Appraisal Management Company’s, a New Reality
AMCs have become an increasing presence in the real estate lending industry and are currently involved with over 70% of residential mortgages. That residential number will definitely increase in the next few years with commercial/agricultural order management and review increasing also. There have been several reasons for the growth of the AMC industry. One is Federal Regulations emphasizing the complete separation of the appraisal ordering and review process from anyone involved in the loan administration or lending function. The second reason is the economy of outsourcing this increasingly complicated process. Banks are coming to the realization that they have reduced reporting and compliance risk with the professional management of the appraisal process by AMCs. As a result of working with an AMC, a bank can expect to streamline the overall appraisal process through improved consistency, quality, and service.
Many of the appraisers that work with SAMCO understand that we work together as a team to achieve that higher level of quality and service. We are here to answer your questions, to discuss together approaches to unique and tough projects, and sometimes just to share about weddings, vacations, our families, or even the occasional serious illness. That's why SAMCO only works for community banks and credit unions, and when a bank/credit union joins the SAMCO team, that client's approved appraisers join our team also. Many appraisers in more rural areas have not had the opportunity to work with an AMC, but appraisal management companies have been around for years. It's true that the Home Valuation Code of Conduct (HVCC) created opportunity for many AMCs. That was just the beginning of the largest series of changes to ever happen to the appraisal industry in the last few years. HVCC has now been replaced with changes to Fannie Mae's Selling Guide that maintains the spirit of the HVCC. It's not dead; it just has another name! The Dodd-Frank Act, the Federal Reserve's Interim Final Rule in response to Dodd-Frank, and the soon to be announced 2010 Interagency Appraisal and Evaluation Guidelines are moving the entire appraisal industry to the spirit of the HVCC. In my opinion, HVCC was the first real change in creating appraiser independence and what was missed 20 years ago when appraiser licensing was mandated.
If you have searched on the internet, you have found many charges laid at the door of AMCs. You will read that the AMC charges a huge fee and pays the local appraiser just a fraction after they've done all the work, and that fraction is way below the customary fee that is typical for that area. You will also read that they utilize out-of-area appraisers that produce inferior reports; these appraisers are willing to take lower fees in return for higher volume but lower quality. I will agree there are some AMCs who will negotiate a fee that is below a typical fee. The local lender must be aware and have constant proof that this does not happen when they are working with a vendor. The CFPB has significant fines for this and those fines are assessed to the lender whom the AMC is working for. Don't place your financial institution at risk! Most AMCs not only desire, but require high quality. They do not send an appraiser out of their market area. Try a few out and you will see an AMC can be a great partner in your profession.
At SAMCO, we have always paid the customary local fee for a very good reason. Our clients expect to have the best by working with us. Because of that, we only work with the best! We are held to a high standard of quality and performance, and we in turn, expect that from our appraisers. We also do not send appraisers out of the area they serve. It has to be an extremely unusual situation for an appraiser to be sent over 30 miles from their base of operations. (If you're from Nebraska or North Dakota, that's a different situation.)
Again, I encourage all lenders to contact multiple AMCs for vendor approval. I also encourage you to seek out the AMCs that don't just consider you as another appraiser, but as a partner in the process. Find an AMC that will be loyal to you, and you can be loyal to be to also - one that rewards you for delivering a quality report in a timely manner.
I have watched our industry grow and mature for over 30 years now. What changes! I'm sure there will be more! We are in a great profession, and we're all in it together.
NOTE: Appraisals are as unique as the individual subject properties. SAMCO understands that occasionally there will be an appraisal that simply will not conform to Fannie/Freddie guidelines. In those instances a very complete "My Comp Search and Results" paragraph is required. SAMCO also understands that the appraiser's best comparable may not conform to guidelines. In that instance though, those comparables that do not meet guidelines should be placed in the second grid, as supporting information.