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Here’s What You Need to Know About HR 4173

As you surely know by know, the President recently signed into law the Frank-Dodd Wall Street Reform and Consumer Protection Act (HR 4173).  Title XIV of the legislation, the Mortgage Reform and Anti-Predatory Lending Act, has significant appraisal reforms addressing appraisal independence, oversight of appraisal management companies, and changes to FIRREA.  Below are the highlights of the bill as it pertains to appraisals.

Appraisal Independence

  • Provides new appraiser independence requirements under the Truth in Lending Act (TILA) within 90 days of enactment
  • Broadens the violations of appraiser independence to include to state: “Any appraisal of a property offered as security for repayment of the consumer credit transaction in which a person with an interest in the underlying transaction compensates, coerces, extorts, colludes, instructs, induces, bribes, or intimidates a person, appraisal management company, firm or other entity conducting or involved in an appraisal, or attempts, to compensate, coerce, extort, collude, instruct, induce, bribe, or intimidate such a person, for the purpose of causing the appraised value assigned, under the appraisal, to the property to be based on any factor other than the independent judgment of the appraiser.
    • An appraiser may consider additional, appropriate property information including additional comparable sales to support an appraisal, provide further detail, or correct errors.
  • New conflict of interest standard in TILA that prohibits an appraiser or AMC from having a direct or indirect interest, financial or otherwise, in the property or transaction involving the appraisal.
  • Home Valuation Code of Conduct (HVCC) sunsets within 90 days of enactment.
  • TILA amendment that any “mortgage lender, mortgage broker, mortgage banker, real estate broker, appraisal management company (AMC), employee of an AMC, or “any other person involved in a real estate transaction involving an appraisal in connection with a consumer credit transaction secured by the principal dwelling of a consumer” who has “a reasonable basis to believe” that an appraiser has failed to comply with the Uniform Standards of Professional Appraisal Practice (USPAP), is violating applicable laws, or is otherwise engaging in unethical or unprofessional conduct must report the matter to the applicable state appraisal board.
  • Appraisers are to be compensated at a rate that is reasonable and customary for appraisal services in the market area of the property being appraised.

Changes to FIRREA, ASC and use of BPOs and AVMs

  • Appraisal Qualifications Board (AQB) Qualification Criteria for licensed and trainee appraisers becomes mandatory for the states (currently is voluntary).
  • The Federal Housing Finance Agency (FHFA) and the new Bureau of Consumer Financial Protection become members of ASC.  The Office of Thrift Supervision is no longer a member of ASC.
  • Broker price opinions (BPO) may not be used as the primary basis to determine the value of a property for purchase money transactions.
  • Appraisal Subcommittee (ASC) shall monitor state appraisal boards to determine 1) whether states complete investigations, appropriately discipline, and reports complaints to the registry and 2) whether the state as effective appraiser independence laws.
  • ASC may impose sanctions on states that fail to have effective appraiser regulatory programs.
  • Automated valuation models (AVMs) are required to have quality control standards that 1) achieve a high level of confidence in estimates produced by AVMs, 2) protect against the manipulation of data, 3) seek to avoid conflicts of interest and 4) require random sample testing and reviews.

ASC Oversight of AMCs

  • Minimum federal requirements established for appraisal management companies (AMC).
  • ASC shall maintain a national registry for AMCs and impose an annual registry fee.
  • ASC may remove AMCs (and appraisers) from the registry on interim basis pending state action.
  • AMC must register with and be subject to state appraisal board in each state the company operates
    • AMCs that are subsidiaries of financial institutions are not required to register with the states
  • May use only licensed or certified appraisers for federally related transactions
  • Appraisals must comply with USPAP
  • Appraisals must be conducted independently
  • AMC may not be registered with a state or be on the registry if directly or indirectly owned by a person who had an appraisal license revoked, refused, denied, cancelled, surrendered in lieu of revocation, and must be of good moral character.

