Wednesday, July 28, 2010

What Happens Now? Questions on the Passage of the Dodd-Frank Financial Bill

/PRNewswire/ -- The following statement is attributed to Tom O'Grady, CEO, Pro Teck Valuation Services.

Pro Teck Valuation Services applauds the passage of the Dodd-Frank Financial Bill. It incorporates the best of HVCC, provides overdue protections to consumers and limits the financial exposure firms can maintain while investing.

Now comes the hard part.

During the next 90 days the Comptroller of the Currency, Federal Deposit Insurance Corporation, National Credit Union Administration Board and the Federal Housing Finance Agency will be drafting the regulations, rules, interpretive guidelines and general statements of policy - a daunting task. With so many moving parts, interdependencies and constituents, drafting the regulation should prove more difficult than passing the bill.

As an AMC, Pro Teck hopes that common sense prevails while drafting regulation. Most notably, we look forward to clarification on AMC appraiser registration fees and the definition of "customary and reasonable" fees paid to appraisers.

Part of the Dodd-Frank bill was a yearly $25 per appraiser per AMC registration fee (which may be adjusted to a maximum of $50 per appraiser per year). While Pro Teck understands the need to finance the new regulation, the way it is now written looks to be excessive.

Currently there is no cap on the fee an AMC can pay.

As an example, let's say there is an appraiser in California who works with 10 different regional and national AMCs (there are 350 registered AMCs in CA). The government would now receive $250 in fees for that one appraiser. If you estimate that approximately 40,000 appraisers are on at least one AMC panel, the cost to AMCs, including registration fees to comply with various State AMC registration and regulation laws, are likely to be in excess of $10,000,000.

These increased costs of doing business will eventually be passed onto the consumer.

Also in the bill it says that "customary and reasonable" fees will be determined by a study, excluding the fees that are "customary and reasonable" when an appraiser works with an AMC. Because of the reach of national lenders and their need for a national appraisal solution, 70% of appraisals in 2010 are being performed through AMCs.

How can you exclude 70% of the market in a study to determine market rates?

A good AMC adds value by investing in technology, data, quality control and customer service - all leaving the appraiser more time to appraise. AMCs also finance receivables, do all sales and marketing and manage workflow and orders.

Isn't it reasonable that the AMC would share some of the fee for what it provides the client and appraiser?

A recent experience of mine made the absurdity of these provisions come to light. What experience? Buying a dishwasher.

I bought the dishwasher at Sears, but it just as easily could have been Home Depot, Best Buy or any other national chain. I paid Sears the "customary and reasonable" fee to have the dishwasher delivered and installed by a licensed master plumber. The fee was the same as if I went to a plumber myself. The plumber took less from Sears for the customer service, marketing, billing, back office and planning they provide. I'm happy with my dishwasher, the plumber was happy for the business and Sears was happy with the sale.

Now, what if Sears had to register each plumber they use? What if each chain had to do the same? What if the government came in and told the chains how much they had to pay the plumber?

Sears needs the plumbers, so they will pay the added cost, but who is ultimately going to pay? The consumer.

Same is true in this. I know installing a dishwasher and appraising a piece of property are two totally different things, but the free market dynamics, wholesale versus retail, and responsibilities of the contractor and managing companies are the same.

Large national lenders are still going to work with AMCs because most banks do not want to become AMCs. They don't want the added cost, overhead and it's not a core competency. So who is going to pay?

The consumer.

For more than 30 years banks, servicers, investors and independent appraisers have seen the value of doing business with AMCs like Pro Teck. The need is there, the positive track record is clear, yet the bill in its current form does not reflect these truths.

Pro Teck Valuation Services sees the need for AMCs, lenders, appraisers, investors, consumers and the federal government to work together to guarantee efficient and effective commerce. We believe that if those writing the Dodd-Frank regulations share this belief, then common sense will prevail.

No comments:

Post a Comment

We do not publish all comments, and we may not publish comments immediately. We will NOT post any comments with LINKS, nor will we publish comments that are commercial in nature.

Constructive debate, even opposing views, are welcome, but personal attacks on other commenters or individuals in the article are not, and will not be published.

We will not publish comments that we deem to be obscene, defamatory, or intended to incite violence.