Some housing industry professionals have cheered the Trump administration’s actions to disable the Consumer Financial Protection Bureau (CFPB), but appraisers have mixed feelings about it.
On one hand, they welcome the end of the Property Appraisal and Valuation Equity (PAVE) Interagency Task Force, the federal effort to investigate racial bias in appraisals for which the CFPB was a stakeholder. But the unraveling of the CFPB would also mean the bureau won’t issue final rules on complaints from appraisers. They allege that appraisal management companies (AMCs) take an unfair share of the fee that homebuyers pay to have their home’s value determined — and that they deliberately hide it from the public.
Gaming out what will happen with CFPB has gotten increasingly difficult. That’s because President Donald Trump’s hirings, firings and replacements have led to four different CFPB directors in less than a month, and one of them effectively shut down the department unilaterally.
“CFPB is kind of a necessary evil,” said Josh Tucker, an appraiser with InterBank and chairman of the Appraisal Regulation Compliance Council. “But I feel like a lot of states have relied on the CFPB to do the heavy lifting for them and have not been looking out for their consumers as well. So, it’s a double-edged sword.”
It’s an open question as to whether Trump has the legal authority to shut down the CFPB since the bureau was created by Congress. Regardless, appraisers are concerned about the role of AMCs and will have to find another way to push back if the CFPB is eliminated or rendered inoperable.
“A lot of appraisers feel like AMCs are just generally in this gray area and they get forgotten about in the regulatory landscape,” said Dallas Kiedrowski, a residential appraiser with Olympic Valuation. “A lot of appraisers are sad to see [Rohit Chopra] go. There was hope around it finally getting some attention and that it would go in the right direction.”
Goodbye to PAVE
Former President Joe Biden and his administration made civil rights and social justice cornerstones of its policies. The PAVE Task Force sought to correct what it perceived to be racial discrimination in the home valuation process.
Using data from the FHFA’s uniform appraisal dataset, PAVE concluded that there was systemic racial bias that led to huge discrepancies in appraisal values between Black and white neighborhoods. PAVE cited a Brookings Institution study that had similar conclusions. But appraisers have seized on the fact that the Brookings study used Zillow’s Zestimate for comparison points, a metric that’s widely considered flawed for use in research.
Appraisers believe they were unfairly thrown under the bus in regard to PAVE’s conclusions. Some say that differences in home valuations are downstream effects of government redlining between the 1930s and 1960s. The legacy of redlining continues to have an impact today.
Researchers at the American Enterprise Institute (AEI), a conservative policy think tank, conducted a study on appraisal discrepancies and concluded that the gap in valuations is caused by socioeconomics, not race.
“We actually wanted to tie it to what happened in the election,” said Ed Pinto, the co-director of AEI’s housing center. “The election wasn’t about race. The election was about class. People of lower socioeconomic status or lower class wanted to be treated and have programs that dealt with that issue, not because of the race, but because of their economic status.”
The debate around the validity of the studies is a moot point as it relates to PAVE. That’s because Trump launched a ferocious assault on policies and programs related to diversity, equity and inclusion (DEI), removing them from government websites.
Appraiser pushback on AMCs gets harder
AMCs took on a greater role in 2015 when the CFPB instituted a “zero percent tolerance” rule in response to lenders lowballing the cost of appraisals, which resulted in homebuyers paying more for appraisals than was quoted to them. The rule requires lenders to list an inflexible appraisal cost within days of receiving a loan application. If the appraisal ends up costing more, lenders have to eat the expense.
Lenders responded by outsourcing the appraisal process to AMCs, which weren’t subject to the CFPB’s rule. AMCs are intended to serve as an intermediary between lenders and appraisers, as regulators believe their relationship was too cozy in the run-up to the financial crisis of 2008.
But these companies are largely unknown to the general public, and appraisers accuse AMCs of using their position as opaque “middle men” to take more of the appraisal fee that homebuyers pay than the actual appraisers receive. Appraisers say AMCs have suffocated the profession by artificially suppressing their fees, which has led to a precipitous drop in the number of appraisers in the U.S.
AMCs do indeed take a large cut. According to FHFA data, AMCs have charged consumers more than $15 billion since 2013. And a recent analysis from Business Insider estimated that AMCs received about $12.3 billion between 2019 and 2023.
Appraisers took their fight to the CFPB in the hopes of getting the appraisal fee broken out in closing documents to show how much goes to the AMC. They believe this would prompt homebuyers to question why so much of the fee goes to the AMC — and to ask what an AMC even is.
Mark Schiffman, executive director of the Real Estate Valuation Advocacy Association (REVAA) — the trade group that represents AMCs — says that REVAA has suggested to the CFPB that it eliminate the zero percent tolerance rule to allow for more flexibility in what is charged to homebuyers.
Schiffman also believes that the drop in the number of appraisers is not because of the added role of AMCs but a byproduct of record-low home sales. He also said that smaller appraiser fees are simply a result of the market for appraisers, in which REVAA plays an active role.
“Appraisers set their own fee, so what an appraiser quotes for their fee comes from them,” he said. “They’re lowering their fee to try to create volume. We’re concerned about it because low volume for appraisers means low volume for AMCs, so we’re having to adjust to that as well.”
‘We ain’t playing around anymore’
If the first three weeks of the Trump administration has taught the public anything, it’s to expect the unexpected. But appraisers concerned about AMCs fees are displeased with the chaos at the CFPB. Thumbing through social media posts suggests that frustration has boiled over.
“We ain’t playing around anymore,” said Pat Turner, an appraiser with P.E. Turner & Co. in Richmond, Virginia. “It’s been going on way too long, and the American public needs to be made aware.”
Appraisers are exploring backup plans if the CFPB folds or otherwise doesn’t issue rules on AMC fee disclosures. In this scenario, Turner said that appraisers could take a “shotgun” approach and take their complaints to other regulators in the federal government, such as the Treasury, the FDIC or the Federal Reserve.
In the meantime, appraisers may get some outside help. Morgan & Morgan, a law firm with a long track record in class-action lawsuits, announced in a blog post that it’s investigating AMCs as part of its fight against “junk fees.”
Attorney John Yanchunis said the firm is fielding calls and gathering information from homeowners who believe they’ve been affected by AMC fees.
“What would be the harm in just breaking [the fee] out?” he asked. “There are no problems if consumers are given full disclosure of what these are, but when they’re masked or hidden, I think that’s deceptive and certainly unfair.”
Appraisers say the problems in the industry cut far deeper than fees and their disclosure. There’s also concern about erosion in the quality of appraisals, which many appraisers say is happening in the current environment. This might cause mortgage-backed securities to be mispriced on the basis of inaccurate appraisal values. And broader adoption of hybrid appraisals, along with the rising role of artificial intelligence in the appraisal process, could accelerate the decline.
“Unscrupulous or deluded people are dangling the false promise that big data and AI can replace real property appraisal,” said Cindy Chance, the former CEO of the Appraisal Institute. “These are homes, stores, offices and data centers. The rapidly changing context of real property means real people with high levels of analytical skills and ethics are needed to ensure price reflects value.”