Subprime Mortgages

  • A subprime mortgage requires a written appraisal of the property to be mortgaged.
    • The applicant is entitled to one free copy of the appraisal.
    • The applicant must be notified that the appraisal is prepared for the sole use of the creditor.
  • Defines subprime mortgage.
Comments
  1. Retired Appraiser

    I don’t see anything in this mess of words that can be defined as a victory for appraisers or consumers.

    HVCC will sunset? Good news?

    Only if you fail to recognize that it was already destined to expire in the same month that it will sunset.

    Appraisers shall be paid the market rate?
    Define market rate (appraisers will say $400…AMCs say $150)

    Bottom Line: Banks won again. Surprise surprise surprise.

  2. Peter

    well I don’t think it says anywhere that loan officers are forbidden to order appraisals directly…? I could not find that language. I thought Dodd wanted to prohibit brokers from ordering appraisals…

  3. Jack

    I see plenty of words that help appraisers. Some of us can read and do not go through life as a miserable person.

  4. Dan

    @ Retired appraiser
    You should read the details. Amc’s aren’t going to determine the “market rate”. It will be determined by Gov’t or third party. Right now that’s either VA or alamode both of which have the “market rate” between $325 – $400 for most areas.

    @ Peter
    The specific language you’re looking for is that no one that is paid based on the loan closing is permitted to order the appraisal.

    As the amcs are eerily silent right now I wouldn’t jump the gun and call this an outright win, but its the best news I’ve seen in my 10 years in the business.

  5. Elizabeth

    I’ve been looking through the text of HR 4173 and I’m not seeing anything about who can order the appraisal. Can someone point out the page that language is on? http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h4173enr.txt.pdf

    Also, the AMCs first defense is that they don’t believe the Ala Mode study is comprehensive or reliable, and that the VA rates are not valid because they only apply to VA appraisals. And so it begins with stall tactics. I urge everyone to write to their State Appraisal Board and ask how they’re planning to oversee and enforce the new Truth in Lending laws as per HR 4173!

  6. Retired Appraiser

    Since you guys can read and I obviously can’t, please point out the line that says:

    “Appraisers shall be reinstated the hundreds of clients they were forced to surrender when HVCC was created”.

    If you guys see this as a victory for appraisers I have some ocean front property to sell you in North Dakota.

  7. Stanley L. Reaney

    Once again, this is nothing but layers of BUREAUCRATIC humbug. Nothing will happen, and in my opinion FRANK & DODD belong in jail with the rest of the crew from Frannie & Freddie. AMC’s are nothing but DO-NOTHING’s. I do not work for any, and will never work for any.

  8. Dave Smith

    Wooah . . . Hold on Nute . . . She’s headed for the barn. Let’s give the big boys and girls a chance to sort this thing out and correct some of the mistakes . After-all it took them a long time to get things as screwed up as they are . In my 47 years in real estate ( the last 26 in appraisals )I have seen many good ideas come along and just as many bad ones . This new law has enough of both to go around .
    We must exercise patience and help our own profession become an honest business . I remember very well the ups and downs of selling homes . Even during double digit loan rates we worked hard to be good real estate people . We are all part of the same real estate family and should act like it .Do your part and help those who suggest doing bad things that the good path never hurt anyone . Take your time . Someone is watching .

  9. Karen

    Retired Appraiser: I see you writing at various sites, and I don’t think there is a more “glass half empty” appraiser out there. My guess is your clients retired you.

  10. Margie Gosser

    Well…Anything the Gov touches turns to s@$% !!! Yea for the good! With that said…what is “Reasonable & Customary” ? Is it reasonble to assume our fees will return to a SANE range or is it reasonable to assume what we now have been ‘price fixed’ to accept..is now…’reasonable & customary’ . BIG Gov bunch of words signed into law…but to what affect? My stance remains…I will accept work assignments based upon the complex nature of the assignment, so I say NO more often than yes to the $160 fees. ALL reports are now Complex in nature. Again, IF appraisers would band together and say NO enough times…we might get some respect back and also ‘rational and sane fees’. With use of AMCs (owned by banks) where have all my ethical clients gone to never return. Banks/lobby money is still running the show UNLESS Appraiser stand together and say ‘NO’.

