Working with the wrong appraisal management company (AMC) can slow the appraisal process, cost you money, cause potential reporting gaps and create exposure. You have to be discriminating when deciding which AMCs to use, as many AMCs lack the qualifications to properly execute, and the lender is ultimately responsible for any errors the AMC makes.
There are numerous constantly changing compliance regulations that lenders must adhere to. Now, more than ever, it is imperative to remain in compliance or risk being fined, receive buy-backs or have appraisals delayed which can kill deals. Most lenders turn to AMCs to manage what has become a much more intricate and complex process than it once was amid compliance mandates. But be careful, not all AMCs are created equal. A significant number of AMCs lack technology, expertise and stability to effectively handle the process and produce compliant appraisals. However, if you select the right AMC to work with, you’ll lower costs, reduce risk, prevent fraud, speed up turn times and sell compliant loans to the secondary market.
There are number of things to consider when selecting an AMC. Below is a checklist to help guide you.
►Make sure the AMC is truly national and licensed in every state. Most AMCs are not. Unbeknownst to lenders, it is not uncommon for them to outsource appraisals to AMCs that are licensed in states they are not. This introduces a third party that can complicate matters.
►Make sure the AMC uses sound technology to automate the appraisal process. Does the technology offer ease of communications, status updates and detailed reporting? Does the AMC offer a mobile application that appraisers can utilize in the field? Can their technology integrate with your LOS?
►Make sure the AMC is Uniform Collateral Data Portal (UCDP) compliant, uploads appraisals to the UCDP in a Uniform Appraisal Dataset (UAD) compliant format, and returns a compliance certificate.
►Make sure you check references and Google the AMC (the results might surprise you). All too often, lenders make the decision to work with AMCs without doing this. The AMC’s reputation is very important. For example, some are slow pay or don’t pay their appraisers, resulting in unexpected financial liability. Certain states, like Texas, require AMCs to be paid within 60 days.
►Make sure the AMC has been in business and is established along with what their attrition rate is among the staff? It’s telling. Many AMCs sprang up due to an uptick in demand, and many later closed their doors with limited to no notice.
►Make sure they are experienced. What is the combined experience of their management team? Do they fully understand the appraisal process?
►Make sure the AMC has a robust reporting structure. If the CFPB audits you, the burden of proof is on your organization. Detailed reports will prove you are handling appraisals efficiently and compliantly.
►Make sure their fees are customary and reasonable per the Dodd-Frank Act. Many overcharge you and underpay appraisers. Score the AMCs and then make an informed decision based off capability and price. Don’t just rush into an engagement and wait to see how they perform.
Just because you have an AMC managing your appraisals, it doesn’t mean you have nothing to worry about–unless you selected the right AMC.
Vladimir Bien-Aime’ is president and chief executive officer of Global DMS. Since co-founding Global DMS in 1999, Bien-Aime’ has grown the company to capture a leading share of the appraisal management segment, with a client base of over 20,000 unique users and a 100 percent retention rate among lender clients. He may be reached by phone at (877) 866-2747 or visit www.globaldms.com.