With the enactment of HVCC a couple years ago, time was allowed for the industry to put in place provisions conforming to HVCC regulations, specifically that area which dealt with separation of loan officers and originators from appraisers. The exact provision of HVCC stated that appraisals must be ordered by someone not dependent of the loan success. This does not mandate use of AMCs and many astute financial institutions set up departments within their institution which ordered and processed appraisals. They set up appraisal panels and rotated appraisers with no threat of lost work for "below-value" appraisals. The members of these departments are salaried and not at all reliant upon loans closing as part of their income. But here comes the glitch:
Several larger financial institutions recognized that, by forming their own AMC rather than simply a new department within their bank, they would be able to skim additional profits off the consumer through AMC fees which are added to the appraiser fee. This is tantamount to a kickback to the lender paid by the consumer which would have been illegal prior to HVCC. Further, by forcing appraisers to work at reduced fee levels, lender profits increased through owned AMCs. While it is easily understandable why AMCs are so opposed to a requirement that their fees be separated from the appraisal fee on the HUD, it is even more critical for lender owned AMCs to conceal these fees as well as their ownership interest in the AMC.
Not only should the AMC fee be separately disclosed on the HUD, but the ownership interest of the lender in the AMC should also be a required disclosure.
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