Why CFPB Should Make Lenders Separate Appraiser, AMC Fees on TRID

Appraisers and the appraisal management companies they work with don't see eye-to-eye on everything, but there is one issue where both seem to agree: the fees that each charge should be separately disclosed to homebuyers. Consumers have a right to know what each entity does and how much each charges.

Appraisal fees are one of the gray areas of the Consumer Financial Protection Bureau's TILA-RESPA Integrated Disclosures. These fees often include two separate charges; one from the appraiser who actually does the on-site inspection and analysis of the property, and one from an appraisal management company — if one is used — that manages the appraisal ordering and delivery process.

These two fees are often lumped into one, which misleads the consumer into thinking that the appraisal "fee" is too high. Unfortunately, the CFPB seems to be leaning toward keeping this separation of the two fees optional rather than mandatory, which will only serve to keep some consumers asking questions.

The CFPB needs to get in line with the rest of the industry. The Federal Housing Administration allows disclosure of the fee paid to the appraiser, and many states already allow or require the appraiser to disclose the fee paid within the appraisal report. Recently, appraiser coalitions in 23 states asked the CFPB to require separation of the fees at the closing table.

As the owner of an AMC, my view is that we have nothing to hide and I am in favor of separately disclosing appraiser and AMC fees. Consumers should understand that AMCs perform a valuable service that costs time and money and should be compensated accordingly.

Appraisers and AMCs perform separate functions, which is why our fees and the reasons for them should be highlighted. Independent appraisers work directly with consumers and lenders that employ them. The client, typically the lender, pays fees directly to the appraiser. The lender then passes the fee along to the consumer.

AMCs facilitate any communication issues that pop up between the underwriter and the appraiser. The AMC is also charged with paying the appraiser in a timely fashion. Some states require that AMCs be registered and licensed, which can cost upwards of $2,000 per state.

The work of appraisal management companies helps get appraisal reports completed and delivered quickly and accurately, which first-and-foremost is a benefit to consumers. Homebuyers have a right to know the costs associated with a real estate appraisal and should have full trust in their lender and its vendors because we are all better off with a more informed consumer.

Sam Heskel is the president of Nadlan Valuation, an AMC based in Brooklyn, N.Y.