In its release, CoesterVMS said it is the first company to adopt this concept. Customarily, AMCs utilize a tiered fee structure, whereby prices are determined based on the property type or the state in which the property is located.
Marc Savitt, the president of the National Association of Independent Housing Professionals and a critic of AMCs, said the move to a flat fee validates his organization’s position on the appraiser independence rule.
“NAIHP strongly believes local, licensed mortgage professionals, should be ordering appraisals from local, licensed appraisal professionals.
“It appears this new fee structure is a continuation of appraiser selection based on fee, instead of knowledge and experience. How much will appraisers receive out of the $450? Most qualified appraisers can’t afford to accept an assignment for less than $450. In some areas of the country appraisers receive $500 to $600, based on the assignment.
“I would also caution Coester to consider the provision of Dodd-Frank that concerns customary and reasonable fees. It’s not one size fits all. It’s meant to compensate appraisers based on local markets. I also question a flat fee model that exempts ‘negotiated contractual arrangements,’” Savitt said.
A spokeswoman for Coester said the program is compliant with Dodd-Frank because the appraisers set their own fees. Coester has the variable margin in this situation.
There is also a sophisticated tracking system that makes alerts if the fee is outside a 10% tolerance.
From Coester’s point of view, the program makes it easier for originators to comply with disclosure regulations.
“RESPA guidelines mandate new disclosures to be sent to borrowers when the difference between quoted fees and actual fees is 10 percent or more,” said Brian Coester, CEO of CoesterVMS. "With tiered appraisal fee structures, there tends to be a lot of add-on fees, which can easily put the lender at risk of a RESPA violation. On the other hand, there’s nothing safer than a fixed fee.”
The new fee structure went into effect on Jan. 1.