Appraisers' Free Forum

National Association of Realtors® (NAR) President, Charles McMillan, recently met with both the New York State Attorney General and with the head of the Federal Housing Finance Agency – the overseer of Fannie Mae and Freddie Mac – to convey industry concerns. Representatives Travis Childers (D-MS) and Gary Miller (R-CA) have co-sponsored HR 3044 that would impose an 18-month moratorium on the use of the HVCC. It would seem a good time to pause and reassess.

Published: August 18, 2009

The primary complaint about AMC appraiser selection processes is that too often appraisers are given assignments that take them out of their geographical area of familiarity and expertise.

Steve Owen wrote:All it will take to set this right is enforcement of existing regulations.

Goodpasture wrote:I would think that putting AMC's under ...

Edd Gillespie wrote:The banks are using AMCs to avoid risk and responsibility and for a CYA. Don't kid yourself into thinking Fannie thought this HAVOC up on her own. I'd wager every word of it was veted by the banks. If AMCs didn't serve their purposes, the banks wouldn't tolerate them no matter what the law or Fannie said.

I take a slightly different read about "transferring the money" (although I acknowledge AMCs are a significant profit center for the larger lenders).

I've argued (and will continue to argue) that it isn't so much about transferring money as it is about transferring risk- specifically, regulatory risk.
Prior to the HVCC, regulatory risk and the appraisal process was focused on two points: The appraiser and the lender. The appraiser had the responsibility to comply with USPAP and the lender had its responsibility to comply with FRI requirements or GSE requirements. I think we can both agree that the regulatory enforcement process was dysfunctional and did not work.

Now, the HVCC represents a transfer of much of the risk from the lenders to this 3rd party AMC for managing the appraisal process. The appraisers still have their same share of regulatory risk (USPAP), but the lenders have a cover (plausible deniability) for much of appraisal management process. The HVCC has, in effect, become an insurance policy for large lenders (that's what insurance is- risk transfer). If AMCs ever get licensed, then that risk-transfer mechanism will be ensconced in the system and it will never go away.
A better solution (as far as I'm concerned) is to allow the banks to use whatever mechanism they want to manage the appraisal ordering process but to hold the banks 100% responsible and use aggressive regulatory oversight to ensure they are in compliance.

Obviously not all lenders use an AMC. US Bank is one of my clients who orders direct using their own process (which is separated from the origination department). I have a couple of smaller bank clients that work likewise.

A reduction in the risk level for lenders who use AMCs does result in increased profits, for sure. So, ultimately, I think you are correct when you effectively say follow the money. From my point of view (which may be in the minority), focusing on the risk-transfer aspect eliminates all the side-arguments about business decisions (appraisal fees and fee splits, AMC geocompentency, etc.) and keeps the spotlight on where it should be: The appraiser and the FRI or Financial Institution that is going to sell the loan to a GSE.

Edd wrote:'course I refuse to work for them any longer even though, unlike Plant, I am not independently wealthy. From what I hear mortgage brokers were better clients, but we squawked due to the excesses a few. And we provided the AMC carte blanc opportunity by asking somebody else to solve our problems.

Leann used to say organizing appraisers was like herding cats.

The banks are using AMCs to avoid risk and responsibility and for a CYA. Don't kid yourself into thinking Fannie thought this HAVOC up on her own. I'd wager every word of it was veted by the banks. If AMCs didn't serve their purposes, the banks wouldn't tolerate them no matter what the law or Fannie said.

Edd Gillespie wrote: So, if we are going to have affordable housing we need a plan. Smaller may be better.

Senior Jefe wrote:Actually, thanks to a bipartisan effort, that part of the plan was a rousing success, we have affordable housing now, a whole hell of a lot of it in fact. Mr. Edd it's good to see you back.

Edd Gillespie wrote:[We cannot maintain our standard of living and compete well.