  11. Doug Quenzer

    There is nothing in this bill that prevents AMC’s to continue to pay their low rates. AMC’s existed before the HVCC and paid low rates. All they have to do is prove that, and there you go we have lowered fees. Also mortgage brokers didn’t have to use AMC’s under the HVCC, but only did so out of confusion and fear. I don’t see how that is going change. Bottom line is 12 years of clients are gone. 2 years of crappy fees have been established as the “market rate.” And who is going to ENFORCE fees. A toothless law is a useless law. Fees are determined by the market, but in the past two years what is the market? We don’t have a basis for determining that because of the HVCC and the usage of AMC’s. This law could be written on toilet paper because its only worth is to be flushed with the dung of good intentions.

  12. Dan

    What’s with all the bitterness toward other appraisers? I just pointed out the 2 points being overlooked, now retired appraiser wants me to pay his “pension” just because I’m cautiously optimistic that the detailed wording in the new law will mean that I won’t have to work 70+ hours a week anymore to make my “nut”. If your actually retired why are you all over the web?

    Stanley if you don’t even need to do any amc work, why do you even care enough about this to waste your time posting? It sounds like you got it all figured out!! Maybe instead of seething you could tell us all the secret on how to be successful appraisers paying their bills all while avoiding the evil empire that is the amcs.

  13. Doug

    How can the government fix fees or determine fees? Who gives who the power to determine what is fair in the market place? What gives them that right to determine my fees in my locality? If you think that is a victory you need to go back and take economics 101. I don’t want the government determining fair appraisal fees. I want the government to get out of my business and let me run it the way I want to run it. I want appraisers determining fair appraisal fees. In 2000 I was getting $300 for a URAR that required less work today. Based upon inflation a basic URAR should be at least $400. But then if you add in all the supplemental requirements by lenders such as the 1004 MC, more comparables, tighter comparable guidelines, etc. everybody agrees that it takes about 1.5 hours longer to do an appraisal. Therefore a typical URAR 1004 should be at least $475! Who is going to pay that? AMC’s? Who is going to enforce that? The government? Pleeeeze spare me.

  14. Steve

    I can fix fees!!! And I do!!! If they don’t pay me my standard fee, I don’t put the keys in the truck. If all would do that we would not have a problem. I turn down 50% of the request I receive because the fee is too low, even if it means I stay home.

  15. Retired Appraiser

    Dear Dan

    I’m all over the web and I was all over Congressmen because I actually cared about the profession. I’m still shocked by the number of appraisers out there (97% maybe) who could care less about their businesses. They never did a thing to fight against the injustice of this greed play. For this very reason I believe appraisers received everything they deserved. Banks made a grab for your paychecks and your rolled over in your beds and asked if they needed anything more.

  16. David Rasmussen

    To pay mortgage put food on the table, replace my vehicle, partially fund my retirement account and pay health insurance cost my financial planner and account projected that minimum average fee need to be $450.00. No one gets paid what they are worth only what they negotiate. I am waiting for the first call for a comp check within the next 90 days. Real Estate appraisal may only be part of my future income stream.

