Twenty Questions You Could Be Asking Your AMC??? 

John R. Recser

May 5, 2009   

   

Last year (2008) unfolded with our Valuation Services spotlight being directed toward  rapidly changing customer guidelines, re-emphasizing the importance of appraiser competency, and requiring additional documentation to address declining markets.

As 2009 develops, we are experiencing the impact of questions aimed at the issuance of “new” Interagency Guidelines  and the development of the Home Valuation Code of  Conduct,  referred to as the HVCC  .  We once again are being asked to readdress concerns with “Appraiser Independence” and “Influence or Pressure” as related to the appraisal process.   

Highlights from the Proposed Inter Agency Guidelines

Highlights of the HVCC

The question from our policy folks as they scratched their heads is “So, we are being asked to support what is already in place as a part of our Appraisal Management Company’s (AMC’s) existing protocol”?

 

It is quite easy to explain the concerns of the end users of valuation services, as well as those looking toward an AMC managing their portfolio in the future.  This regulatory scrutiny demands that there be a commitment to creating control measures for  their order management and delivery platforms, as well as meeting compliance needs to improve the quality of the overall appraisal service.

 

Why should your AMC not be questioned based on existing and future compliance needs in such a volatile market? Especially, since we are operating inside an appraisal industry which is loosely designed around self regulation.

 

At ELS, we decided to organize policy information received from our national customer base and combined that with the proposed guidelines to create some “best practice” questions that each lender should be asking of their AMC.

 

We extend these questions to move forward and summarize the concerns created by recent policy:  

   
What you should be asking your AMC?  

Appraiser Independence and Influence

“No employee, director, officer, or agent of the lender, or any other third party acting as joint venture partner, independent contractor, appraisal company, appraisal management company, or partner on behalf of the lender, shall influence or attempt to influence the development, reporting, result, or review of an appraisal through coercion, extortion, collusion, compensation, inducement, intimidation, bribery, or in any other manner.”… HVCC “requesting that an appraiser provide an estimated, predetermined, or desired valuation in an appraisal report prior to the completion of the appraisal report, or requesting that an appraiser provide estimated values or comparable sales at any time prior to the appraiser’s completion of an appraisal report”… HVCC  

1.      Are third parties or individuals involved with loan production allowed to select the appraiser of there preference or from a preferred list with your AMC?  

 

2.      Does your AMC provide the loan processing units with the name and phone number of the assigned appraiser as a part of their status touch points? 

 

3.      Do the employees of the AMC operate independently “WITHOUT” a formal agreement signed that addresses ‘Independence and Influence” as a term of employment?  

 

4.      Does the AMC request pre-qualification or pre-comparable services from the market appraiser?

 

5.      Do you as an AMC provide a target value or an owner’s opinion as a part of the appraisal assignment for any of your customers?

Selection of Persons Who May Perform Appraisals and Evaluations

“An institution’s collateral valuation program should establish criteria to select, evaluate, and monitor the performance of persons who perform an appraisal or evaluation. The criteria should ensure that: The institution’s selection process is non-preferential and unbiased; The person selected possesses the requisite education, expertise, and competence to complete the assignment; The work performed by persons providing appraisal and evaluation services is periodically reviewed by the institution; The person selected is capable of rendering an unbiased opinion; The person selected is independent and has no direct, indirect, or prospective interest; The person selected to perform an appraisal holds the appropriate state certification or license.”…. 2009 Proposed  Inter-Agency Guidelines  

6.      Is the AMC “UNABLE” to report the proximity or county location of the appraisers/appraisal company’s approved panel?

 

7.      How does your AMC provide mass communication to their appraisal panel concerning competency and other market specific issues?

 

8.      Can your AMC provide examples of protocol directed specifically at each appraiser that is delivering appraisal services in declining markets?   

 

9.      Does your AMC require the appraiser to be Licensed or Certified for at least 36 months before they are added to their panel of approved appraisers?

 

10.  Can your AMC identify FHA appraisers and Certified Appraisers as a part of their panel?

 

11.  Does your AMC employ systemic control measures that provide performance ratings for each supplier as related to each appraisal assignment completed?

 

12.  Does your AMC provide management reports, service calls, and online tools to manage order activity?

 

13.  Does your AMC provide an online platform that delivers consistent touch point information from assignment to review?

Appraisal Quality Control Testing

“The lender agrees that it shall quality control test, by use of retroactive or additional appraisal reports or,other appropriate method, a randomly selected 10 percent (or other bona fide statistically significant percentage) of the appraisals or valuations that are used by the lender, including the results of automated valuation models, broker’s price opinions, or “desktop” evaluations.” HVCC 

14.  Does your AMC employ staff review appraisers that are licensed, certified or designated?

 

15.  Does your AMC provide and support a complete line of valuation products and services on  their website?

 

16.  Does your AMC have the ability to control information about the appraiser assigned to the order – from other associated entities within your lending footprint?

 

17.  Is your AMC allowing their appraisers to collect direct payment from the borrower or COD at the time of the inspection?

Representations and Lender Guidelines

“A lender shall certify, warrant, and represent that the appraisal report was obtained in a manner in compliance with this Code of Conduct.” HVCC 

18.  Does your AMC provide hardcoded instructions that define each lenders needs and deliver those at the time of order placement?

 

19.  How long has the AMC been in operation and do they have current references that can address overall performance and compliance?   

 

20.  What is the financial stability of the AMC and their associated order counts?

 

These questions and many more will become relevant as scrutiny and compliance collide in the future. It should be imperative to everyone looking at existing AMC policy or moving along the path of an AMC start up, that they be able to answer these questions.

 

We know that you as a user of appraisal services rate performance, utility, and customer service, we at ELS also believe that our industry demands a standard for measuring the validation of its compliance for your future needs. 

 

Too many peers in the industry have looked at this blossoming policy and answered it with – “it doesn’t have the steam that it did” or “I don’t think it will come to fruition – its just a political move” or “federal regulation will supersede any outside policy”.    

 

It’s a different market and we believe that level of scrutiny within the delivery of appraisal services needs to be advanced.   

 

At ELS we are able to answer those questions and meet the needs of our customers to succeed and operate in front of that future.   

  

   Associated Links: 

(www.fdic.gov/news/news/press/2008/pr08117a.pdf)

(http://www.ofheo.gov/media/agreements/3308HomeValuationCodeofConduct.pdf