Open Letter to Mortgage Lenders

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Open Letter to Mortgage Lenders - Your Appraisal Management Company

How much vetting have you done on the appraisal management company? How involved are you as the lender in the day to day activities of the appraisal management company?…

The world has changed and most everything in our lives involves technology. The technologies available to each of us are tools. They are not a more reliable means, merely more convenient. Human thought and analysis is still required in every aspect of life.

When the Final Rules of the Dodd Frank Legislation went into effect, many lenders chose to use appraisal management companies with the false idea they had no liability for appraisals. This simply is not a true belief. You, the lender, are 100% responsible for the appraisal and additionally are 100% responsible for the actions of the appraisal management company utilized.

How much vetting have you done on the appraisal management company? Are you aware some owners of appraisal management companies have criminal records? Assault convictions? Disciplinary actions as a State Licensed Appraiser?

How involved are you as the lender in the day to day activities of the appraisal management company?

  • Are you aware, most appraisal management companies violate appraisal Independence Requirements on a daily basis?
  • Are you aware most appraisal management companies pressure appraisers for higher values?
  • Are you aware some appraisal management companies shop an assignment, sometimes for over a week searching for the lowest priced appraiser? Does this not delay the appraisal completion?
  • Are you aware some appraisal management companies send an appraisal request to 50-100 appraisers regardless if they cover the subject market area or not? Does this not delay the appraisal completion?
  • Are you aware most appraisal management companies do not value the education and experience of the appraiser? The appraiser that was licensed last week is seen equal to an appraiser with 40 years’ experience.
  • Are you aware most appraisal management companies violate Fannie Mae guidelines on a day to day basis in regards to Collateral Underwriter results?
  • Are you aware some appraisal management companies employ individuals to review appraisals that are not properly educated or licensed to do so?

The GSE’s have given lenders their assurance if an appraisal meets a certain score in Collateral Underwriter the lender has no liability for the appraisal. This could not be further from the truth.

Fannie and Freddie may not hold you liable however, there is nothing stopping an investor of the mortgage backed security from legal action against the lender. There is nothing stopping a borrower, Realtor, or seller from legal action against the lender, and there certainly is not any guarantee an appraiser will not seek legal action against a lender. What about E&O insurance companies? They too could file a legal action against the lender due to the actions of the appraisal management company.

Are you aware the cost of an appraisal has risen significantly to the borrower because of the appraisal management company? Why is the borrower paying for a service the lender outsourced? Could this be another area for legal action against lenders?

Regardless of who pays the appraisal management company, what does the appraisal management company actually do to earn their fee? Their title states appraisal management company. One would tend to believe they actually manage something. But they do not manage anything about the appraisal itself. In fact, most appraisal management companies force the appraiser to sign an indemnity agreement releasing them of all liability, completely ignoring the fact each appraisal management company has their own instructions on how to complete the appraisal. Heck, some even want to make the appointment for the appraiser. How can someone who is supposed to manage the appraisal be released of all liability? Where does that leave the liability? Directly on the lender!

The market has been crazy and everyone is extremely busy. But what is going to happen, not if, but when the market turns? The foreclosure moratorium will end at some point. Then what? Forbearances will end. Then what?  The lender who signed off on the entire loan package, including the appraisal will be on the hook for any and all legal claims. The appraisal management company the lender hired approved the appraiser and signed off on the appraisal. The legal action from all parties is pointed directly to the lender, after all the lender approved and funded the loan!

The Dodd Frank Legislation does not require the use of an appraisal management company. If you are utilizing an appraisal management company, you are encouraged to reevaluate your responsibility and liability with using appraisal management companies. Why not pick up the phone and call some appraisers and get their feedback on the appraisal management companies. I am sure they will be more than willing to talk about their experiences. These companies provide no benefit to the lender, nor do they release the lender of any liability.

Lenders, start getting better quality appraisals quicker and for less money by eliminating the appraisal management company. Start protecting your liability by eliminating the appraisal management company.

