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.
- Sale Price vs Appraised Value Disconnect - April 10, 2023
- Speed Regardless of Accuracy Under the Banner of Modernization - March 8, 2023
- Marin City Discrimination Case Settled - March 7, 2023
My issue is giving out my social security number.
I AGREE that background checks should be done, and i agree that ONE background check should be done at the time of our renewal or application so appraisers dont get stuck paying for multiple reports.
however, what i keep wondering about is, what are (they) looking for and what disqualifies an appraiser? i think this needs to be spelled out and i think we should know the details. i am assuming an appraiser will be disqualified for a felony, but will appraisers be disqualified for a misdemeanor or speeding tickets? in this ridiculous and sometimes absurd we live in right now, it wouldnt surprise me anymore if appraisers were disqualified for not putting the toilet seat down or not recycling aluminum cans too.
the bleeding continues . . . . .
Thank You, for once again for being the voice of reason. How many other “companies, consulting organizations, lenders, government, etc” need a Background Check…EVERY YEAR, and REQUIRE the “employee/consultant” to have to pay for this????
I my past life in the “Real World” the employer or the temp agency, PAID for the background check, for the potential employee, if they were interested enough in hiring them (even Wal-Mart does this). It is part of the cost of the employer to do business.
So once again…..here is one more “rule” made with out further consideration on how to implement the process.
Where in the guidelines does it stated where the Back ground check needs to come from & Who is responsible for paying for this?
WHY in OUR INDUSTRY it is the Appraiser who once again must cover this cost?
Why does each “employer/AMC” need to have it come from THEIR specific vendor (this is Perfect – as long as the “employer/AMC” is covering the cost of this
I would think the local sheriff office (sorry – I’m sure they are not prepared to handle a large group of people needing a BC), should be “Good Enough”
I personally don’t even like to give “potential AMC’s” my license, e/o, w-2 information…. I may never get any assignments from them & who knows what they do with my info.
just receive a email that I will no longer be consider for appraisal by a AMC because I need a B/C from this specific vendor. I sent a B/C I have on file to them but the AMC declined to accept it. They request I pay $45 to use their B/C vendor. I declined. No problem for me since their fee are NOT c/r or $150 below my standard fee.
I recommend sending every AMC that requests a separate background check a Xerox of your posterior along with this note: “As requested, I am enclosing a complete BACKground check. Feel free to review this document at least twice a day”.
lets all get real now….Most AMCs do NOT have the best interest of the appraiser. if AMCs are forced to throw someone under the bus, it will be the lending appraiser NOT their lender/clients. Thus, they make the appraisers ate the overall costs of doing a URAR 1004 appraisal. The AMC business model is NOT a friend of the lending appraiser!!!. Until, appraisers regain control and/or influence(to say nothing of basic respect) over the lending appraisal process, nothing will significantly change. Not a good picture, just a real reality.
Dave, insightful article. After reading your comments AND the Bulletin referred to and linked within it, I see NO JUSTIFICATION or reason for AMCs requiring background checks of appraisers.
Red the relevant bulletin sections:
Banks continue to increase the number and complexity of relationships with both foreign and domestic third parties, such as
outsourcing entire bank functions to third parties, such as tax, legal, audit, or information technology operations.
outsourcing lines of business or products.
relying on a single third party to perform multiple activities, often to such an extent that the third party becomes an integral component of the bank’s operations.
working with third parties that engage directly with customers.3
contracting with third parties that subcontract activities to other foreign and domestic providers.
contracting with third parties whose employees, facilities, and subcontractors may be geographically concentrated.
working with a third party to address deficiencies in bank operations or compliance with laws or regulations.
The OCC is concerned that the quality of risk management over third-party relationships may not be keeping pace with the level of risk and complexity of these relationships. The OCC has identified instances in which bank management has
failed to properly assess and understand the risks and direct and indirect costs involved in third-party relationships.
failed to perform adequate due diligence and ongoing monitoring of third-party relationships.
entered into contracts without assessing the adequacy of a third party’s risk management practices.
entered into contracts that incentivize a third party to take risks that are detrimental to the bank or its customers, in order to maximize the third party’s revenues.
engaged in informal third-party relationships without contracts in place.”
IF ANYTHING, it would point to the need for BANKS to conduct BACKGROUND checks of the AMCs; NOT the appraisers!
This is a due diligence issue. Reading the bulletins elaborative comments its clear that it is the contract between bank and (AMC) vendor that is the issue; not so much vendor to appraiser. The OCC concern is with overseas service providers; accounting firms preforming direct audits of BANKS internal policies and procedures.