  17. I’m a Realtor. Am I understanding this right that no longer will BPOs be ordered for Short Sales?

  18. Allen

    Fellows, Calm down. I am going to look on the bright side of this thing. There have been several of you lamenting the fact that you have lost many clients to fear and ignorance. I am going back to EVERY client I enjoyed working with and I am going to educate them. I am going to make marketing material that shows in HUGH LETTERS that the HVCC IS GONE!!!!! I am then going to present them with a fact sheet of how the new law works. I will go to the president or even the Board of Director if I have to. I want THEM TO KNOW that they have a choice. I believe that the officer shouldn’t be able to pick the appraiser but they can have 3 or 4 LOCAL RESPECTABLE appraisers that they work with and have one of they NON COMMISSION staff order the reports on a rotating basis. It will save the customer money, save them time and they will again be in control of WHO DOES THEIR WORK. If we all did this you could say GOODBYE to the ROTTEN STINKING NASTY CHEAP AMC’S. We, as a group, are just like teachers. If we would get together and set standard fees with options to increase for complex or rural properties, there would be no need for AMC’s. It is the “puppy mill” appraisers offices that accept the RIDICULOUS LOW FEES OFFERED by AMC’s. They send out trainee’s ( who aren’t making mimimun wage) and then sign off them and make a hyndred bucks. Shame on all of you. Keep your fee up. Respect your profession and yourselves. GOOD LUCK ALL. WE WILL NEED IT!!!!!

  19. Jerome Nagy

    Dear Readers: Your humble moderator here with a quick note to remind you all that the comments for each post are reviewed before being published. While we hope this blog brings you updated appraisal information we also hope it’s a forum for healthy debate. That said, none of us should let the debate get personal so please refrain from offensive language and name calling. While we do not define “offensive language” or “name calling” we know it when we see it so take a deep breath and give your comments a quick review before hitting submit. Thanks all for reading and posting comments.

  20. Jerome Nagy

    Debbie: With respect to BPOs, the legislation states they may not be the primary method of valuation on mortgage transactions where the buyer will occupy the unit as their primary residence. BPOs are still permitted in many areas at the federal level including short sales, foreclosures, loan modifications, and refinances. Check your state law to see permitted use of BPOs in your state as it varies across the country. Thanks.

  21. objectiv1

    I LIKE THE LINE THAT STATES APPRAISALS MUST BE CONDUCTED INDEPENDENTLY. THAT IS POSSIBLE ONLY IF YOU ARE NOT ON THE LENDERS STAFF, PAYROLL OR UNDER THE INFLUENCE OF ITS SUBSIDIARY.

  22. objectiv1

    How many, especially asset managers, found out too late that BPOs were a disastrous alternative to genuine appraisals. The problem with so many in the real estate industry is that most did not complete Economics 101. Anyone with basic knowledge of economics understands the difference between price and value. The other problem we have is that the authorities have no concept of either, never mind the difference. And they are in control. Scary, eh! Thus the chaos we have today. The meltdown was really setup as a result of the so-called reforms following the Savings and Loan Scandals. By the time we are all well aquainted with the new rules the amendments and addendums will be presented to us for further study.

  23. Tom G

    For Licensed Salespeople, appraisers and Mortgage folks who will experience the age old “Market Value” or geographical competence and other USPAP issues and opinions…before you “Report” an appraiser as in violation of USPAP – you will need to fully understand USPAP subject and verse, inside and out. Any reporting would set off a chain of events that require evidence based, factual correct specifics of violation. Not from someone who lost a sale, or other non compliant issues.

    The law states the following:

    “any other person involved in a real estate transaction involving an appraisal in connection with a consumer credit transaction secured by the principal dwelling of a consumer” who has “a reasonable basis to believe” that an appraiser has failed to comply with the Uniform Standards of Professional Appraisal Practice (USPAP), is violating applicable laws, or is otherwise engaging in unethical or unprofessional conduct must report the matter to the applicable state appraisal board.

    This should improve everyones performance and professionalism, yes?

  24. I agree with most that this has done very little to protect our businesses. With the rate at which all of the lenders and AMC’s have cut our “market rates”, whom do you think with set that figure? What organization are they going to, that will decide what our rate should be? Whom do you think they will collect the data from? Will it be data from before HVCC or after?

