AMC Exposed… Getting the Value Needed
Are AMC appraisers pressured to inflate property values?
We stumbled upon this article yesterday from WSB Atlanta and thought it was worth sharing. Jim Stickland, a Channel 2 Consumer Investigator with Atlanta TV News, covers the story of a lender colluding with an AMC to inflate property values. Stickland reports that John Laymac, a new homeowner was denied a mortgage on his $390,000 home when the appraisal came at $365,000. Consequently, the builder, SR Homes, had Laymac apply with its preferred lender, Brand Mortgage, claiming that they will get the value needed to close the deal. In an email to Laymac, the builder writes: “I want you to go with my preferred lender, Brand Mortgage. They’ve never had a problem getting the value needed.” Brand Mortgage orders an appraisal through its partially owned Appraisal Management Company, Valuation Management Group (VMG). VMG brings in a different appraiser and voila! The AMC appraiser comes back with a value $25,000 higher than the original appraisal. The same as the sales price.
Appraisers have complained bitterly for years about AMC pressure to inflate numbers under the threat of denying future assignments. An inherent conflict exists when those that originate or securitize mortgages are still allowed to own or control the selection of the appraiser. Today many AMCs are directly or partially owned by mortgage wholesalers and large national banks. They hide behind the firewall of an independent company. But if they own that company, either in whole or a piece, it is like the fox guarding the hen house.
Excerpt from the article:
Valuation Management Group and the two appraisers wouldn’t talk to Strickland.
So Strickland called 30-year veteran appraiser Beryl Tylar to look at each appraisal.
She noticed the square footage and more.
“The reason, in my opinion, that there is such a big variation in the two bottom lines is because of the comp selection, and that is a biggie in appraising,” Tylar said.
The higher appraisal uses a comp sale of a home that costs $80,000 more than Laymac’s.
“Personally, I would not have used it,” Tylar told Strickland.
She said there was an entire subdivision of more appropriate comps.