More AMC and PDC Bull

[George Hatch]

I don't know what the answer to this question is, but I think it prudent to consider the possibility:

What's the plan if it comes to pass that the post mortem on appraisals performed over the last 15 years don't show a significant difference in the number of gross overvaluations between AMC-engaged vs direct engaged? What are you guys going to do if you can't prove the allegation that the low cost appraisers (and the hybrids and the waivers) pose a significant threat to safe/sound lending?
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And before any of the leakage comes about tone policing my comments, let me say this:
if it comes to pass that the AMC-appraisals HAVE been causing significantly more problems than the direct engagement then that would completely justify prohibiting the lenders from using those appraisals, too.

That's another if/then position upon which I have been consistent all along.

 

[djd09]

but what about parea...and the public trust

 

[George Hatch]

I already oppose the use of PAREA for other than QE.

 

[J Grant]

AI Overview


Lenders would likely significantly reduce or cease using Appraisal Management Companies (AMCs) if they could not pass on the costs to consumers
. While AMCs offer compliance (Dodd-Frank Act) and efficiency benefits, they are often used because their management fees can be passed on to borrowers, saving the lender internal operational costs.
National Association of REALTORS® +3

• Cost Shift Impact: If lenders had to absorb AMC fees, the administrative expense would likely drive them to bring appraiser management in-house or find cheaper, automated alternatives, as the "middleman" fee is often seen as a significant hidden cost.
• Alternative Value: AMCs provide value by managing complex, high-volume, and regulated appraisal processes, saving lenders the overhead of building in-house teams.
• Compliance Necessity: Some lenders might continue to use AMCs for compliance purposes, as they provide an "arm's-length" buffer to meet appraiser independence requirements and prevent lawsuits.

 

[J Grant]

AI Overview




Lenders use Appraisal Management Companies (AMCs) to handle appraisal logistics, aiming to ensure independence, compliance, and efficiency in valuation. Pros include compliance with AIR (Appraiser Independence Requirements), faster turn times, and reduced bias risk. Cons include higher costs, potential loss of local expertise, and over-reliance on automated, sometimes inaccurate, data
.
SAMCO - Appraisal Management Company +4
Pros (Advantages) of Using AMCs

• Compliance & Independence: AMCs ensure lenders adhere to Appraiser Independence Requirements (AIR), providing a necessary buffer between loan production staff and appraisers.
• Quality Control & Reduced Bias: AMCs often have internal review departments to check for Uniform Standards of Professional Appraisal Practice (USPAP) compliance, reducing errors.
• Speed & Efficiency: AMCs manage large panels of appraisers, often resulting in faster, streamlined appraisal turn times.
• Regulatory Support: Utilizing AMCs helps manage the legal complexities of valuation regulations.
  cKissock +4

Cons (Disadvantages/Risks) of Using AMCs

• Higher Costs: Using a third-party intermediary adds administrative fees, increasing the total appraisal cost.
• Lower Appraiser Quality: The focus on speed and low cost can attract less-experienced appraisers rather than experts with deep local knowledge.
• Reduced Quality of Reporting: Some studies suggest that the "review" process can lead to "cookie-cutter" reports, where uniqueness in a property is missed.
• Limited Communication: The strict separation can hinder direct communication between the lender and the appraiser, complicating complex valuations.

 

[Surf Cat]

What's the plan if it comes to pass that the post mortem on appraisals performed over the last 15 years don't show a significant difference in the number of gross overvaluations between AMC-engaged vs direct engaged?

IMO the complaints are not about gross overvaluations (even though AMC's dole out ROV's regularly) the complaints are about fees and hiding from the borrower what their payment is actually going to.

But I like your idea on comparing AMC work to direct lender work. I'd like to hear from Sputnam (or any other review appraiser here) if there's a significant difference "in quality" (accurate description, appraisal methodologies, clear concise reporting and reasoning, Etc.) between AMC and direct engagement appraisals.

Are direct engagement appraisals that pay appraisers approximately $600 to $800 dollars any different than AMC assigned $200 to $300 ones?

 

[George Hatch]

Are direct engagement appraisals that pay appraisers approximately $600 to $800 dollars any different than AMC assigned $200 to $300 ones?

I don't think that's exactly the relevant question to be asking. I think the way I characterized it is the relevant question.

" .... show a significant difference in the number of gross overvaluations between AMC-engaged vs direct engaged?"

An appraisal report can have all manner of housekeeping or documentation deficiencies without adding to the risk of gross overvaluation in the mortgage decision. Up to and including pulling adjustment factors out of thin air or slight variations in GLA.

 

[J Grant]

I don't think that's exactly the relevant question to be asking. I think the way I characterized it is the relevant question.

" .... show a significant difference in the number of gross overvaluations between AMC-engaged vs direct engaged?"

An appraisal report can have all manner of housekeeping or documentation deficiencies without adding to the risk of gross overvaluation in the mortgage decision. Up to and including pulling adjustment factors out of thin air or slight variations in GLA.

Since when has "gross overvaluation" become the standard of tolerance, and who says that it is, besides yourself?

It sounds like a really low bar to aim for.

 

[Sadie]

AI Overview


Lenders would likely significantly reduce or cease using Appraisal Management Companies (AMCs) if they could not pass on the costs to consumers
. While AMCs offer compliance (Dodd-Frank Act) and efficiency benefits, they are often used because their management fees can be passed on to borrowers, saving the lender internal operational costs.
National Association of REALTORS® +3

• Cost Shift Impact: If lenders had to absorb AMC fees, the administrative expense would likely drive them to bring appraiser management in-house or find cheaper, automated alternatives, as the "middleman" fee is often seen as a significant hidden cost.
• Alternative Value: AMCs provide value by managing complex, high-volume, and regulated appraisal processes, saving lenders the overhead of building in-house teams.
• Compliance Necessity: Some lenders might continue to use AMCs for compliance purposes, as they provide an "arm's-length" buffer to meet appraiser independence requirements and prevent lawsuits.

I bet the lenders haven't reduced any of their fees, like the processing fee or the UW fee.

 

[George Hatch]

Since when has "gross overvaluation" become the standard of tolerance, and who says that it is, besides yourself?

It sounds like a really low bar to aim for.

They're lenders, not our peers. Their view of appraisals is different than out view, as is appropriate given the different roles.

So what's the stated intended use of the appraisal? To aid in making a mortgage decision.

We can reasonably elaborate on that decision as their effort to avoid overencumbering the property. And to avoid loaning on other disqualifying property attributes. I can't really see them having any alternate prevailing use, can you?

If not to cut back on gross overvaluations, what other reason would Congress have to cut the AMCs off?