    We need our own organization to protect our best interestes, not unilke what the Realtors have. Not a union, but a group of peers that have governmental contacts and where with all to fight for us in Washington.

  25. Jim

    How about we turn the tables on AMC’s. How about an Appraisal Management Company run by appraisers designed to protect appraiser interests. You could call it an Appraiser Union so to speak. These would be appraisal panels throughout the country by region that take in and distribute orders locally. These panels set the fees based on the region they serve. These regional panels would have quality assurance appraisers to review completed appraisals. The fees are set with the idea that both the lender and appraiser copay to support the panels. If, for example you appraise in Minnesota and the fee for a 1004 non-complex property appraisal is determined to be at $400. The fee charged would be $425 with the the lender paying $25 and the appraiser paying $25. The fee received by the appraiser would be $375. The real challenge is that no appraiser can accept a federally transacted appraisal assignment that does not run through OUR organization. Obviously, this is just an idea with a lot of rough edges, but if we could somehow band together and force the issue it would make all this whining about AMC’s a moot point and drive them out of the “pimping” business.

    Name another service industry that essentially forces the service provider to “take it or leave it”. When you take your car in for service and the mechanic tells you the cost of a specified repair is X amount of dollars, then later they find out X amount is now XX amount because they had to do additional work that could not have been forseen until they did the initial work, what do you think their response would be if you said “well mr mechanic, I will only pay you for X amount, and you will like it. I’ve never been involved in an industry like this where there is really no recourse. Can you imagine the legal or medical profession operating like this? I could have several hours into an assignment and if I came back and said this requires additional time and research due to complexity, and the fee should reflect this, I not only won’t get paid for what I’ve done, but I will lose the assignment altogether, and possibly future assignments. For the amount of liability we accept when we perform an appraisal assignment, there needs to be fair and offsetting compensation. No more whining, it’s time for ideas and action. Any other ideas????

  26. Jim has the right idea. An appraiser’s union. By the way, there was a group who tried exactly this and could not get a ground swell of support. The group began their efforts back in 2008 when they first started talking about the HVCC. They even went to Washington DC to protest but with the numbers so small, they were laughed at. Now, two years later, we see that the ONLY way to combat the banking giants and their AMC’s is to band together with a unified voice “NO”. I’m mad as he>> and I’m not going to take it any more! I have said NO so many times that for the first time in 12 years, I was late on my home mortgage payment.

    I like Ala Mode’s approach because I believe they have the ear of about 40% of the appraisers across the country. They have analyzed NON HVCC fees and they said median is $350 and average is $351 but that is a national average. Not bad…it’s a start! The document says the AMC’s can NOT have any input as to “usual and customary” fees. HOORAY! Those of you working for $200 per…shame on you. Just say NO. If all of you do it, the pendulum swings back in our favor.

    Also, vote OUT the idiots that did this to us in the first place come November.

  27. Larry

    I am a commercial appraiser so my perspective may be a little different, but it appears to me that we are a bunch of individuals trying to do business with an oligopoly. The result is that our fees are as low or lower than they were when FIRREA was enacted. Maybe we need an organization similar to a labor union that can help us get proper fees which grow over time, offsetting inflation.

    Having made the suggestion, I can see some real problems with implementation and labor unions create another set of problems, but we need to do a better job of protecting our livelihoods. We seem to be our own worst enemies.

  28. Nor Cal RE Broker

    I am a successful broker in Northern CA and what I am seeing is a bunch of re-inspections by appraises to balance the scales of compensation. The problem is that it’s creating a lot of closing problems.
    The appraisal pools are cancer. It’s like the “mafia” took over and screwed the appraisers, Realtors and the consumer so they could get their “beaks” in to our industry and our back pockets. I feel that it is criminal what they have done.
    This is just bad business. The appraisals that are being done are terrible many times because people willing to work for nothing are doing many of them and they are from outside of the area. They have no idea what they are doing and they are messing up deals “BIG TIME”!

