Saying that consumers deserve to know what they’re paying for, the Appraisal Institute, the nation’s largest professional association of real estate appraisers, has called on the Consumer Financial Protection Bureau (CFPB) to require more transparency on homebuyers’ forms. In a joint letter with the American Society of Farm Managers and Rural Appraisers, the Appraisal Institute has asked the CFPB to separate appraisal fees from administration and processing fees on the settlement forms that consumers receive when purchasing a home.
“We see no consumer benefit with continuing to bundle two separate services and not fully disclosing such information to borrowers,” the letter said. “We urge the CFPB to revise these forms with a separate line for Appraisal Management (or management fees in total) as Congress authorized last year when it enacted the Dodd-Frank Act.”
The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by President Obama in July 2010, authorized the CFPB to separate appraisal and appraisal management fees to consumers on the HUD-1 settlement statement, the standard form used in the United States to itemize services and fees charged to the borrower by the lender or broker when applying for a loan for the purpose of purchasing or refinancing real estate.
However, the proposed form issued for comment by the CFPB still combines appraisal and appraisal management fees, fees charged by an appraisal management company (AMC) for administrative services, while the appraisal fee refers to the actual cost of the appraisal itself.
In their letter, the Appraisal Institute and the American Society of Farm Managers and Rural Appraisers cited recent research from the National Association of Realtors (NAR) that said borrowers are paying more for appraisal fees than they recently did, but noted that appraisers report their fees have been reduced by as much as 40 percent. This is because banks have passed through backroom administration expenses on the backs of consumers.
“(T)he CFPB … has a unique opportunity to improve transparency for borrowers by requiring full disclosure of costs incurred for appraisal services and costs for appraisal management services,” the letter said, adding “…we believe that consumers deserve to know who is providing services relative to their loan and how much was paid. This is the spirit of transparency and the core presumption with development of a consumer disclosure form.”