Comment from Spraggins, Jennifer

I am an advocate for consumer transparency and especially, in purchasing property which is typically the largest investment a consumer makes. Within the real estate transaction why shouldn’t the borrower know what they’re paying for when they purchase a home. Why consumer transparency is important: 1. Consumers deserve to know what they are paying for. If they are charged $800, they should be able to see, for example: * Appraiser’s professional fee: $300 * AMC administrative/management fee: $500 2. Accurate representation of costs. A single “appraisal fee” can lead borrowers to believe the appraiser received the entire amount, when a significant portion may have gone to the AMC. 3. Meaningful comparison shopping. Separate disclosure allows borrowers to compare lenders more effectively. One lender may pay the appraiser more and charge a lower management fee than another, even if the total cost is the same. 4. Supports customary and reasonable fees. Knowing how much is actually paid to the appraiser can help regulators and the public evaluate whether appraisers are being compensated at customary and reasonable levels, as required in many circumstances. 5. Greater accountability. Separating the fees makes each party’s charges visible. This can encourage competition and discourage excessive administrative markups. 6. Reduces confusion. Many borrowers assume the appraiser sets the total appraisal charge. In most AMC-managed transactions, the appraiser does not determine the total fee the borrower pays. Separate disclosure makes that distinction clear. The appraisal and the appraisal management service are two distinct services provided by two different businesses. Just as settlement statements often separately list title insurance, recording fees, and attorney fees. This should also include the appraiser’s fee and the AMC’s fee should each appear as separate line items so consumers can clearly understand what they are paying for. Why is the appraiser a proponent for this and the Appraisal Management Companies are opponents adamantly against it? Because the AMC is profiting if it continues to remain the same and therefore, * They profit by compressing the appraiser’s portion of the fee * They reward speed and cheapness * Less quality and transparency Keeping 50% to 80% of the appraisal fee without any liability or bringing in real value to the process. The other way AMC’s cost the consumer is they’re creating this idea that there’s a lack of appraisers one in reality there’s a lack of appraisers that are willing to work at their low fee fees. Which results in a push for more property data collectors, staff appraiser with limited training. and unlicensed, unqualified individuals either providing data, completing inspections, and providing appraisal reports. 1. Issue with AMC’s hiring their own staff appraisers: Which leads to potential influence over appraisal results * If staff appraisers are pressured to meet lender expectations, it could violate USPAP (Uniform Standards of Professional Appraisal Practice) independence requirements. Some argue that employment inherently creates pressure, whether explicit or implicit. * AMCs may set internal productivity metrics, which could indirectly affect independence. * This is why disclosure is often required on Fannie/Freddie panels, even if legal on their panels. * Conflict of interest perception: If the staff appraiser is employed by the AMC, and the AMC’s revenue depends on the lender continuing to use them, some argue it could influence appraiser judgment. * Pressure to produce acceptable values: Even subtle pressure to “avoid extreme values” can create perceived bias, which regulators take seriously. * Transparency concerns: Lenders and secondary market participants may question whether staff appraisers are fully independent, especially if AMC ownership is complicated. 2. AMC’s cause of opinions of bias within the appraisal process: AMCs hire staff appraisers partly for control and reliability, which looks like they want to ensure values meet client expectations. It’s legal if structured correctly, but the perception of bias is almost impossible to avoid. Hiring inexperienced appraisers who are not geographically competent but are the cheapest bid and quickest turn time has lead to an uprise in a perceived appraisal bias when in actuality it’s likely due to the appraiser is not knowledgeable in the specific area. * AMCs or lenders may steer certain types of appraisers to certain assignments based on borrower demographics, location, or property type. * Low fees or selective panels could inadvertently affect the outcome. * In some cases, lenders may indirectly influence value by setting unrealistic turnaround times, incentivizing staff appraisers, or rejecting appraisals that don’t meet internal expectations.