Consumer Financial Bureau Looks to Regulate Appraisal Industry

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Appraisal industry is buzzing

As the Consumer Financial Protection Bureau, or CFPB, seeks input on appraisal fees. In a recent Request for Information, the CFPB aims to tackle what it calls “junk fees” in mortgage transactions, specifically focusing on rising closing costs and who benefits from them within the Appraisal Industry.

CFPB Director Rohit Chopra emphasized the need to address anticompetitive fees in the Appraisal Industry that negatively impact both homebuyers and lenders. Nearly 100 comments have been submitted by appraisers and national organizations, highlighting the need for transparency in Appraisal Industry fees, particularly regarding the current practice of bundling appraisal and appraisal management company (AMC) fees in the Appraisal Industry.

Critics argue that this bundling obscures true costs for consumers, as many are misled into thinking all fees go to the appraiser. Within the Appraisal Industry, appraisers report dramatic fee reductions—up to 50%—while consumer costs remain high, raising questions about market fairness in the Appraisal Industry.

Prominent voices, including the National Association of Realtors® and Appraisal Industry organizations, are calling for the separation of these fees on disclosures. They argue that doing so would enhance competition and transparency within the Appraisal Industry, benefiting both appraisers and consumers.

As discussions continue, the CFPB’s inquiry could lead to significant changes for the Appraisal Industry, promoting clarity and fairness in an industry currently under scrutiny. The Appraisal Industry will be closely watching these developments, as potential changes could reshape practices and fees within the Appraisal Industry to ensure more transparent transactions for all parties involved.

In response to CFPB’s actions, Appraisal Industry experts are advocating for better disclosure and accountability in how fees are presented to consumers. With mounting public and industry interest, the Appraisal Industry may face new regulatory guidelines aimed at eliminating deceptive fee practices.

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Homebuyers Need 86% Income Boost

The strain on the housing market is more evident than ever, with new analysis from the Federal Reserve Bank of Atlanta revealing that buyers need an 86% income boost to keep pace with rising home prices. Since January 2020, while U.S. median household income increased by 29.3%, the income required to afford a median-priced home surged by 86.6%.

This disparity stems from the pandemic housing boom, driven by ultralow interest rates and a surge in remote work. Federal researchers estimate that new construction would have needed to increase by a staggering 300% to meet this demand. However, housing supply has struggled to keep up, leading to a significant depletion of inventory and skyrocketing home prices.

As of July 2024, home prices soared a shocking 53.4% compared to January 2020. The average 30-year fixed mortgage rate has also jumped from 3% to over 6.5%, further complicating affordability.

In concrete terms, the median household income rose from about $65,925 in January 2020 to $85,255 in August 2024, yet the “qualified income” needed to afford a median home skyrocketed from $64,257 to nearly $119,870.

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Dream Finders to Acquire Alliant National

And financially, Dream Finders Homes has announced its plans to acquire Alliant National Title Insurance Company. The acquisition, which is still subject to regulatory approvals, aims to enhance Dream Finders’ vertical integration alongside its existing title insurance agency business.

David Sinclair, president and CEO of Alliant National, expressed enthusiasm about the partnership, stating, “We envision an exciting future that combines our innovative builder with a strong title agency.” This collaboration is expected to position Alliant National as a formidable player in the title insurance market.

Dream Finders Homes, ranked No. 14 on the 2024 BUILDER 100 list, operates primarily in the Southeast, Mid-Atlantic, and Midwest regions, generating $3.5 billion in revenue from 7,314 home closings in 2023. Meanwhile, Longmont, Colorado-based Alliant National boasts over 700 independent agents across 32 states and is recognized as the largest independent title underwriter in the country.

Chairman and CEO of Dream Finders, Patrick Zalupski, highlighted the strategic nature of the acquisition, emphasizing the potential for growth in the title insurance marketplace. Both companies anticipate that this partnership will benefit their bottom lines and enhance their competitiveness in the industry.

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