By Advocate. The author is a Certified Residential Appraiser and has chosen to use the pen name Advocate to protect their identity. Many famous people including Benjamin Franklin, Agatha Christie, and Steven King have written under a pen name for various reasons. Just Google pen names used by famous authors, there are only 45,700,000 results to choose from.

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21 Responses

  1. Avatar Mike says:

    I got my sanity back two years ago when I stopped accepting amc work. I have more business than I want, stop working at a decent hour and am actually making more money. AMC’s are the biggest problem of this profession. Lenders would be wise to eliminate amcs from their associations.

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  2. Avatar Xpert says:

    Great letter advocate!

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  3. Avatar Jeanie says:

    Amen!!

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  4. Unfortunately, lenders are no different than much of the rest of the internet-based economy. Buy-don’t buy decisions are routinely made on little or no information.

    Extensive ‘policies’ or special requirements are drafted that attempt to cover all contingencies…from the AMC side-NOT the appraisers.

    Ten or twenty page policy statements for each order ignores the REQUIREMENT that federal regulators require the LENDER (not the AMC) to determine appraiser competence in advance.

    That means they need to know & communicate exactly what type of property is to be appraised, AND the ownership interest. Most AMCs (& far too many appraisers) don’t know what this means, or why it is critically important.

    Policies that only pay minimal trip fees to appraisers for assignments which their policies preclude completion of are unfair. Appraisers research and drive out to a property; measure it and inspect it before determining via extended or repetitive discussion with an occupant that the property has permit issues. They have already invested more than a few hours.

    Similarly they may be told it is an owner-occupied SFR only to learn its an SFR with ADU and both are rented. More than agreed upon SOW is required. Again hours of time have already been invested.

    Fees are present by the lenders. Thats called price fixing and protestations to the contrary, it is illegal! Lenders need to switch to a cost plus system immediately. AMCs get only a fixed rate (disclosed to the client) & the complexity of the assignment will be determined and bid by the appraiser.

    None of the problems are new. We’ve had these issues since HVCC came into effect, and both before and after CU systems were implemented.

    Make no mistake. Lenders and AMCs do not want to fix these issues. Lenders knowingly select AMCs based on how well they can expect them to ‘play ball’ when a value reconsideration is sought rather than on any specific appraisal or even order management expertise.

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  5. Avatar Bill Johnson says:

    Open Statement to “THOSE” Appraisers.

    Stop putting profits before principles! If you have a profitable business with non-AMC clients, stop being coached into expanding your business by way of abandoning your morals and choosing to work with AMC’s. If you work with AMC’s, have a plan to get off their dependence. Stop listening to the Podcasts from those who drink the AMC coached Kool-Aid that say it’s okay to work with “the good ones”.

    Seek the truth, and make the decisions for the mortgage lenders by saying NO to long term AMC work.

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    • Baggins Baggins says:

      You went a whole post about amc’s without mentioning the coach! Oh no, I just said it. I said it again. I said it again! We shall say Ni!! again to you, if you do not appease us. Pepsi challenge if amc appraisers could recreate the volume without the financial incentive they constantly provide to the amc companies. They’re getting desperate, I’m getting amc invites and bid emails daily again. I’ve spent more time trying to get off of lists and avoid these relentless predatory companies, than I ever regrettably spent applying or working with them. If they find out an appraiser is still alive, they add and retain without question. The qualification illusion fell flat years ago, but some appraisers still fall for it.

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  6. Avatar Last Word says:

    There is a lot of truth in this letter!

