Eight Factors To Consider When Choosing an Appraisal Management Company

Eight Factors To Consider When Choosing an Appraisal Management Company

By Matt Holmes | Data Facts

If you’re tired of the burden of managing appraisals in-house when your processor’s focus would be allocated to moving loan files forward, then it might be time to outsource your appraisals to an appraisal management company (AMC). However, the easy decision to outsource to a highly proficient AMC model is hardly comparable to deciding which AMC to use.

In recent years, the path towards choosing the right AMC has changed quite a bit. Compliance has become an increasingly critical factor due to the rise in lending regulations nationally and locally. These regulations, not to mention the flurry of new GSE guidelines that have surfaced in the wake of COVID-19, have made it increasingly more difficult for lenders to perform in-house appraisals with complete confidence and at optimal speed.

So, what makes an AMC great? Let’s break down the top factors to consider when comparing AMCs.

1. Industry Experience.

Experience. Of course, numbers do matter. You can’t deny the role experience plays in the effectiveness of your partnership. As a lender, you make a living balancing past data with future risks and quantifying the experience of a knowledgeable AMC management team is no exception. Ask yourself, what complex property specialties does this company have, what technical support is available, what geomarkets do they serve, and how long have they been delivering an outstanding AMC experience to their clients?

How many clients has the AMC served? What is their client retention rate? Are these clients like your business? This is a key element to explore with each of the AMCs you examine, since it gives a major indication of how they manage clients with needs that are near-identical to yours.

2. Services Offered.

When looking for the right AMC, think about the real-estate market your lending institution’s community base most often covers, alongside what expertise you don’t have from your in-house resources that would be welcome. Think about auditing demands. Do all your appraisal work meet the Uniform

Standards of Professional Appraisal Practices (USPAP) standards? Are you able to gauge whether your panel of appraisers are operating in full compliance with state and national standards?

You’ll also want to ask yourself if the AMC is willing to work with the many existing appraiser relationships you’ve trusted over the years. Is the AMC’s panel of appraisers local, or is it spread about too thinly across your lending region?

3. Order Management Technology.

Be certain to research the AMC’s order management platform with a focus on ease of use, existing integrations to LOS/POS mortgage application systems, automation on selecting the most qualified, local appraiser, and its ability to provide detailed invoicing. In some lending organizations, the ability of the AMC’s technology to securely accept credit card payments is vital to the business model.

4. Quality Appraisers.

It’s important to know whether your AMC is truly bringing their a-game, and it starts with the appraisers on their panel. Ask the AMC about their appraiser vetting process, which procedures are followed, and what criteria is used to vet them. Verify whether appraisers are checked with individual state licensing authority, the Appraisal Subcommittee (ASC), the Appraisal Qualification Board (AQB), or the FHA Roster to determine their active status and any potential disciplinary proceedings.

5. Payment.

The Dodd Frank Act mandates that appraisal fees must be disclosed on the final loan estimate. It also requires that lenders compensate appraisers fairly based on the geographical market and complexity of property.

Be sure to investigate the fees paid and appraiser payment processes for each AMC. Does the AMC offer prorated “customary and reasonable” fees as part of the solution, or do they take a more case-by-case approach, "shopping" your assignment for every order they receive? Neither of these options is inherently right or wrong, but it’s important to determine the most cost-effective option for alignment with your operational expectations.

6. Agility.

Staying on top of regulations in today’s lending landscape isn’t just preferable, it’s imperative and lenders know it. Now more than ever before, AMCs need to be on top of their processes regardless of what the market throws at them. A great example of this is how AMCs reacted to the mandates set by Fannie and Freddie during the COVID-19 pandemic. For example, at the onset of the GSE regulations concerning modified interior inspection guidance, Data Facts recognized the urgency, and adapted their processes in just a few days. You should also keep in mind that having an AMC that can quickly scale seasonally and in response to low rates is vitally important. Simply put, lenders can’t afford delays, especially during times of great volume.

7. Focus on Compliance.

Without a doubt, compliance is a critical factor to weigh when considering an AMC. Noncompliance is the fastest way to put an AMC out of business, and the fallout can have a devastating impact on the lender.

Does the AMC employ an in-house compliance officer, or do they outsource to a vendor? The AMC should disclose information about this executive or vendor, including their responsibilities with regards to identifying and interpreting state licensing regulations, appraiser independence rules, and the Uniform Standards of Professional Appraisal Practices.

The AMC should be able to show exactly how it manages its licensing requirements for each state in which it operates. It should monitor state regulations for implementation of AMC licensing requirements and have a clearly defined process for maintaining active licensing.

In addition to these compliance considerations, those involved with placing or reviewing appraisal orders should be required to take and pass a current USPAP course every two years.

8. Customer Service.

Your lending institution needs to solve a problem with an appraisal or to discuss how best to handle a unique property, and it’s up to your AMC to properly advise you on that problem. If you’re constantly weaving through a maze of automated call centers without talking to a human, are you seamlessly addressing the problem? Do your research upfront and evaluate how the AMC support staff, chief appraiser, and their written or verbal expertise covers their overall business practices and industry knowledge. Is this information accurate and, more importantly, helpful in supporting your communication of a resolution to any issue with the borrower or a concerned realtor? Once past the consideration stage, take note of the everyday interactions you have with the AMC. Do they frequently communicate product and regulatory updates? What about the billing process? Is it straightforward or bogged down?

Most importantly, your AMC should feel like part of your team. Doing business with an AMC should feel like having a close division of your company strictly dedicated to appraisals. Once your interactions become second nature, and you’ve gained a sense of trust and honesty with your AMC, chances are you’ve found a partner worthy of a long-term relationship.