone is interested. Consumers are getting taken advantage of to the tune of millions and millions of dollars each year. Appraisers are being taken advantage of and forced to complete appraisals faster and cheaper to satisfy the AMCs demands. Many experienced appraisers refuse to work for these AMCs and have left the industry. Obviously this has a direct impact on the real estate markets throughout the country. Please go to the Appraisers Forum for many viewpoints, stories and examples. This is a forum for appraisers across the country. http://appraisersforum.com/index.php There is also a new petition to the Federal Reserve Board going around that explains the AMCs continuing misconduct and violation of the recently passed Dodd/Frank bill in 2010. http://www.petitiononline.com/CnR2011/petition.html