NAR President Testifies in favor of regulating Appraisal Management Companies

The President of the National Association of Realtors®, Charles McMillian, testified today before the House Committee on Financial Services’ Subcommittee. In his remarks, President McMillan spoke in support of Appraisal Independence and in favor of managing Appraisal Management Companies.

According to his written testimony:

The “Mortgage Reform and Anti-Predatory Lending Act of 2007” and the HVCC both work towards a strong and independent appraisal industry yet fail to mention the regulation of appraisal management companies (AMC). In many states these companies operate without oversight from any level of government. In fact, the HVCC was a response to inappropriate activities by an AMC with Fannie Mae and Freddie Mac.

NAR will likely support the regulation of AMCs by the states through the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). This may include requiring AMCs to maintain a licensed or certified appraiser in the state where the AMC is doing business.

According to our lobbyists in DC, McMillan’s testimony focused primarily on appraisers and how to improve the appraisal profession. When the President of the most powerful real-estate association in DC speaks in favor of your issues, that’s a good thing.

  1. Gregg Brown

    I am a Realtor and I applaud NARs stance with regard to AMCs. They truly are the “missing link” in the chain of regulated entities. It is absolutely imperative that the AMCs are regulated.
    In my opinion, AMCs must be treated as lenders or appraisers; they can’t operate in a gray area between these two regulated entities. I believe that AMCs should be certified appraisers in each state in which they operate.
    Furthermore, in terms of transparency, I believe that regulation should include the requirement that the borrower see the amount actually paid to the appraiser; not the amount charged by the AMC.

  2. Bryan

    The new reform by the HVCC to have appraisals distributed by AMC’s is predatory and will cause monopolies through the United States.
    Members of my immediate family own and operate an appraisal business here in Arizona and will be forced to eventually close due to this new system imposed.
    Start thinking about the effect on small businesses and how many jobs will be lost before you start an overhaul of an entire sector.

  3. fred coutchie

    The underwriting requirements for many of the AMC are out of touch with our market. There concerns are generally more along statistical requirements than the quality of the report and the factors of the market. This does nothing to reduce fraud. In fact it may encourage it, as it is easier to fulfill the requirements than address the property and its market.

  4. The fact is that appraisers and the appraisal industry have checks and balances in place that are not being inforced now, whats makes new regulation and accountability any different for AMC’s.
    I was a review appraiser for the third largest lender in the country. I saw appraisals in every state of the union and I got one word for them, garbage. But, the company took them anyway, and at most times with tolerances. 10% to be exact. AMC’s are a cloud to the public at an attempt to quite those who complain and to try to insure the public trust. The fact is, that if consumers want real protection, they need to hire appraisals themselves, independent of AMC’s, lenders, agents, etc. Only then will the consumer truely be protected.
    The truth is, that most agents are not interested in protecting there clients, they are only interested in there commissions. As a new agent, and an appraiser for 20 years, this is nothing new.

  5. Steve

    Another government regulated agency is just what we need. You have to be kidding. This is yet another example of how our vote at the ballot box is being diluted piece by piece.

  6. Anybody, in any state, performing an appraisal should be a licensed individual. Not just the person managing or heading the office, ANYBODY! I am a 20 year Realtor and definitely know my business, yet I would need a license to perform appraisals. Shouldn’t we all be equal under the law?

  7. As Mr. McMillian testified, AMC’S were an active component in the NY case and resulting HVCC.
    In recent years regulators and appraisers have fought this type of behavior that supports appraiser pressure, appraisal value shopping, threats of removal of business, making real estate loans without qualified appraisal reports and values.
    Discounted appraisal fees and rushed reporting, especially in this complex and dynamic market, is inadequate to allow the appraiser the ability to provide an accurate and reliable appraisal report and analysis. This type of allowed activity in the past has lead to our financial markets troubles. The appraiser must be provided adequate compensation and time to provide much needed accuracy and reporting.
    The “client”, “bank” or “borrower” can not continue to be allowed to control fees in the analysis, reporting times and adequacy of reporting based upon the Scope of the Appraisal Assignment, the Intended Use of the Appraisal or the Intended User of the Appraisal.

  8. Pamela Wiengarth

    I am a Realtor for 22 years, and have been an Appraiser for 18 years owning my own appraisal company with over 40 appraisers working for me. I considered my company a small business. I have been involved in many aspects of residential and commercial real estate. I was a Chapter President of Central New Jersey AGA. I find that AMC
    ‘s are to impersonal, do not look to put out quality research/product. Are too concerned with DOLLAR$. AVM Models don’t take into consideration all the criteria of an appraiser who is physically inspecting the location and the property. You need Human Eyes to distinguish differences that affect values. Big Business can’t do the job that the smaller companies and independents can do to keep the standards. Mortgage fraud may climb higher if BIG BUSINESS Appraisals are done to support lending. What needs to be done is to remove the lender pressure on appraisers to perform with preconcieved numbers or they become black listed for doing a thorough, honest and accurate job. Find a Solution to REMOVE the Pressure the lender/mortgage rep exerts.