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  7. Baggins Baggins says:

    Never seen such a large group of ‘managers’, incapable of managing anything. When an amc contacts an appraiser, the appraiser IS the customer. Amc’s are predatory companies. They function as the long arm of the lender, pressuring appraisers with impunity. Because the company rather than the individuals are licensed, they skirt or deflect all regulatory scrutiny. Appraisers who accept their orders are unethical, because they have provided a thing of value to be the assigned appraiser with no regard if cost savings are returned to consumers or not. Or alternatively, they ignore the ethical implications, and damaging effects of their own actions, as they bid high and land the amc orders. Meanwhile, appraisers elsewhere pay the price for those occasional higher fees. The amc always gets it’s pound of flesh one way or another.

    I got tired of always having to educate my never endingly new ‘manager’ on the most basic principals of valuation theory and real estate process. The csr turnover is incredibly high with amc’s. INDIVIDUAL APPRAISER LICENSING REQUIREMENTS for everyone whom distributes appraisal orders. At least the individual mortgage banker was someone we could hold accountable. Even many direct assignment lenders purposefully hire appraisal desk managers whom are not licensed, or have lost their license in the past. The last reasonable ML safe haven for appraisers are direct assignment lenders whom hire a qualified experienced licensed appraiser to administer the panel. The amc retainment of a licensed appraiser is nowhere near equivalent.

    The three direct assignment lenders I work with currently, all hire a fair volume of actively licensed appraisers whom are peppered throughout their various appraisal desk related positions. When I call in to talk about an order, ask for more work, or just anything, I almost always speak to another actively licensed appraiser, or persons with reasonably commensurate industry experience. Not mysteriously, this client swap took revisions from predictable to very rare, doubled my income, and provided entirely better liability shielding. Simply pull up a top lenders list for your state, market down the line, keep careful notes and client folders, answer all amc redirects with the response that you do not work for amc’s but please keep your contact information. Two of the three companies I mentioned, I had solicited that way years ago and they used to be amc subscribers. My newest one pays better than VA rate, without the VA rules. I was shocked and what a turn around. For a lender things are easier to manage with direct assignment. A lender can distribute twice the orders in half the time for half the cost compared to the overhead requirements of the amc, the appraiser still gets the full fee. That final point aligns with Mr Fords point, because you are entirely more likely to deal with aggressive lending if you are working with amc’s, there is no way around this critical point.

    Still waiting on Corelogic company to figure out how to code a simple checkbox for appraisers in the Mercury and Scope system, if the appraiser accepts amc work or not. Now because amc’s tanked every email server they ever used, as most appraisers set their emails to spam, the amc’s have learned that they can send an infinite amount of blind bids through scope or mercury. Appraisers will be powerless to stop the transmission, lest they lose their direct assignment emails alongside or shut the doors to all possible new clients in the future. This amc abuse trend is ramping up swiftly, suggest you write in and complain every single time until this obvious abuse stops. Scope is more tricky, emails appear as coming from somewhere independent, but really it’s just another Scope generated message. If you spam one, you lose all the others, even though they have different @thisorthatplace landing, because all are originated from the same sending server. You’ll need to call scope and ask them to verify you have an active email which is not set in their spam category which may explain if you lost all direct assignment order emails if you also simultaneously buck off amc’s. They mismanage it so badly on purpose, to try and direct these lenders to their partner amc’s so they can double dip the transmission fee. Everyone whom claims amc experience or gain, has attained that at someone elses expense.

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    • Avatar chase says:

      Good stuff! You should write a guest post on how to dump AMCs effectively work directly with lenders.

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      • Baggins Baggins says:

        Thanks. Unnecessary layers of redundant amc management from the individual appraisers perspective equates to more work, less pay, no tangible benefit to the appraiser. They do a great job of dressing it up, in the end, the appraiser gets a negative value return if an amc is involved. Lenders may be unaware they may be getting a negative value return if using amc’s, which is why this writer has a refreshing take.

