BANKING & LENDING APPRAISALS

Under current laws and regulations in our country today; the majority of loan officers (or brokers) and/or their firms cannot select (hire) an appraiser. In fact, neither can the borrower. It doesn’t matter if you’re buying a home or simply doing a refinance.

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Federal regulations have now dictated how lenders and appraisers must behave throughout the appraisal process. Both Dodd-Frank and Truth in Lending Acts now require appraisals to be “conducted independently and free from inappropriate influence and coercion.”

These new federal appraiser-independence requirements define a narrow scope of acceptable interactions between appraiser and loan officers. Lenders are simply afraid that having any contact with appraisers could be construed as violating the law by attempting to influence the appraiser's opinion before the appraisal is completed. Lenders are understandably cautious in order to avoid the possibility of severe disciplinary action.

Therefore, the lender often will order the appraisal through a third-party company called an Appraisal Management Company (aka AMC). Using an AMC is not a requirement. However, since all the GSE’s (Government Sponsored Entity) such as Fannie Mae, Freddie Mac and HUD will not accept an appraisal ordered (obtained) directly to/from the Appraiser; the use of AMC’s has become the common approach to adhering to these appraiser independence requirements.

Some lenders however – especially small & local ones – may have direct relationships with a small panel of appraisers and will not use an AMC. Some lenders may have an in-house independent appraisal department or utilize their own independent subsidiary company.

So what is an AMC?

An independent entity through which mortgage lenders order residential real estate valuation services for properties on which they are considering extending loans to homebuyers. AMC’s fulfill an administrative function in the appraisal process, including selecting an appraiser and delivering the appraisal report to the lender. AMC’s do charge fees to the lenders which get added into the overall cost of your appraisal. The majority of independent individual appraisers who work for AMC’s provide the actual property valuation services. Some AMC’s employee their own staff of appraisers as well.