Appraisal management companies aren't regulated in Oregon - a problem, say appraisers involved in a legal complaint against one such company in Portland; at least one state legislator is exploring the issue
By Nick Budnick / The Bulletin
SALEM - Oregon lawmakers are considering whether to set new rules for appraisal management companies - a growing but unregulated sector in the real estate industry.
Known as AMCs, these companies act as middlemen, taking money and appraisal orders from mortgage lenders and then hiring appraisers.
They have proliferated since May thanks to new national appraisal guidelines intended to discourage appraisal fraud. The guidelines essentially stop appraisers from working directly with mortgage brokers, and are intended to produce unbiased property valuations.
But critics, including Patrick Solitz, a Bend real estate appraiser, say the rise of AMCs spells trouble for homeowners and appraisers. They accuse AMCs of hurting appraisal quality and of pressuring appraisers to undervalue properties on behalf of cautious lenders.
The complaints have led to several states passing new rules on the companies, and Oregon Rep. Paul Holvey, D-Eugene, says he's "very interested" in the issue as well. He plans to hold a hearing on the subject in the House Consumer Protection Committee, which he heads. He added that he would even consider legislation for the February special session.
Unlike appraisers and mortgage brokers, AMCs are not regulated in Oregon. Their owners and employees are not required to undergo background checks. The companies are not required to be licensed, bonded or insured.
Solitz, for his part, says he has a good example of the need for new rules: an AMC that appears to be the target of a criminal investigation, one in which Solitz is a complainant.
Solitz has been waiting two months to be paid by Valuation Logistics, a Portland-based AMC that does business with appraisers across the country.
According to an online appraisers forum, some are urging people to share information with Portland police based on reports of appraisers not being paid by the firm. Solitz is one of those cooperating with authorities, saying he has received two phone calls from a Portland police detective in recent days. The detective, Liz Cruthers, declined to comment.
The Better Business Bureau has rated Valuation Logistics with an "F," or failing grade, citing four complaints involving billing or collection issues that the company either did not resolve or did not respond to.
The company's owner, Scott H. Olson, denies any wrongdoing. He says he hasn't paid appraisers because lenders have failed to pay him. He said the "majority of lenders still are looking for a way around the system," and refuse to pay if the appraisal values don't match what the lender wants.
"There needs to be better regulation for all involved," he said.
Michael Read, a Portland appraiser who did four appraisals for Olson, has filed a $7,500 small- claims action in Multnomah County. He says he checked with Olson's client on some of the appraisals, and confirmed that Valuation Logistics was paid.
Richard Hagar, a Washington appraiser, lecturer on real estate and expert witness, says about 10 states have already passed new rules for AMCs, while 10 others are following suit. He says Valuation Logistics demonstrates the problems of leaving AMCs unregulated - noting the complaints about nonpayment by the firm, as well as the fact that the address listed on its Web site is no longer valid.
"There's a great example right there," he said of the firm. "No bond, no background check, no address of who's really in charge: a company in the wind, and yet they are (doing business with) federal banks."
Public records also show that staff of the agency that regulates Oregon appraisers, the Appraisal Certification and Licensure Board, has brought Valuation Logistics to the attention of the board's appointed members. Of particular interest was that Olson co-founded the company with a Portland appraiser who has had several run-ins with the state board.
In April 2009, the board suspended that appraiser, Nathan Bernhardt, for six months based on nine violations of appraisal rules.
Asked about Valuation Logistics, Bernhardt said he is no longer involved in the firm but declined to otherwise comment. Other past business partners of Olson also declined to comment.
Public records show that Olson has been involved in other companies before going into the appraisal management business. He also has been under law enforcement scrutiny in the past, including an arrest in Clackamas County for contempt of court in 2007.
In 2005, in an unrelated matter, his participation in a Wilsonville manufacturing firm called Medium Build ended when his two partners accused him of embezzling more than $50,000 as well as transferring a company vehicle to a friend of Olson's without permission, according to a Clackamas County Sheriff's Office report.
Olson, who calls the matter a "messy business divorce," denied wrongdoing; the case ended with a civil settlement.
Solitz is still waiting for a payment of about $530 for an appraisal performed in John Day.
Oregon's failure to set rules for AMCs will contribute to further problems, he said, adding, "I think we're going to see more of that, because that door has opened."
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