        Just acquire a list of lenders whom operate in your state, market down the line, eventually you’ll hit some leads with non amc’s. Roughly 20% of the lending industry does not use amc’s, that figure is obscured and not verifiable. A shifting target, have to remain nimble. If given the choice, the majority of appraisers would not work with amc companies. After more than a decade of trying to reign in these companies with regulatory efforts it should be obvious that the solution lies not in government, but rather our own abilities to sell our own product. If you’re good enough to be a legitimate appraiser, you don’t need the help of an amc to sell your services. What kind of negotiator reaches for the price dive every time? The notion that the appraiser whom price slashes the most is the most competent person for the specific task of analyzing value, defies logic.

        Landing direct assignment clients means you don’t have to continue to sell, or continue to bid. Things move along at a more routine predictable pace, stability and reliability for income stream and time management. If every appraiser whom wanted to escape amc’s kept up with lender based solicitations, the illusion would be revealed. Lenders would have a better understanding there is no shortage of appraisers, but rather, merely a shortage of appraisers willing to work with amc’s. FNMA CU systems white paper which sought to analyze quality differences between amc vs non amc appraisal work, eluded to 3 out of 4 appraisers who’s reports ran through CU, not even taking amc work in the first place. While amc appraisers enjoy roughly twice the normal volume of non amc appraisers.

        You know what they say, all it takes to be a successful independent appraiser, is one good reliable client. Stable upfront fees for all panel appraisers. Nobody undercuts anyone else, distribution is fair and balanced. The way it’s supposed to be. The way it was before amc’s monopolized the market with collusive price controls which drove consumer fees up, and appraisers fees down. Almost everyone here who is an appraiser wants to grind the same axe. Appraisers are a market force unto ourselves. The overwhelming flood of predatory amc’s pushed us back but we are regaining ground.

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  8. Avatar ken says:

    sounds like sour grapes form someone with an axe to grind who is afraid to stand behind their words so they post anonymously.

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    • Avatar chase says:

      Sounds like comments from someone who owns or works for an AMC…

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    • Avatar IMJSAYN says:

      says the AMC troll lurking anonymously as ken

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      • Baggins Baggins says:

        What’s your fee and turn time? Troll me.

        You won’t believe how great the standard compensation is with this new one I landed. Here, take a look. If I can do it so can anyone. Just keep marketing and signaling to lenders you are available, as long as an amc is not involved.

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    • Avatar Advocate says:

      Ken,

      I do not do any amc work. I own a professional appraisal business that does not advertise. All my clients are referrals and repeat business. I have personally built this business and my reputation speaks for itself. The only grapes I have are turned into wine. Sorry to disappoint.

      I have been an active contributor to this blog for a long time. My writings and guidance speak for themselves. Clearly you are not a regular on appraisersblogs and post irrelevant and useless words because you can not accept the truth.

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      • Avatar ken says:

        sure thing mr. anonymous. since everything is so rosey in your world and you don’t do any AMC work why hide? what are you afraid of? be proud of what you think and write, because if you aren’t it doesn’t mean squat.

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        • Baggins Baggins says:

          Let’s recall… Keyword; Blacklist. The issue persists today. The force of corrupt amc companies only added a new level of danger for appraisers, these companies did not fulfill their intended purpose of protecting the appraiser industry from corruption and improper influence. These amc’s accomplished the exact opposite and now seek to rebrand their business purpose as some vital administerial bureaucratic interlink between lenders and appraisers. Did not need them then. Still do not need them now.

          https://appraisalnewsonline.typepad.com/appraisal_news_for_real_e/blacklisting_exclusion_lists/

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        • Avatar Advocate says:

          Who is hiding? Who is afraid? I write many articles using a pen name; have been for years. Look at my bio and educate yourself. Google pen names and who uses them and why.

          It is truly sad that you have nothing constructive to add to the conversation, yet you feel the need to criticize others. If you truly disagree with what I wrote, please feel free to respectfully share your thoughts. This blog encourages opposing views. Perhaps you are unable to add anything constructive because you know I wrote the truth.

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    • Guest Author is a regular poster here. The letter above is well thought out and factually correct. Can you cite one inaccurate statement in the article?

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Open Letter to Mortgage Lenders

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