Those doing business in the U.S. mortgage lending industry are operating in an extremely complicated environment. Anyone working here knows that. Those working on the collateral valuation side of the transaction know it all too well. New rules that began with the Home Valuation Code of Conduct and expanded by Dodd-Frank, and the regulatory changes being implemented under the Consumer Financial Protection Bureau, have made it far more difficult for banks to manage their appraisal processes in house.
Fortunately, our industry has a very well-developed system of vendor management companies that have traditionally served lenders with complicated title- and appraisal-related processes. HVCC may have started the rise of the appraisal management company, but when its language was adopted by later legislation it created a unique niche for these vendor management firms.
While this has created some friction in the professional fee appraiser community, AMCs are far better equipped to manage large professional fee panels than banks. Since they also take on the responsibility of making certain the bank remains in full compliance with the changing regulatory environment, AMCs have earned a large share of the collateral valuation business. And, the new federal mandates for state-level AMC registration and other regulatory changes introduced with the interim final rules and the interagency guidelines are also playing a part to strengthen the overall quality of AMCs in general.
As AMCs are seeing their business increase and their role become more complex, the quality control departments within these AMCs find that they are fighting a two-front war against both the speed and affordability requirements of their lender clients and the shifting regulatory landscape. Despite the difficulties, failure to protect a lender from compliance issues is key and ultimately an appraisal-related buyback request would be catastrophic. Many have turned to automation, but when the rules are changing as quickly as they are today, even that seems like only a partial solution.
As of Dec. 1, AMC QC departments were visited with another hurdle. Any loan with an application date on or after the first that will be sold to Fannie Mae or Freddie Mac must have an appraisal report delivered in a format compatible with the new Uniform Appraisal Dataset. Some have been working with UAD-formatted reports since Sept. 1, but many others are seeing them for the first time.
Some AMCs are looking at the UAD as an opportunity to revisit quality control processes, updating them and streamlining them where possible. Those AMCs that are not taking advantage of this opportunity should be.