While one can ‘stretch’ to include appraisers, we were never the issue or concern. Due diligence related to us would be to make sure we are licensed. VERIFY that we are competent to perform the SPECIFIC assignments (meaning no more broadly blasted emails to find the cheapest appraiser); and that the fees for the services are reasonable (see fees comments in the bulletin link itself). The fees PAID are not suppose to place the bank in jeopardy. Low fees do exactly that.
THIS IS A RED HERRING!
By focusing on ‘appraiser background checks’, the “third party vendors” are pulling a sleight of hand trick and distracting from all the FAR MORE CRITICAL RISK ISSUES that they both know about, and choose to collude with bank clients to ignore!
You tell me which poses the most risk to a bank:
(1) A deadbeat parent appraiser that is behind in child support, doing an appraisal with a $450 fee; or
(2) A desperate, possibly poorly trained appraiser working for only $200 to $300 for an SFR to where they feel they MUST do two appraisals everyday?
In scenario one if you REALLY twist yourself into a logic-pretzel a case could be made that some DA somewhere might try to claw back the fee paid to the appraiser by the banks agent AMC (not likely!). Even IRS does not do that.
In scenario two there is a very real possibility of significant errors being made that could result in serial losses to the bank in the many hundreds of thousands of dollars. THAT is a risk I think OCC is referring to much more than whether you or I have outstanding child support; traffic tickets or even more serious issues.
Due diligence on the part of the AMC would be to do a traditional employment interview with me IN PERSON, in addition to having my work reviewed by a person qualified to do so. Due diligence would be to contact references I have listed and to have THAT done by person competently trained to understand red flag interview warning signs; and follow up on them.
But NEITHER banks nor AMCs are interested in meaningful “due diligence”. They are ONLY interested in “plausible deniability” which means hiring people that come to them and say “Let US make YOUR problems, OUR problems.”
I’m tired of paying for someone else’s plausible deniability. Both in terms of low fees and added operating costs. Ask yourselves this; Are attorneys paying for background checks on themselves? Architects? Doctors? CPAs? Engineers?
WHEN are YOU going to do something effective about it? you know my ongoing message: email firstname.lastname@example.org
If no one gives their information out,then they won’t have any appraisers.will they? I already deleted sone AMC’s….Bye, don;t let the door hit you on your way out. I should run background checks on them
Mike Ford, if you were running the appraisal institute i wouldn’t have given up my worthless sra designation many years ago.
Tom, that is probably the highest compliment I’ve ever received as an appraiser. Thank you. Realistically, if you can reinstate your SRA, I would do so. Experienced appraisers still recognize the significance of that achievement.
In fairness, lets not beat up the AI too much. I personally think they have strayed from the path that made them great in the first place, but they still do many things VERY well. IF I were running the AI, the FIRST thing I would do is to reassure and convince SRAs; Candidates and even affiliates that THEIR issues & concerns are just as important as those of the MAIs. IF THAT upset MAIs, I’d remind them that membership has been declining for many years. If THEY then decided to leave I’m sure there are a lot old timers that would be just as happy to see a return of SREA; and SRPA designations.
The second thing would be to really do what’s right for the profession; and not just the AI. Contrary to the remarks of their lobbyist 6/2/15 in Redondo Beach, NO ONE believes that the needs of the of the profession over those of the AI. Not even MAIs.
Contingent fees? Really?
for those that think “just say no” will slow this AMC tsunami of requests, I doubt it very much. The lenders and amcs know there is a segment of lending appraisers that will jump thru their hoops regardless of how unreasonable and unfair their demands are. not a good scenario but again that’s just the reality of the lending appraisal arena.
RESPA (Reg X if you can’t remember) Title 12 ? Chapter X ? Part 1024 ? Subpart B ? §1024.14
(b) No referral fees. No person shall give and no person shall accept any fee, kickback or other thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or part of a settlement service involving a federally related mortgage loan shall be referred to any person. Any referral of a settlement service is not a compensable service, except as set forth in §1024.14(g)(1). A company may not pay any other company or the employees of any other company for the referral of settlement service business.
Your identity is a “thing of value”
RESPA issue if you have to give up a thing of value to get an assignment.
And if you have to PAY for that background check, please re-read that last line above.
You can not violate RESPA when doing GSE work, as RESPA is part of the laws and regulations that pertain to GSE lending work, see AO 30 in your USPAP along with the Competency and Ethics Rules in USPAP.
(c) No split of charges except for actual services performed. No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed. A charge by a person for which no or nominal services are performed or for which duplicative fees are charged is an unearned fee and violates this section. The source of the payment does not determine whether or not a service is compensable. Nor may the prohibitions of this part be avoided by creating an arrangement wherein the purchaser of services splits the fee.
HOLY COW BATMAN!
ARE ALL AMC ORDERS IN VIOLATION OF RESPA???
§1024.14 Prohibition against kickbacks and unearned fees