Comment Detail

Comment

I believe that it is time to re-evaluate the HVCC requirements implemented in 2009.

Technology advances and checks and balances that are now available (and that have been implemented by the lenders, Fannie Mae, and Freddie Mac) on the appraisal data have tremendously improved the ability of these entities to detect fraud and over valuation on appraisals.

The Appraisal Management Company's function in this process is no longer necessary or relevant. It is an added unnecessary expense to the lender and the consumer.
They no longer add any significant value to the process. The lenders are still held responsible for the content of the appraisal report, thus still maintain a quality control team to review the appraisals that are completed and reviewed by the AMC's. Fannie Mae and Freddie Mac now have processes and technology in place that also validates and Quality reviews the appraisal better than anything that the AMC's maintain.

FHFA's own review of quality and accuracy of appraisal's completed through AMC's and appraisals not completed by AMC's dated
March 2018 had this conclusion:
FHFA Working Paper 18-01
5 Conclusion
Appraisal management companies became prominent largely due to their nature as intermediaries that prevent lenders from directly pressuring appraisers to “facilitate” transactions, but this function was only intended to be the means to an end—a means of approaching unbiasedness in appraisals. Simply playing the firewall is not all an AMC can do to improve appraisals; there is still the matter of quality assurance. An accurate, well-documented appraisal cannot support an inflated valuation.
In this paper, we specifically study the differences in quality between appraisals associated and unassociated with appraisal management companies. Our analysis indicates that, when compared to non-AMC appraisals, AMC appraisals generally demonstrate a similar degree of overvaluation. At the same time, AMC appraisals are seem to be more prone to contract price confirmation and super-overvaluation. Beyond valuation statistics, AMC and non-AMC appraisals seem to share a similar propensity for mistakes, a somewhat-unexpected finding given that the former tend to use a greater number of comparable properties.34
Our research has two main policy implications. In the first place, AMCs can be more effective, specifically in fulfilling their roles as firewalls and in implementing quality assurance— a main administrative function that also happens to be crucial to the objective that prompted their expansion. Secondly, borrowers’ access to credit may be affected by this lack of effectiveness in the long run. Some would argue that because AMCs take a cut of prevailing appraisal fees and decrease appraisers’ take-home pay, their growing prevalence may have contributed to an appraiser shortage. This shortage could lead to increased costs and growing timelines for appraisals in the future.
Although our evaluation employs relatively basic statistical comparisons,35 the results provide scant evidence of any systematic quality differences between appraisals associated and unassociated with AMCs. Future research can focus on the incentive and organizational structures of AMCs as well as on the network structure among AMCs and lenders. Such structures might have substantial impacts on appraisal quality.
34 One might assume that a greater number of comparables would be correlated with a greater amount of appraiser effort, which in turn would be inversely correlated with the number of mistakes.
35 We employ a set of appraisal quality measures that is not universal; similarly, we observe neither a universe of appraisers nor a comprehensive portfolio for any given appraiser represented in our sample, to the extent that many of our statistics serve as lower-bound estimates.

The fact is, that 10 years after implementation, AMC's have not improved the quality or standards of the appraisal. But they have significantly increased the cost and turn time of the appraisal.

Other Factors effecting the appraisal industry by AMC's
Amc's employ a large number of appraisers in thier offices. These employees (appraisers) are no longer completing appraisals in the field, thus reducing the number of appraisers actually completing
the actual appraisals. This has contributed to a shortage of appraisers in the field to complete the actual work. A shortage means that turn times are extended and prices go up significantly.
The numbers that I have heard (this needs to be verified) is that there are approximately 80,000 licensed appraisers in the US at this time, but only 40,000 actually completing appraisals in the field
at this time. This would mean that the other 40,000 are working as staff appraisal reviewers at different entities, including AMC's. I would suggest that by eliminating the requirements for lenders to
use AMC's that a large number of appraisers would return to completing appraisals in the field again. If we say that only 10,000 appraisers would be back in the workforce, (that would a 25% increase)
This would in effect lower costs and turn times. This may even improve quality because the stress of meeting deadlines would also be reduced, thus an appraiser could spend more time on each report.

I know that there would need to be guidelines and rules put into place for this to happen, but these would be minor compared to forcing companies to continue to use an ineffective expensive middleman.

Conclusion:
Technology has improved tremendously in the past 12 years and the Appraisal Management Company is no longer needed as the middleman in the appraisal process.

With today's technology the lenders are totally capable of implementing procedures and processes that can replace the AMC's and maintain Appraiser independence.
We can lower both the costs and turn time to the consumer.
We can improve the accuracy and quality of data being delivered to the GSE's by eliminating an extra unnecessary step (AMC's).
The Lender would remain responsible for everything that they are currently responsible for to the GSE's.

This is a win for the GSE's, a win for the lenders, a win for the appraisers, and a win for the consumer.

Walt Coats
Stat Realty Group, LLC
5023 W 120th Ave #412
Broomfield, CO 80020
720-938-5506