Background Checks Issue for Appraisers
Background checks & third party relationships
One of the recent thorns in appraisers’ sides has been the issue of background checks.
A key reason for this is the Office of the Controller of the Currency (OCC) bulletin, which outlines the management responsibility banks must take when dealing with ‘third parties.
Third parties include the AMC’s banks use to ‘manage’ their appraisal orders, and vendor appraisers.
The bulletin puts the fear of God into bank Board of Directors. Since water runs downhill, the banks are telling AMCs that they must improve how they ‘vet’ appraisers on their panels. Many AMC’s are taking the position that their panel appraisers must have a background check to be sure the appraiser is white as the driven snow (not a reference to race here), and ultra clean.
The difficulty for appraisers is mostly related to the acceptance of background checks. Most AMCs have taken the position that ‘you’, the appraiser must provide a background check through the AMCs selected contractor who does the background check. If an appraiser works for multiple AMCs, the hassle and expense increases. Typically, individual separate AMCs do not accept a background check from a company they are not joined at the hip with.
To be fair, some of the ‘better’ AMCs provide a background check to their individual vendor panel appraisers at no cost to the appraisers.
The other exacerbating factor is most states currently do not do background checks for renewing appraisers, and in some cases, currently don’t do them for new appraiser license applicants. That will change in 2017 when the AQB has mandated that all NEW APPLICANTS must have background checks done by the state as part of the application process. The AQB policy does not address license renewals by existing appraisers. Individual states will decide what to do for those.
There is no current way, that I know of, for an appraiser to get a ‘formal’ background check by any certified entity, including the state police agency, and then make that background check available to any requesting party, such as an AMC. I’m not even certain that an individual can be given a copy of a background check done on them. Some claim ‘privacy rights’ will be violated. Really? If I go into my local sheriff office and request a concealed carry permit, a background check will be done. Since I have not done this, I’m not sure if the background check result will be given to me. But if it is, why couldn’t a copy of that document be given to an AMC to satisfy the background check requirement? Or is this considered to be something akin to a borrower paying for the appraisal report, but not really ‘owning’ the report? I frankly don’t know.
There are two individual companies I know of who claim to do this – using another background check providing entity – but it only works for AMCss who are subscribers to that company’s database of appraisers, and appraisers who must ‘sign up’ to be on that list. Since there are approximately 450 AMCs in the US, and 17,000 +/- appraisers, this won’t work for the vast majority of AMCs or appraisers who are not joined with either company. Both of these companies require annual BC renewals, which cost about $60.
This background check issue is a major conundrum for appraisers. It’s currently not possible to “cross pollinate” multiple AMCs using one background check provided by a certified company who provides background checks. Most states don’t have the resources to archive individual background checks from multiple appraisers, and make the correct one for a certain appraiser available to a requesting third party AMC.
The only real sensible way to solve this problem is for states to do background checks on BOTH renewing appraisers and new applicants, and certify that the individual meets acceptable criteria to hold the appraiser license per state criteria. No license would be issued if criteria was not met. That way, multiple background checks requested from individual companies, and paid separately by the appraiser, won’t be necessary. However, it does not solve the problem of current existing appraisers between renewal cycles who want to work for certain AMC clients.
This issue is one the various appraisers’ organizations and the one appraisers’ union should address – working collaboratively without turf wars. They need to work with everyone connected to the mortgage lending process, all regulators, Congress and the States to come to a workable process to make this work efficiently, at the least expense for appraisers.