  9. Richard Zaikovsky

    What makes anyone think involving AMCs in our business will do anything but regulate our fees and take part of our fee. If a lender or mortage broker (MB) has a “pet” appraiser who is willing to attain the value needed, this will not change anything. The burden to find the “right” appraiser will only shift from the MB to the AMC. If the value conclusion is not satisfactory to the MB, they will change to an AMC that will provide an appraisal to the get “value” needed. The AMCs know this which will require them to “shop” for an appraiser that will deliver. They will NOT forfeit a client over something so “trivial” as an honest and qualifed appraiser. To really fix the problem, would it not make more sense to have 2 appraisals performed for every mortgage, or a review appraisal or, at least, a “drive by” 2055 assignment.

  10. As an appraiser I am thankful that NAR has lent their name to helping put a spotlight on AMC regulation. However as a broker and an appraiser I also believe that an equally important issue facing appraisers and realtors alike is the growth of the BPO sector. I hope NAR also takes further action to reduce this unregulated trend, that I believe will one day dilute the Realtor Brand. HVCC did nobody any favors, and allowing for BPOs in place of appraisals is as bad has handing the keys over to the AMCs…both of which will hurt us.

  11. Doug, NC

    The HVCC plan was hatched by now NY Atty. General Cuomo. Mr. Cuomo was once closely associated with an AMC, and I think someone should have investigated his ties to the AMC industry before falling head over heels for the HVCC scheme. Incredibly, the HVCC came about as a direct result of corrupt and illegal activity on the part of a few of the largest AMCs. Rather than punish them for their part in the destruction of the banking industry, AMC use has been blessed with the force of law in the form of the HVCC. There is no end to government malfeasance and corruption. Appraisal quality and integrity will suffer as a result of the near-mandate requiring lender use of AMCs. A lot of good appraisers will be forced out of the industry, and once again, consumers will inevitably have to pay the price for bad decisions made in Washington.

  12. Samantha

    I am a mortgage broker and have worked with AMCs via Wells Fargo Bank. I strongly oppose AMCs because they do not allow us to communicate directly with the appraiser. If there is a problem with an AMC appraisal, we are required to submit a written request and wait 48 hours or longer for a response. This further delays the closing process. Instead of using an AMC, I recommend lenders use a 3rd party review company to keep appraisers in check.

  13. Ed, Wa

    Regulating AMC’s is the worst of all possible options as it entrenches them into the system. Their claimed necessity use as a “buffer” between the lender and the appraiser is overblown hype. The buffer they claim to be is really a band-aid for what’s really wrong. Enforcement of regulations. The Feds left regulation and enforcement to the states but gave them no funds to do it. The pressure has only transfered from the bank to the AMC – and from what I hear, pressure is increasing, as in AMC control of what the appraiser puts in the report for comparables. AMC’s want off-market and AVM derived comparables included. They are influencing value and are a totally illegal “mob” type enterprise getting “protection” fees. We need to be protected from them! The AMC model says all appraisals and appraisers are the same and they use this to justify their “appraiser as commodity” low fees. Regulating them might (not likely) effect full fees for appraisals but it will cost the consumer more for the AMC to pay us fees worthy of experience. But, without effective quality control reviews, we’re simply back to the boom and bust mentality and appraisals fly through without review, as they are now. All in all, entrenching them in the system will effect price-fixing and more consumer costs. They’re no more than leeches as their existance only hobbles the appraisal profession. Low fees are meant to drive out quality appraisers and inexperienced “skippy” appraisers that fill the void make their AVM’s look ohhhh so good. Their goal is to get rid of appraisers so they and the banks can keep all the fees. 19 years experience as an appraiser.

  14. The implementation of the HVCC is a double edged sword. It is in part an attempt to stop coercion of appraisers to “make the number”,and that is a noble gesture (at best). Checks and balances are already in place for this (see FIRREA and USPAP). Appraisers have spent years forging solid business relationships with mortgage companies, banks, and realtors only now to have our businesses taken away from us by the use of AMC’s. Owners of appraisal companies have gone into business for themselves because they, primarily, grew tired of splitting fees. But now with the use of AMC’s we’re back to square one. The fees some AMC’s are offering to pay put us back to apprentice status (nothing against trainees).
    Actually, we’re worse off now because there is no guarantee we’re going to get any work at all from the AMC’s. AMC’s are supposed to distribute the work evenly on a rotation basis with ALL of the appraisal companies that registered with them. Does anyone see coercion and collusion happening to secure work from teh AMC’s? Wells Fargo recently sent out a letter which was forwarded to me by a member of the National Association of Mortgage Brokers, directing the brokers to use appraisers of their choice as Wells Fargo, at least for now, will not use AMC’s. Bravo Wells Fargo! AMC’s, with or without gonvernmental oversight, are the absolute wrong way to go!

