With so many appraisal management companies (AMCs) in business, one can get lost inside the sea of guarantees, promises, and misrepresentations. It has been a frustrating time for appraisers over the past 12 months as they have worked through the mess that has become the appraisal profession. No more are the days of being rewarded for great customer service and building business relationships with clients and being a leader in your local business community. Now it is merely a profession of being at the ready when the call or email comes in from the AMC.
There has been much debate regarding AMCs and their contribution to the appraisal process. These issues have come from many different factions but some of the greatest concerns seems to be coming from individual appraisers who do work for these management companies. Long established, professional appraisers have been relegated to a role of waiting for their turn to come up on the AMC roster.
At the heart of the controversy are AMCs, through which the major banks arrange appraisals on mortgage loans that they intend to sell to Fannie Mae and Freddie Mac. The system that is in place has many tens or hundreds or thousands of appraisers enrolled with a particular AMC to do work in a given county. So, for example, and I'm making these numbers up, but say that with a particular AMC, there are 769 residential appraisers signed up with appraisal management company A to do appraisals in Cook County, Illinois.
Now, how do you think the appraisal management company decides who does a specific appraisal. That's right, it is based on the "rotation" of appraisers within that companies list. So, once you, as an appraiser, receive an order from Company A, you can expect that another 768 appraisals will be ordered by that company before it comes back to you in the rotation. Where is the business incentive in that model?
Appraisal management companies came to the forefront with the implementation of the HVCC. The Home Valuation Code of Conduct (HVCC) tries to eradicate potential appraisal influence by prohibiting mortgage brokers from hiring their own appraisers, and by encouraging banks to accept anonymous appraisals arranged by a third party. Although banks are allowed to hire appraisers directly, the employee choosing the appraiser cannot be involved in loan production.
The biggest problem is that banks are allowed to own the appraisal management companies they use. For example, Bank of America owns the appraisal management company LandSafe Inc. And almost every single AMC is owned at least in part by the bank or mortgage financier that engages them. That is just nuts, people.
The AMCs are already legitimized by the big banks with no rein on their business activities. Since the AMC's are not going away, I am in support of regulating them HEAVILY!
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