  29. Randall Jonason

    $160 per Appraisal? —— When appraisers as an industry choose to accept a fee that low for a product that requires thought and reasoning ability along with long term liability —— you just become a HACK with that reputation following you forever. If you take that path – don’t you realize that working at Burger King produces a greater financial result – and they have benefits too! — Oh, you need to feed your family?? Well so do the rest of us. I have eaten beans instead of Caviar because I have some pride left. And I have lost almost everything. Been there. My question is why did you get into this field? taking these low fees is an insult to the rest of us — if you just want to be paid employee wages– this is not the industry. Time to MAN- UP or WOMAN-UP – time for an industry-wide strike on fees.
    Oh and AMC’s – who take full fees and give you half – and then want to take out payroll deductions – but you are not an employee – and wont guarantee work flow?? Give me a break.
    Or Amc’s that need reps that are fluent in basic English?
    Or Banks that are now staffing Appraisers again after everthing went wrong – and only give you assignments that are way too difficult – for their staff,s limited brain power
    –that will keep you at the $160 per Appraisal or lower level. Well CUDOS to you!
    I got a couple of Teachers who will work for $10,000 per year,and Doctors that will work for $20,000 per year ——-But would you send your child to them or go to that Doctor????? Welll there you are in good company — Those fees will not cover the Attorney Fees when you get sued for a mistake in one of your Budget products.

  30. Diane Forsberg

    I don’t see in any of this discussion the fact that it isn’t up to the AMCs how much we get paid. It is only up to us. Until we ALL raise our fees to at least what we were getting in 2006-2007 we will continue to complain. I work for AMCs. I have always gotten my fee. So don’t tell me that it can’t be done. We are waiting for the government to fix our problems. Like that has ever happened before! It is my opinion that until we stop listening to all the BS that is told to us and remember the WE ARE THE APPRAISERS, THE POWER IS IN OUR HANDS. If we all say no, what are they going to do? Buck for awhile and then pay our fees. It is pretty simple.

  31. Bryan Parkhurst

    why are we not considering fees that were collected by amc’s as reasonable and customary? if the appraisal industry and im an appaiser thinks thats a victory were sadly mistaken. the amc’s have gotten away with charging the borrower $500 and paying the appraiser $150 because of reasonable and customary fees. $500 has then been established as reasonable and customary regardless if a amc fee is part of the $500. the new law is protecting hud, banks and amc’s from litigation by not including there fees as reasonable and customary. think outside the box and look 3 steps down the road at the unintended or as i claim intended consequences of this law

    the amc’s and bank owned amcs argument all along has been to charge the borrower reasonable and customary fees all along.

    the banks cannot have the argument both ways. if they do they would be in violation of respa laws and truth in lending.

    so is $150 reasonable or customary or $500? if the banks argue $150 they are in violation of respa and truth in lending. their argument that $500 is not reasonable and customary is also flawed becuase they have been collecting these fees under “reasonable and customary” to comply with respa and truth in lending.

  32. chris

    http://www.feesurvey.com/

    go to this site and submit your opinions of “customary” fees. I went with what I think my time and expertise is worth, not what I think amc’s might be “willing” to pay. I don’t mind amc’s – but I don’t need a middleman to do my job.

  33. anonymous

    So, does this mean loan production staff can order appriasals?

  34. Carol Johns

    I am not an appraiser, but my daughter is, in Florida. I have heard many of your complaints about low fees from her.
    The Frank-Dodd bill states, “APPRAISERS are to be compensated at a rate that is reasonable and customary for appraisal services in the market area of the property being appraised.” Therefore, these middle-man companies should not be so feared as I saw in the above comments. Middle-man companies are not appraisers. You folks are the appraisers, and you are to be compensated at a rate you deem to be reasonable and customary—this would be the rate prior to these middle-man companies’ existence.

  35. Should unreasonable demands for turn times be considered as undue pressure?

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