  15. I am an independant appraiser that was never interested in a large shop. I have been appraising for 20+ years and have seen many changes over the years. The most dramatic change came when 3rd party brokers and origonators on commission started ordering the appraisals. That was like putting the fox in charge of the hen house. Don’t make a deal and don’t get any work. I have choosen to work with the AMCs and despite the flaws they bring which is paying less and pressuring for time, in my opinion, that was a better alternitive for me than being paid more but under constant pressure to hit numbers.

  16. I too have a problem with the use of AMCs. The goal of the legislation is admirable but could be accomplished without AMCs altogether by changes in the appraisal standards. It is my opinion that appraisers should not know what the contract sales price is or the purpose of the appraisal before they submit their results. We don’t need AMCs for that, just good honest appraisers, which is what I fear we will lose if we hand things over to AMCs that do not have any oversight and take the bulk of the fees when they add so little value to the process.

  17. Vicky

    I have read all the blogs today and wonder why no one mentions the “other” choice for the lenders to order their appraisals. That is FNC, Appraisalport and Alamode’s X-Site (Mercury). These are engines that the lenders would use to order and receive appraisals directly to and from their approved appraisers via a computer round-robbin system. The AMC’s are not even needed here. That way the appraiser gets the entire fee, with the exception of a $10 charge to be connected per job. That is alot better than loosing 1/2 or more of a fee to an AMC. I would pay $10 per job all day long to be able to keep my entire fee. And, the choosing of the appraiser is actually fair, not biased. This is what the Legislators need to be pushing for. The money the bank would be saving from the AMC’s fees could create jobs for their own reviewers, who actually have their best interest at heart! So, it works out so much better, the bank qualifies their appraisers, they utilize the order/receive engines, their own reviewers check the appraisals and everyone is better protected all the way around. Never mind the AMC’s – let them go away quietly! There is a better way~

  18. Tony

    Yes Vicki I agree there is a better way! I have read a lot of the posts and felt it was time to put my two cents in. I have been in Real Estate for 24 years and an appraiser for 18 years. I have seen a lot of bad appraisals as well as bad BPO’s. I have worked with different management companies for years out of necessity not by choice. I have refused to do work for some due to fees and some of their practices. Most of the ones I have worked for in the past are bank owned so we didn’t get as much arm-twisting for values since the loan officer is paid a salary not a commission. (Mortgage brokers are another story). I have come to refer to them as a tollbooth in the appraisal process. Their primary mission is to negotiate the lowest fee and quickest turn around in order to maximize the profit margin. This in turn has skewed the appraisals as they are hiring the person who will work for the least amount of money (there will always be someone that will do it for less) with no regard to the competency of the individual. I am not one for more government regulation but I don’t see an alternative. I am a Dept. of Veteran Affairs Fee Appraiser and would like to see the appraisal industry head in the direction of the established VA guidelines. 99% of my work now are VA appraisals, as I don’t like dealing with the tollbooth anymore. For those of you not familiar with the process and qualifications I will comment on it.
    VA sets the appraisal fees. (There is no negotiating and we get paid a realistic fee).
    Assignments are on a rotational basis. (Wow you can’t use your buddy or the guy who hits the bull’s-eye)
    There is a value appeal process that anyone involved in the transaction can initiate.
    (This involves the submission of real data not I don’t agree with your value and I wont use you anymore)
    10% of the appraisals are field reviewed by VA Staff appraisers a third party. (Not desktop they actually look at the subject and comps)
    I think 50% are desktop reviewed but don’t quote me on that.
    And finally the most important!
    If you are found doing shoddy work you will be reprimanded and if the problem persists you will be removed (fired). (Imagine that, this would eliminate all the incompetent appraisers and give more work to those who provide competent work)
    Ok so how are you going to fund it? Well how about charging a service fee on top of the appraisal? $25.00 maybe that’s the magic number. I’m sure whatever it costs to service it would be far less than the billions we have given to the banks.
    So what about the management companies? They could apply to become part of the government agency that oversees the appraisal and review process with no affiliation with any lender. And of course they would have set fees. (None of that do it for this or else stuff) Or better yet we really don’t need them.
    As far as BPO work I don’t have a problem with lenders using BPO’s as long as they are not used for lending or modification purposes. If they are then they need to be monitored as well in much the same way as I outlined earlier. This would also thin out the incompetent agents/brokers.

  19. Peter

    I don’t think its a good idea that AMC’s are regulated. Once regulated they become legitimate. They have the funds to hire lobbyists and lawyers. They will become institutionalized. They will drive out all small independent appraisers. Let them compete in this market with unhappy appraisers with an average age of 55. Wait a few years. I bet they too will become obsolete.