AI Connecticut Chapter Testifies Before Legislature on AMC Bill

On February 5, the Connecticut Chapter of the Appraisal Institute testified before the state legislature’s Joint Committee on General Law regarding a bill that would prohibit the payment of a fee for an appraisal to anyone other than a licensed or certified appraiser. While not explicitly stated in the legislation, the impact of the bill would be to prohibit an appraisal management company from taking any portion of a fee that is paid by a lender or a borrower for a real estate appraisal.
In his testimony before the Committee, Ralph Biondi, MAI, Chair of the Connecticut Chapter’s Government Relations Committee stated, “While we support the overall intent of the bill, we do not believe that the bill should be enacted as it has been proposed. Instead, the Connecticut Chapter of the Appraisal Institute would like for the General Law Committee to consider enacting more comprehensive legislation that would provide a reasonable level of regulation for appraisal management companies operating in this state.”

In support of that goal, Biondi provided the committee with the model legislation that has been jointly prepared by the Appraisal Institute, American Society of Appraisers, American Society of Farm Managers and Rural Appraisers, and National Association of Independent Fee Appraisers, and asked for the General Law Committee to insert the language into the existing bill.

While the Connecticut Chapter testified in person at the hearing, a joint AI-ASA-ASFMRA-NAIFA letter was sent to the co-chairs of the committee. In their letter supporting the legislation, the organizations state that, “The growth of the [AMC] industry has resulted in some problems for appraisers, in particular, the widespread “cramdown” of appraisal fees. AMCs market their services to lenders by stating that they will lower the lender’s backroom costs. How can they do this? Simply put, they do this on the backs of local appraisers who are forced to accept significant reductions in market appraisal fees, while a large percentage of a borrower’s application fee goes to the AMC as a management fee.”

The joint letter further states that, “AMCs are not required to register with any government agency, and are not subject to any state or federal regulation. Because of this, we have found that no one is protected from unscrupulous participants. In fact, there has been at least one instance where a disbarred appraiser has formed an AMC outside the reach of any state regulatory agency, much to the dismay of his state appraiser board. We support the public’s right to know just what they are paying for in appraisal fees and to promote reasonable pricing structures for quality appraisals.”

It is possible that the amended bill will be considered by the Joint Committee on General Law later this month. To see a copy of Senate Bill 303 as it is currently proposed, go to
www.cga.ct.gov/2009/TOB/s/pdf/2009SB-00303-R00-SB.pdf.