Third Party Vendor Management of Appraisal Management Companies

Transcription

1 Third Party Vendor Management of Appraisal Management Companies 320 West 202nd Street, Chicago Heights, Illinois Main Office: Main Fax: Website:

2 HVCC/Dodd-Frank/CFPB May, NY State Attorney General investigated WaMu, Fannie, Freddie and reached an agreement called HVCC. HVCC was designed to make appraisals more independent and objective through tighter scrutiny of appraisers, lenders, GSEs, etc. Ultimately, lenders believed this led to conservative appraisals and made it more difficult to get a mortgage. HVCC initially only covered GSE loans, but FHA also adopted it by January, HVCC led to a huge increase in numbers of Appraisal Management Companies (AMCs). This was due to the widespread belief that if a lender was using an AMC, they could demonstrate compliance with the new requirements. Many felt this diluted the quality of appraisals as AMCs often paid lower appraisal fees and could only attract marginal appraisers. Not true of all AMCs, primarily just the larger ones working with the largest lenders, etc. July, HVCC replaced with Dodd-Frank Act. October 2010, Final Rule under Dodd-Frank to establish Appraisal Independence. April, 2012, CFPB issued bulletin CFPB-regulated entities are expected to oversee their business relationships with service providers in a manner that ensures compliance with federal consumer financial law, which is designed to protect the interests of consumers and avoid consumer harm. All of the aforementioned events led to the processes that make up today s third-party vendor management

3 Before and After HVCC Before: Roughly recognized AMCs in business. After: 500 AMCs in business today. 15% +- are truly national, registered/licensed in each state. Before: 15% +- of all residential appraisal orders managed by AMCs. After: 80%+ Before: Number of states requiring AMCs to be registered/licensed to do business in those states ZERO. After: 39 states and counting; will be 50.

4 Typical AMC Before HVCC While exceptions existed, typical AMC infrastructure and SOPs included: Received Orders Via FAX Order forms often included Owner s Estimate of Value or, Value Needed No formal Vendor Management Department most any appraiser could get work No formal Appraisal Review; QC took place but rarely included formal review reports Org Charts typically included Owner, low level management, and clerical staff Paper still prevalent Info Sec barely visible IT limited to ensuring computers, printers, faxes, phones worked Business Continuity/Disaster Recovery policy rare or non-existent Unusual to have business development teams Unusual to have Post Submission Support

5 Today s Leading AMCs Often Run like Large Corporations Org Charts include CEO; President; SVPs; Chief Appraisers; CFOs, Controllers; Operations Managers; Compliance Officers; IT Directors, Formal Quality Control and Post Submission Support Teams; Business Development team; strategic initiatives staff. More than one corporate location for business continuity purposes Adoption of leading edge technology for all components of business model. Competitive compensation plans necessary to attract top talent FT Legal Counsel becoming increasingly more common Attracting new clients requires strategic, lengthy, and costly on-boarding protocol, starting with formal RFIs, RFPs, then contract negotiations.

6 Score-carding and Audits As part of Third Party Vendor Management, many lenders scorecard their AMCs monthly and maintain partnership calls weekly, to help ensure best in class service and quality from their vendors. Annual or Bi-Annual Audits consist of verification of: Appraiser selection process R&C Fee paid to appraiser Timeliness of payment to appraiser Fee charged to client consistent with contract Appraisal review process Who reviewed the report (credentials) Was there any inappropriate communication/pressure on the appraiser to alter the report or hit a value Communication log between reviewer and appraiser checked Review report part of file Facilities inspection and annual audited financials

7 Key Contact Allstate Appraisal, LP National Valuation and Review Services 320 West 202 nd Street Chicago Heights, IL Office: Fax: Website: