In Brandon Melanese‘s article for Progress-in-Lending, posted January 28, 2021, the Valutrust Solutions VP for Sales & Business Development outlines why America’s Appraisal Management Companies (AMCs) are sure to experience an expanding role as “integrated business partners” of the nation’s mortgage lenders.
While change is now the constant throughout mortgage and real estate, he writes, “that’s especially true for the valuation space, where increased innovation, regulation and demand may bring greater change than other areas of lending.”
The value AMCs provide, with both valuations expertise and access to a network of vetted appraisers, has allowed lenders to focus on their core competencies. But following the mortgage crisis of 2007 to 2010, “as blame was leveled at every part of lending, including appraisals, the AMC proved itself a great ally in securing compliance.”
AMCs have now seen themselves “jolted into greater prominence,” especially for larger lenders with broader regional or national footprints, for whom AMCs are “perfectly suited.”
Melanese lists five reasons why he thinks the embrace of AMCs will continue:
- Turnkey compliance with the stringent safeguards that have been established in the wake of the crisis. Farming out the process to an AMC provides the arm’s-length buffer demanded for audits.
- Riding the rise and fall of the market and volume fluctuations is the responsibility of the AMC and its network, rather than an in-house appraisal management department that must scramble to hire – and most likely fire – additional managers as demand surges and recedes.
- Ability to bill staff time and overhead expenses associated with an appraisal order is something that in-house appraisal management is prohibited from doing, but an AMC can, which shifts internal operating expenses to where they can be recouped.
- Appraisers are appraised by their states, which are required to license them and maintain current records of their insurance coverage and disciplinary history. The best AMCs add supplemental layers of oversight to rate appraisers’ quality and compliance.
- Quality control is the fifth advantage. AMCs have very robust quality control processes and each appraisal must pass the review before an order is completed and returned to the client.
