As a chief appraiser for a nationwide appraisal management company with more than 30 years of experience, I have been asked by many over the past few weeks my thoughts on the agencies' proposed minimum rules for AMCs. Issued on March 24 of this year, the proposed rules would implement minimum requirements for state registration and supervision of AMCs. To answer this, it is critical for industry professionals to understand the role of AMCs today and how they work with lenders to fully understand the affect this ruling would have.
AMCs have been around in some capacity since the 1960s. They act as an outside, third-party organization that essentially handles all administrative processes associated with appraisal management on behalf of a lender. Lenders do not necessarily have to work with AMCs. However, in reviewing all they take on and manage, it is clear where the benefit of an external partner comes into play.
The role of an AMC today is extremely widespread; among the tasks they are responsible for include recruiting appraisers, contracting specific appraisal assignments, paying appraisers and compliance QC check of appraisers' work.
The proposed rule covers everything from AMC vendor selection to appraisal independence to reporting and even touches on the occurrence of AMC investigations.
The minimum requirements outlined would apply to specific states that have elected to establish an appraiser certifying and licensing agency with the authority to register and supervise AMCs. They would prevent mortgage brokers or real estate agents from selecting or paying an appraiser if the appraiser's report will be used for lending purposes.
What many are interested or surprised to hear from me when they ask my thoughts is that, at present, the proposal does not indicate any new requirements that are not currently in place with existing state AMC regulations. Many of these requirements are guidelines that AMCs like USRES have already implemented.
For instance, the proposal states that an AMC should ensure appraisers selected for specific assignments render a Uniform Standards of Professional Appraisal Practice-compliant report. However, many AMCs already have compliance QC checks and integrated software to ensure USPAP compliance.
One area receiving considerable attention is the language surrounding "customary and reasonable fees." The federal agencies and the CFPB did not target specific minimal fees broken out by county based on product type, therefore leaving states to determine how best to handle acceptable customary and reasonable fees. It is expected that this will be a major focal point at the state level as appraisal organizations will likely lobby for fee surveys and state imposed compliance.
In some instances, state mandated customary and reasonable fees will require AMCs to reconsider existing service level agreements with some of their clients that are not operating on a cost plus contractual basis.
This issuance of proposed guidelines signifies that regardless of the outcome, there will be more scrutiny placed on AMCs.
Activities of importance under review may include how orders are submitted—is this done electronically, and if so, are secure procedures in place? How frequently are AMCs reporting, and do other parties have access to reports and status updates online, in real time? What is an AMC’s criteria for evaluating appraisers' performance, and are there scorecards kept that lenders can assess? Assessing an AMC’s performance and compliance has become more important than ever before, and today's AMCs need a full time compliance staff in an effort to keep abreast of industry regulatory changes.
As a national AMC, the focus of USRES is always to provide compliant valuation products that serve our client's valuation needs. Having a dedicated AMC compliance department translates into reduced risk and liability for our clients, which is key in today's more stringent and scrutinized environment.
No matter the final result of this proposal, it will continually be crucial for lenders partnering with AMCs to ensure they are committed to understanding the regulations in all states, as well as have the ability and the technology access to adjust to each and every legislative change that follows.
Brad Froelich is chief appraiser at RES.NET and USRES.