Appraiser cancelled; new Appraiser has higher fee

Posted By: Tarhe

Appraiser cancelled; new Appraiser has higher fee - 01/30/17 06:03 PM

Are we out of luck in this situation? We disclosed an appraisal fee of $500 on our LE based on the fee schedule of the appraiser that we planned to use. After we received Intent to Proceed, we contacted the appraiser to move forward and he cancelled out on us. The second appraiser that we selected is charging a fee of $600 - on this zero tolerance item. We are bound by the $500 in this case, aren't we? Bank must absorb the extra $100?
Posted By: Oursisnottoreasonwhy

Re: Appraiser cancelled; new Appraiser has higher fee - 01/30/17 07:37 PM

I do believe you would have to eat the extra $100.00. That is why we list the highest appraiser's fee on our LE's.
Posted By: Cracked Egg

Re: Appraiser cancelled; new Appraiser has higher fee - 01/30/17 07:47 PM

I would agree that you're out the $100. We also disclose the highest appraiser's fee when sending out our LE's.
Posted By: MTBDeb

Re: Appraiser cancelled; new Appraiser has higher fee - 02/01/17 03:51 PM

What if this appraiser usually does charge $500 but saw an opportunity to make an extra $100 and charged more than usual? We could never possibly have known this would happen. We had this recently, where an appraiser we will never use again, tripled his normal and documented price in a deal where the bank was in a rough spot and didn't have a choice. (The original, and engaged appraiser had a family emergency.) The borrower okayed the increase, (time factor). The bank did not eat $1,200. The file is well documented and I'm prepared to debate this one all day long. It was definitely a situation that was unknown and new information, both to the bank and the borrower. The reg just doesn't address dealing with rats. But vendor management does and he's off the approved list now. It just wasn't fair to the borrower or to the bank. If we can't win a debate with an examiner, we'll refund, but harm occurred all around here.

But yes, we also always disclose the highest appraiser's fee. We just didn't think to triple it at any point in time.
Posted By: PCBDebbie, CRCM

Re: Appraiser cancelled; new Appraiser has higher fee - 02/01/17 06:49 PM

If information you relied upon at disclosure, changes and causes your disclosures to become inaccurate, you have 3 business days to re-disclose and reset the tolerances.
Posted By: Compliance NABW

Re: Appraiser cancelled; new Appraiser has higher fee - 02/01/17 09:25 PM

I agree with Debbie. I believe this would be a valid COC. It would be similar to an appraiser going out and figuring out there was some special situation regarding the property that required more work and the creditor was not aware of that situation when the appraisal was ordered.
Posted By: rlcarey

Re: Appraiser cancelled; new Appraiser has higher fee - 02/01/17 10:12 PM

A vendor chosen by the bank deciding to charge you more than you thought they would, unless it was directly related to the fact that there was something different about the property than the applicant provided to you, is never a valid changed circumstance no matter how you slice it. There are three reasons for a changed circumstance:

(1) An extraordinary event beyond the control of any interested party or other unexpected event specific to the consumer or transaction;

(2) Information specific to the consumer or transaction that the creditor relied upon when providing the disclosures required under paragraph (e)(1)(i) of this section and that was inaccurate or changed after the disclosures were provided; or

(3) New information specific to the consumer or transaction that the creditor did not rely on when providing the original disclosures required under paragraph (e)(1)(i) of this section.

While you might think that an appraiser charging you three times as much as they usually do is "an extraordinary event", I do not believe that this rises to that level under the regulation.
Posted By: MTBDeb

Re: Appraiser cancelled; new Appraiser has higher fee - 02/01/17 11:02 PM

Oh, I'm sure many, maybe a majority, wouldn't say it was, but as I said, I'd argue it all day long and I'm totally willing to take a chance with that type of money and unfairness. All. Day. Long. smile It was extraordinary Xs 3 in my humble opinion.
Posted By: MTBDeb

Re: Appraiser cancelled; new Appraiser has higher fee - 02/01/17 11:06 PM

The extraordinary event, out of all's control was the family emergency, not the charge. The charge was just mean.
Posted By: Truffle Royale

Re: Appraiser cancelled; new Appraiser has higher fee - 02/02/17 02:46 AM

I'd agree with Randy and the others that you should have either looked for another appraiser or eaten the difference.
It's not the borrower's fault that the appraiser you hired had a family emergency.
And while it's not your bank's fault either, you picked the appraiser and hired him at a price that was agreed upon with the borrower. If the appraiser, and then by extension your bank, can't uphold your side of the bargain, the borrower should not have to bear the price even if they did want to close due to a 'time factor'.
Sorry, but I'd cure for this now rather than wait to get dinged later.
Posted By: Dan Persfull

Re: Appraiser cancelled; new Appraiser has higher fee - 02/02/17 03:59 PM

I also agree the increased cost by the appraiser was not a valid changed circumstance and even though the borrower may have agreed to it you, the FI, violated the regulation and owe the borrower restitution.
Posted By: MTBDeb

Re: Appraiser cancelled; new Appraiser has higher fee - 02/02/17 06:06 PM

Thank you all! I appreciate the opinions for sure and one hand totally agree. Thanks for the discussion. But we'd like to push this one. It's a principal for this small community bank. We're not hiding it, in fact, it's pointed out in the file. The lender had no control. In situations where the lender had total control, or done something in bad faith, there would be no question. But, life happens.
Posted By: Truffle Royale

Re: Appraiser cancelled; new Appraiser has higher fee - 02/02/17 06:16 PM

Just be sure your small community bank understands what this could cost them if an examiner pulls the file for review.
Posted By: MTBDeb

Re: Appraiser cancelled; new Appraiser has higher fee - 02/02/17 06:41 PM

For sure-that was my main job. We laid out all of the risks - here's what could happen, now you all decide what to do. Very strong CMS, which was also a factor in their decision. It was not made lightly, or by one.
Posted By: Compliance NABW

Re: Appraiser cancelled; new Appraiser has higher fee - 02/02/17 07:04 PM

Don't want to go into the 3X fee situation, but for the $100 difference, is there no consideration to it being information changed that was relied on by the creditor when making the original estimate? They relied on a particular appraisal company to get their Section B estimate, now that Appraisal Company changed. I would see that as a valid COC. Maybe I'm missing something here. Is it just an individual appraiser that is different and not a company? If it is a company, do you think an appraisal company going out of business would count?
Posted By: Compliance NABW

Re: Appraiser cancelled; new Appraiser has higher fee - 02/02/17 07:10 PM

MTBDeb,

Why didn't the borrower go with a different lender? That might be what I would have done. Threaten to walk away from the deal, then maybe you would have paid the extra $700 for the appraisal. Although, I agree the lender shouldn't have to foot the bill in such a situation, well I guess that would depend if you had NO other choice of appraiser, but I also don't like the borrower having to pay the extra money for it either. That could have been a technique to have the appraiser come down on the price too, i.e. tell him the borrower said he will just go to a different lender, who will select a different appraiser (then he/she makes $0). Is this the only guy for miles or something?