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Comment on Financial Reform Implementation

September 11, 2010

Im a Certified Residential Real Estate Appraiser with 9.5 years experience. Please see that the Bureau considers these suggestions in the writing of the new Interim Final Regulations for the Dodd-Frank Law:

Appraiser Independence -
I fully believe appraisers need to be free to do our work without being influenced by anyone with a financial interest in the property. At the same time, we are the only profession hamstrung by being unable to work directly with some clients. With the new licensing of mortgage brokers and loan officers, it will be easy to track all parties connected to a mortgage loan. MBs and LOs should be required to sign an Ethics Statement on the appraisal order at the time of ordering an appraisal directly from the appraiser that they have not in any way influenced the appraiser in establishing or pre-setting a particular appraised value to make the loan. This statement should be similar to the Ethics provisions in USPAP that appraisers are bound to uphold. A Violations Reporting Agency should be immediately implemented in the Interim Final Regulations, and MBs/LOs should be told that they will be reported immediately if any attempt to coerce the appraiser is apparent at any point in the appraisal report process.

The above should also apply to any entity who acts as an appraiser management or assignment placement service on behalf of any lender.

AMC issues -
It is my contention, based on years of experience of AMC vendor work, that most AMCs are in violation of RESPA because they have been paying their own overhead out of what normally would be paid to the appraiser by the Lender that the AMC is working for. Even now, after the implementation of the Dodd-Frank law on July 22, 2010, AMCs are still dictating the fee they will pay to the appraiser, instead of allowing the appraiser to state and negotiate an acceptable fee based on the property characteristics and complexity. The practice of stealing a portion of the appraisers customary and reasonable fee by AMCs has to end immediately. If the lenders are going to use an AMC for appraiser management, then the lender must compensate the AMC directly, and this needs to be incorporated into the Interim Final Regulations. AMCs are also adding report requirements that the lenders themselves dont have as policy, and when the AMC does this there seldom is any additional fee paid for the extra required work. Thats like forcing an employee to work overtime without compensationa clear violation of labor law. The lender should be the one to establish appraisal requirements supplemental to FannieMae and FreddieMac, not AMCs because AMCs do not underwrite the loan.

There is a pervasive tendency for AMCs to only provide assignments to the lowest fee appraisers, and require very short report completion turn times. Both of these aspects compromise the integrity of the appraisal process in that minimal quality reports are being done at a time when we need well documented appraisal reports. Cheap and Fast cannot be tolerated as acceptable appraisal policy. Many appraisers are cutting corners in their reports as a result of lender and AMC low fee and speed requirements. This has the tendency to devalue the appraisal process which should be done by experienced and competent appraisers who produce quality reports.

The Interim Final Regulations should address adequate report completion time, determined by the appraiser.

C&R Fees -
There presently is a giant misunderstanding about the Dodd-Frank law and appraiser fees.

Nowhere in the law does it state that Customary and Reasonable fees charged by appraisers have to be delayed for 90 days. The 90 day window applies to appraiser independence regulations only. Appraisers have always been able to charge appropriate fees for their service. Those fees are well known among appraisers in every geographic region in the US. Most local lenders and even national banks are aware of what most appraisers charge for non-complex property appraisal assignments.

Only with the extraordinary increase in AMCs has this become a major issue. The AMCs have been given the C&R fee the lender would normally pay directly to the appraiser, but the AMCs have stripped out egregious amounts before the appraiser is compensated. AMCs are third-party providers to the lenders, and thus are covered under the RESPA law which prevents siphoning of appraiser fees to pay appraisal ordering overhead expenses.

Despite the distortions of these facts by TAVMA, a trade organization representing AMCs, there is an existing national independent fee survey available to anyone for FREE, and VA also has their own fee tables for different states. Other independent surveys are being promoted by several other entities involved with appraisers, but these do not presently have the validity the other independent fee survey and VA fee tables demonstrate.

Appraisers around the country are attempting to comply with the Dodd-Frank law by raising their fees back up to what would normally be Customary and Reasonable. But appraisers primary clients, in the case of AMCs, are resisting this effort and in many cases are beginning to blacklist appraisers who attempt to be fairly paid.

A governmental agency or AMC should not determine what appraisers should be paid; thats the appraisers responsibility based on the appraisers own circumstances and property characteristics.

The Interim Final Regulations should mandate that the appraiser establish Customary and Reasonable Fees for various appraisal services, and those fees should be honored by the AMCs.

The Regulations should also state that the lender must compensate the AMC for their services, not the appraiser who is hired to complete the appraisal assignment.

Dave Towne
Washington State

Last Updated 9/23/2010 FinReformComments@fdic.gov

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