On Ghosts of Christmases (and Rulemakings) Past
You can be haunted by words on the page, after all...
John D. Russell, JD
12/19/20242 min read
Christmas of 2010 was memorable for me in numerous ways: My wife and I, married only months earlier, traveled to see her family in Minnesota. At the same time, I was working with industry peers to finalize comments to the Federal Reserve on their interim final rule on appraiser independence. It’s a fun read, and also shows the collaborative spirit of the valuation professional organizations who signed onto the comments.
What struck me in thinking back on this Christmas past was not just having to work out of the business center of a condo complex (in the days where Wifi was not ubiquitous!), but how some of what we discussed 14 years ago is still relevant today. Sure, the “customary and reasonable fee” issue was put to pasture by the Federal Trade Commission and its aggressive action towards the Louisiana board, but how we thought about the interplay between AMCs and appraisers when it came to fees was striking.
Even in 2010, we saw how the large market influence of AMCs and their ability to dictate fees to appraisers would have consequences both on appraiser compensation and the ability of consumers to understand where their “appraisal fee” went. I’m going to let you enjoy this block quote:
“When a lender utilizes an AMC, HUD requires the cominlged [sic] fee be disclosed to the consumer on Truth and Lending disclosures and listed on the HUD-1 settlement statement. As a result, a perverse incentive exists for AMCs to seek reductions in appraisal fees to carve out larger profit margins, as the national appraisal fee data illustrate by the existence of a bifurcated appraiser fee market.”
All these years later, and we still operate in an environment where consumers do not fully understand where their money flows to in support of appraisal ordering.
I share this “Christmas” story to underscore how issues of today really aren’t new at all, and reflect the inability of the broader regulatory environment to solve challenges that everyone involved in the appraisal process has recognized for years. Whether these challenges get addressed in the next administration is an open question, but my well-forged cynicism leaves me feeling less than hopeful I’ll get presents and not coal in the proverbial stocking.
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