“Appraisal Management Companies Called Out”
Not much good that has come out of HVCC. This is a bill that should be repealed. I have heard all the arguments as to why, this is a good bill and is a benefit to the public. The negative result is a higher price for the cost of each appraisal.
I originate a lot of mortgages, there are constantly appraisal issues. When there are issues, it is pathetic, that I have to tell my client, that I can’t speak to the appraiser. At which point, I have an upset borrower, probably one or two upset Realtors and I can’t speak to the appraiser.
“THEY” or “BIG BROTHER”, must think that we have such unbelievable powers that we are going to convince someone to do something illegal.
Loan Broker Trade Group Raises Questions on AMCs
By: Brad Finkelstein
Certain appraisal management companies acting as a middleman between an originator and appraiser are not registering with the states, raising concerns about lost tax revenue, according to the National Association of Independent Housing Professionals.
Marc Savitt, president of NAIHP who also operates a small mortgage brokerage firm in West Virginia, said he came across the problem while discussing a problem appraisal with an AMC. (Savitt declined to name the AMC.)
While on the phone, he decided to look up this company's status with the West Virginia Secretary of State's website. The company did not appear to be officially registered with the state, a fact he later confirmed with the department.
All businesses need to register with either the Department of State or a similar entity (like a Department of Corporations). The registration lets the state tax department know the business exists and that certain taxes need to be remitted. This is needed in the business' home state as well as any state it seeks to do business in.
AMCs also must register with state appraisal regulators.
When he raised the issue with the AMC he was working with, the company told Savitt they were exempt. But this is not the case, he said.
The trade group president has conducted additional research, discovering that a “a significant number of AMCs” are not registered in the individual states they might conduct business in.
Carl Streck, a principal at MountainSeed Advisors, an Atlanta-based consulting firm which also operates an AMC, said it's a real issue for the industry. (With a few notable exceptions, the sector is dominated by mom-and-pop businesses.)
Nathan Brown, MountainSeed's chief legal officer, said the issue is whether the company is qualified to do business in a state, "which is a requirement for every business, not just AMCs and it's a requirement that is often overlooked."
But it could come back to haunt AMCs in certain states, he continued. In Alabama, for instance, if a company is not properly registered, there could be a problem enforcing contracts.
For companies looking to do business outside of their home state of incorporation, they have to "qualify to do business, which is filling out a form. Typically there is a very small fee associated with that," Brown said.
Filling out that form notifies the state's taxing authorities that they need to contact this company and provide them with information on the appropriate taxes to be remitted.
This requirement is in addition to the 29 states (and soon all states will have to do under Dodd/Frank) that have rules that regulate AMCs.
As a general rule, a business that solicits clients outside of its home state needs to qualify with the Secretary of State in those other states, Brown explained, echoing what Savitt said.
To comply with the AMC regulations, these companies need to be registered with the Secretary of State first.
Streck added a lot of those smaller AMCs are not completing the registration properly. He doesn't think they are doing this intentionally, but that they lack the staff and capabilities to deal with this as a primary course of business.
The registration also includes having a registered agent in that state -- someone who can accept legal papers in case they are sued. Brown noted there are companies that will act as a registered agent for a fee.
InHouse Inc., a Ponte Vedra Beach, Fla.-based provider of appraisal technology and an operator of an AMC, "is registered, licensed and pays taxes in all of the states in which it does business," said president and CEO Jennifer Creech.
“Even if there is an issue where a tax hasn't been paid, the states are very quick to let a company know there is an issue. If you want to keep operating in that state, you must pay the taxes,” she adds.
New Mexico is an interesting state in terms of appraisals, Creech notes. When InHouse places an appraisal order there, the appraiser will not accept the order unless he or she is given a Nontaxable Transaction Certificate.”
“On our platform, we only have AMCs that are registered to do business in a particular state receiving orders for those states. I think it is becoming increasingly difficult for AMCs to do business in states where they are not licensed and registered,” Creech says. “If an AMC missed a state registration or law change, it generally catches up with them quickly.”
Many appraisers, she said, make sure an AMC is licensed or registered in the applicable state prior to accepting an order.
image: chris sharp/freedigitalphotos.net
Comments(5)