Every mortgage lender is required by law to order every appraisal through an Appraisal Management Company (AMC). AMCs maintain large pools of licensed appraisers who are randomly chosen to appraise properties when appraisal orders are received by the AMC.
No loan officer is ever allowed to speak with an appraiser in regard to a particular transaction.
HVCC Rules to Prevent Appraisal Fraud
The above rules went into effect in 2009 with the establishment of Home Valuation Code of Conduct (appraisal) guidelines, or HVCC.
Prior to the 2008 mortgage meltdown, loan officers could order appraisals themselves and speak directly with appraisers. As a result, loan officers would often pressure appraisers to appraise properties for specific values. Many appraisers felt pressure to comply because they did not want to lose future business. This dynamic resulted in a lot of fraud that greatly exacerbated the mortgage crisis.
HVCC rules eliminated the potential for fraud but created another huge issue: a lack of accountability for negligent appraisals.
Large nationwide AMCs were created soon after HVCC came about and all of the large banks and mortgage lenders started to order their appraisals through the AMCs. We were in the broker channel (where we sent loans to be underwritten by other mortgage banks) prior to 2014, and these nationwide AMCs were a total nightmare, and a main reason why we left the broker channel.
We had far too many transactions killed entirely because of negligent appraisals, and the AMCs refused to amend the reports or hold the appraisers accountable. I recently blogged in fact about an “appraisal horror story” here.
Many mortgage banks (like ours) maintain their own internal pool of hand-picked appraisers who are not only skilled but local to the area. This is a key to our success and why purchase-oriented mortgage companies like JVM would never risk returning to the broker channel.
If you are an agent in a competitive market where appraisal skill is essential, you should make sure your lender has its own internal AMC.
Local AMCs vs. National AMCs. Our frustrations with AMCs only involved the national firms. We had excellent interactions with many regional AMCs, including Axis, Apple and DVS for example.
Founder/Broker | JVM Lending
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