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Comment on Financial Reform Implementation
Proposed Interagency Appraisal and Evaluation Guidelines
Appraisal Management Companies (AMC's)
Workgroup Leader John G. Ferguson
August 16, 2010
This paper is submitted to provide a better understanding and possible guidance for regulatory oversight of AMC's. I included a brief description of different types AMC's, their function, the pros and cons of their actions, and a summary of possible regulatory oversight.
AMC's have been around for several decades and performed an important function for the mortgage industry. There are several types of AMC's with the two most recognized being the Captive AMC and the Independent AMC. The Captive AMC such as Countrywide's Landsafe employs directly or through an affiliate company with people that compile a list of approved independent fee appraisers. An independent AMC is not in any way affiliated with the lender. They both provide the same service; engage the appraiser, tract the appraisal progress, receive and review the appraisal, submit the appraisal to the lender, act as a go between if the lender has issues with the appraisal, bills the client, and pays the appraiser. This process is complex and is best handled by people that have the experience. The unintended consequence of this process became a factor in the degradation of the appraisal profession and not protecting the consumer by placing the emphasis on low fees to the appraiser and fast turn around times.
Typically, AMC's compile and maintain a list of approved appraiser's. The problem is that these lists have been restricted to appraisers that will do the appraisal at a reduced fee and fast turnaround time while in many cases overlooking experience and geographic competency. Many competent appraisers are excluded from the list quite often just because the appraiser cannot comply with the turn-time and low fee, or because the more experienced appraisers refuse to work for AMC's due to these sometimes-unrealistic service agreements. The process promotes a lack of competence not only in knowledge of the appraisal process but more importantly in the geographic competency. I have reviewed many appraisals where the appraiser has a good grasp of the appraisal process but he was out of his area and was not aware of the nuances of the local market.
In summary, regulatory oversight is long over due for the AMC's. Appraiser competency and independence is key in correcting appraisal abuses and gaining confidence in our work product. All licensed and certified appraisers meet the minimum standards to be able to provide real estate appraisals. Eliminate the approved appraisers list and focus more effort on identifying and compiling an exclusionary appraiser list, and enforce the existing rules by disciplining the offending appraisers. The geographic competency issue would be easy to solve if an appraiser appraises property more than x miles from his office then, he should be required to follow USPAP and gain that local knowledge or more simply use an appraiser from that or close to that zip code. Wouldn't it be nice if whoever needed an appraisal could be assured that the appraiser he contacts is qualified to take the assignment and is geographically competent. I think that we can all see how faster and cheaper appraisals have much greater costs than we ever imagined when the tide goes out.
Additional Guidance suggestions:Appraiser fee -
Appraiser Engagement - from HVCC III
Errors and Omissions Insurance -
John G. Ferguson
|Last Updated 9/14/2010||FinReformComments@fdic.gov|