Most of us who work in the real estate industry are accountable for how we perform our duties and responsibilities as well as the services that we provide our clients.
Realtors are bound by the rules and regulations of not only their state real estate associations but also by their local MLS boards. Mortgage lenders are also regulated by at least a dozen or so state and federal regulatory agencies with new financial regulatory agencies being created as we speak.
Real estate appraisers and home inspectors are also regulated by the Office of Real Estate Appraisers as well as state regulatory agencies and boards.
Appraisal management companies (AMC) on the other hand are regulated by no one. Yes folks, that's right, there are no governing bodies, agencies, associations, boards or any or any other state or federal regulatory function that controls the way an AMC operates.
Furthermore, the people that own and operate these companies are not required to undergo background checks, nor are any of them required to be licensed, bonded or insured. Moreover, the most important criteria for an appraiser working for an AMC is basically how cheap they're willing to work for.
Based on that, many experienced and qualified appraisers have chosen not to work for AMC's because of the cut that AMC's take from the fee that the borrower paid and that they (the AMC) calls an "appraisal fee", which, by the way, is not legal.
Three of the local appraisers that I've been using for years will not work for AMC's because AMC's refuse to pay them the standard appraisal fee. Fortunately for me and most of my clients, I am still allowed to use my local appraisers for my FHA transactions and only a couple of my clients have been subjected to poor and sloppy conventional HVCC appraisals.
In those cases, I appealed the appraisals because of sloppy work and blatant errors in the appraisal. Good grief, one appraiser didn't even have the correct address for the subject property. In those cases that I appealed, my lenders would tell me that they have no recourse in which to insist that the AMC's have their appraisers correct errors in the appraisal. B^!!$#!T
When lenders enter into agreements with AMC's, they MUST incorporate measures into the agreement that allow sloppy and inaccurate appraisals to be questioned and corrected. If lenders are not incorporating this into their agreements with AMC's, then SHAME ON THEM - THEY SHOULD BE!
While I'm not crazy about the fact that FHA is now trying to implement some form of HVCC in the FHA appraisal ordering process, the FHA guidelines clearly state:
4155.2 4.1.b Lender Responsibility for Appraisers
The lender is equally responsible, along with the appraiser, for the quality, integrity, accuracy and thoroughness of the appraisal. The lender will be held accountable by HUD if the lender knew, or should have known, that there were problems with the integrity, accuracy and thoroughness of an appraisal submitted to FHA for mortgage insurance purposes. Lenders that submit appraisals to HUD that do not meet FHA requirements are subject to the imposition of sanctions by the HUD Mortgagee Review Board.
Note: This applies to both sponsor lenders that underwrite loans and loan correspondent lenders that originate loans on behalf of their sponsors.
That's right folks, nowhere in there does it say that lenders who use AMC's are exempt from any accountability for the accuracy and thoroughness of the appraisals they order through their AMC's. As a matter of fact, nowhere in there does it mention AMC's at all. Does that mean that FHA/HUD isn't going to hold AMC's accountable for the work that their appraisers perform? Hmmm...
Regardless, I will be holding my lenders accountable for the work that their AMC's appraisers perform. What I would really like to see and what I am hoping very much happens next month is that lenders start doing away with AMC's all together. I know, I'm dreaming because AMC's are probably here to stay but it's time they start being held accountable for they operate and the work their appraisers perform.
I can't stand working with AMC's and as far as I am concerned, they have made the whole loan process so much more difficult and stressful for everyone in the transaction. It's time they either start being held accountable for the way they operate or they need to cease existing.
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