SAMCO’s clients disclose appraisal costs in two different ways on the Good Faith Estimate and initial Truth in Lending Disclosure (both being replaced by the new CFPB Loan Estimate in August 2015). The first is to total both the appraisal management fee and appraisal fee into one total cost. The second is to separate and identify the two individual fees to the consumer.
The Consumer Financial Protection Bureau’s final rule on Integrated Mortgage Disclosures under the Real Estate Settlement Procedures Act and the Truth in Lending Act favored making this separation of the appraisal fee optional rather than mandatory. The CFPB was concerned that there may be “information overload” for the consumer. However the Federal Housing Administration allows disclosure within the report of the fee paid to the appraiser, and many states now allow or require the appraiser to disclose the fee paid within the appraisal report.
Due to the appraisal fee increasingly being stated in the appraisal report itself, I strongly urge all lenders to separate the appraisal management fee from the appraisal fee. The issue is, if the borrower reads the appraisal report, sees that the appraisal fee is (for example) $350, but on their loan documents it states $445 appraisal costs, this will lead to questions, concern and doubt. We all need the consumer walking away from closing confident they understand their costs and have full trust in their lender and their vendors.
SAMCO makes this easy for their clients. When a completed appraisal is sent to the bank, not only is the documented Review sent with the appraisal, but an invoice stating the fee paid to the local board approved appraiser, Samco’s order management and review fee, and the total of those two fee’s. Then once a month a total collective invoice is sent to our client banks, detailing the date, address, borrower, and total fee (not separated as in the original invoice). This allows easier monthly accounting to be accomplished by the lender.
But the important issue is, if there is a complaint to the CFPB on any part of the transaction, when the file is pulled to be analyzed, the CFPB (or any other examiner) will see easily in the file by the individual invoice that the ‘customary and reasonable’ fee as required by law was paid to the appraiser. If your AMC is not providing this individual documentation and proof, they may be placing you in a dangerous position. The identification of fee’s and ‘customary and reasonable’ will be hot button issues in the coming year. Give me a call or respond on our blog if you have any questions.
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