Eliminate Bank Owned Management Companies

We beseech the U.S. congress to propose a bill mandating the abolishment of bank owned/ affiliated and/or contracted appraisal management companies for the following reasons:



Appraiser independence (per FIRREA law chapter 564-5-6) is compromised as bank owned management companies have an interest in directing the outcome of the mortgage transaction.

Management companies who control the appraisal ordering process, negate appraiser independence by coercing appraisers to follow a predetermined outcome, one favorable to the funding of the loan at any cost, and without regard to the welfare of the consumer. Management companies go so far as to remove appraisers who do not meet specific financial goals from their panel of acceptable appraisers.

Bank owned/affiliated and/or contracted management companies mark up the cost of an appraisal to cover their overhead, but fail to properly disclose that to the consumer, rather simply stating on the Closing documents that a fee higher than the one paid to the appraiser was charged for the appraisal. As a result, the spirit and letter of the Truth in Lending mandates are being reported inaccurately to the consumer. Profiting from an appraisal fee constitutes a clear conflict of interest for the bank. Mandate that the appraiser collect the entire fee, in advance, directly from the consumer, and not a portion thereof.

Management companies routinely demand predetermined values, and routinely refuse to pay appraisers for work if this contingency is not met. They often set forth a scope of work that so limits the appraisers ability to properly collect and analyze relevant data that credible results are impossible to attain. Among these requirements are 24 hour deadlines to complete assignments, and a directive to stop work and consult the management company if it becomes clear that any of these contingencies can not be met.

Many bank owned management companies are now filing bankruptcy in an attempt to hide behind a corporate veil. Consequently, appraisers are not paid on jobs performed. Accordingly, said management companies are retaining the appraisal fees and in no way independent of the transaction.

Bank owned/affiliated and/or contracted management companies are not acting in the capacity of fiduciaries to a transaction, as they are so regulated to be, but are interested parties of the first part.

In addition, management companies appear to be price fixing appraisers fees. This alleged collusion by lenders/bankers/appraisal management companies is contrary to anti-trust laws.

Appraisers who are not on key lenders (management companies) approved lists cannot receive work from clients in the mortgage community (mortgage brokers/realtors), which puts appraisers out of business.

Damage to PRINCIPALS --The consumer -- (buyers/sellers) oftentimes occurs when substantial money paid to management companies for appraisal fees are lost, if/when; the bank (who controls the management co.) decides to not fund the loan. The principal then wants the appraisal report (which the management company routinely refuses to give to the principal) - hence, the ensuing obstacle created via the next BANK owned/controlled mgmt co. (who subsequently refuses to take the report from the appraiser who is not on their approved list), creates havoc and chaos in endeavoring to fund the principal's transaction.

The keeping and monitoring of approved appraiser lists has turned into a list of unapproved appraisers based on nothing more in some cases than the ratio of how often the appraiser returns the required value, or one who refuses to accept such limiting conditions as to render an appraisal unreliable. Once an appraiser is placed on one of these arbitrary lists, there is no remedy offered to the appraiser and the appraiser often finds he is blocked from doing business with any or all companies based on such a list. With the existence of so many lists of unacceptable appraisers, it is impossible for a buyer to shop for a competitive mortgage, as he must continually hire different appraisers based on each companys list. This practice clearly is a restraint of trade in the marketplace

The FIRREA law as it presently stands which states: The Lender or its Agent must engage the appraiser, is in complete contradiction to consumer rights laws, and free trade/commerce, wherein the consumer, ie; the PRINCIPAL cannot engage the appraiser, and seek out an appraisal for a fair price as the Lender (or management company) dictates who the borrower-consumer (Principal) must use.

Accordingly, damage may result in foreclosure to the principal if they are facing a balloon mortgage or a lapse of contract; and once expired, the transaction can fall apart. Either the principals deposit or equity can be lost, as trade has been restrained for the principal; the consumer.

The actual client (mortgage brokerage agent or real estate agent) is typically forced by the lender to order a NEW appraisal, as the management company more often than not steers the client (mortgage broker/or real estate broker (AGENT) to their approved appraiser), thereby restraining trade for the mortgage brokerage agent and their client, the borrower-consumer, unnecessarily creating time constraints and extra fees contrary to the FIRREA anti-discrimination appraiser law Chapter 564.5-6, which management companies openly, defiantly, and routinely violate.

Appraisers have seen the pitfalls of the lenders owning the companies selecting the appraisers first hand. Discrimination against honesty and unbiased opinions has led to the reward of fraud, deceit, and unreliable results at the expense of the general public. Without honest, unbiased appraisers who are free to communicate reliable, well researched and well documented reports, who will protect the consumer?





As a group, the undersigned implore you to make such affiliations between Lenders and Appraisal management companies prohibited. Help us return the appraisal ordering process to what it was intended to be when such regulations as FIRREA, USPAP and Truth in Lending were established. There is no way a company owned/affiliated/contracted/managed by the lender can act without bias towards that lender. Regulation would only serve to legitimize this orchestrated effort to defraud the consumer. We owe it to the people involved in these transactions, especially in the light of our current mortgage crisis, to give them every measure of protection and disclosure possible to avoid any further damage to our professions and the economy as a whole. Please, outlaw this embedded, insidious conflict of interest as soon as possible.