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EFFECTIVELY MANAGING THE APPRAISAL PROCESS has become increasingly challenging in recent years amid the introduction of new state and federalbased rules and regulations, the Dodd-Frank Wall Street Reform and Consumer
Protection Act and Consumer Financial Protection Bureau (CFPB) monitoring. The appraisal process used to be much simpler but is now far more intricate, fluid and compliance-intensive.
There are many different tasks that must be completed in order to produce an appraisal that is cost-effective, accurate, compliant and ready to be submitted to the Uniform Collateral Data Portal® (UCDP). Lenders can elect to handle the appraisal process using an appraisal management company (AMC) or by taking the process in-house and developing their own appraisal panel.
There is no wrong or right approach. Both can work well. However, determining which model is best for a lender's specific organizational structure and motivation is a critical decision.
This column examines the details of each model, the pros and cons of using them, and offers suggestions as to how lenders can go about deciding which is best for their business-in a neutral manner.
Using an AMC
Many lenders use an AMC to manage the appraisal process for them, taking and assigning orders to independent appraisers, managing the appraisers, handling billing and ensuring compliance is met in each state in which they are licensed.
The AMC also has expertise in ensuring that the appraiser selected to value the property was chosen without influence from originators or other motivated parties.
Using the right AMC, lenders are able to efficiently outsource the appraisal process, lower costs, reduce risk, eliminate fraud and remain compliant. However, AMCs don't work for free-so adding the extra layer of management comes at a cost. Lenders need to assess if the additional fee of $50-$150 per appraisal is cost-effective and whether they are getting the desired results.
In addition to the cost, there is also the burden of due diligence and oversight of a third party. The regulations are very clear on the fact that lenders cannot outsource their responsibility. As a result, if an AMC makes an error or is out of compliance, the lender is ultimately responsible for any fines or sanctions.
Before engaging with an AMC, there are some crucial things that should be...