If you’ve been in the mortgage industry for even just a few years now, it becomes quite apparent how complicated the appraisal management process can be. With the advent of Dodd-Frank, regulatory oversight has pushed the valuation industry to the brink, and many lenders have lost sleep worrying about remaining compliant with the countless new requirements and regulations—all of which can lead to thousands of dollars in fines and/or a complete loss of a license for violations.
Maintaining compliance in the appraisal management spectrum requires due diligence by the party overseeing the operations, especially when that party is a lender that has to manage various other processes all on their own and all at the same time. There are many things that can go wrong, which need to be immediately handled and resolved to ensure that appraisals are continuously being returned and properly completed following all requirements and regulations. This usually requires a large staff and a lot of time when the entire process is handled internally.
Fortunately for lenders, there is another solution that will help alleviate their stress while reducing costs; partnering with a well run appraisal management company (AMC). A trusted third-party AMC will help lenders manage the appraisal process by:
- Making sure their subject properties are inspected promptly
- Assisting the appraisers with any technical questions related to any appraisals—such as compliance issues
- Ensuring that appraisals are always completed within a reasonable timeframe after the inspection has been completed
- Providing an extensive coverage area with sufficient appraiser panels
AMCs will also carefully review all completed appraisals, making sure they always meet the client’s requirements and are specified the way the lender wanted them. Once everything is reviewed and deemed acceptable, they will then seamlessly deliver the appraisals for the lender to the appropriate party—such as the Government Sponosred Enterprises or institutional investors—and the entire process usually only takes around 3-5 business days.
Listed below are some of the other advantages for lenders that use an AMC to help manage their appraisal process:
AMCs have extensive quality control departments to ensure that all appraisals are conducted properly, and that the data collected is presented accurately.
Payments for Appraisers
Most mortgage companies don’t have an extensive payment processing system that can effectively pay appraisers with consistency, or on time. AMCs will typically accept all major credit cards, personal checks over the phone, as well as money orders. They also have the ability to front the appraisal fee in advance, regardless of whether the client has paid them yet or not. Lenders typically don’t pay for an appraisal until after the loan closes, which can be 30-90 days after the appraisal is completed. AMC’s will pay the appraiser well before the loan closes, and ensure the appraiser is paid for every appraisal he or she completes.
An AMC will help insure that a lender’s appraisals are always in complete compliance with the HVCC, OCC, FHA, OTS, and any other state or federal regulations. This helps tremendously in reducing the risk of a lender producing a bad loan, because one overinflated appraisal could end up costing a lender hundreds of thousands of dollars in fines—easily eating up all the profits that were made from 40-50 good loans. AMCs will always monitor all completed appraisals to make sure they’re done as accurately as possible in order to avoid this dilemma.
Multiple Product Offerings
On top of offering compliant appraisals, AMCs can provide other valuable products to assist mortgage lenders with creating a better overall operation. Most national AMCs will typically offer BPOs, appraisal reviews, AVMs, title, credit checks, and flood insurance.
Extensive Order Management System
AMCs are able to compliantly order, track, manage, receive updates, and deliver appraisal reports. By having these systems in place, AMCs are quite valuable to their clients in the form of communication and access. These are services all lenders need to ensure their deals are moving along properly, and most appraisers aren’t equipped to do everything listed above on their own.
In conclusion, working with an AMC allows a lender to focus more on what their primary objective is; closing loans. They will remove the burden of having to constantly chase down appraisers, will keep a lender’s appraisal reports in compliance with all regulations, and will ensure that a lender always receives the best possible product in a timely fashion.
Choosing the right AMC to work with can be a process all on its own as well, so please visit the GlobalDMS blog titled 8 Things Lenders should look for when Selecting an AMC to find out which companies to use and/or avoid.