A new government report recommends that minimum standards be established on a national basis for states to use in registering appraisal management companies.
With the implementation of the Home Valuation Code of Conduct, many lenders began relying on AMCs to comply with HVCC requirements.
The reliance on such entities continued when the Appraiser Independence Requirements replaced HVCC.
The Dodd-Frank Wall Street Reform and Consumer Protection Act mandated that the Government Accountability Office study the various types of real estate valuations used, their costs and appraisal rules. It also was required to look into conflicts of interest.
On Wednesday, the GAOÂ released its findings.
The report highlighted concern by individual appraisers that they are paid too little under the AMC model. It also acknowledged that new rules requiring that appraisers be paid a customary and reasonable fee could affect consumer costs and appraisal quality.
The GAOÂ said that wider use of AMCs has raised concerns about AMC oversight.
“Some industry participants said they are concerned that some AMCs may prioritize low costs and speed over quality and competence,” the report stated.
Federal regulators, Fannie Mae and Freddie Mac reportedly hold lenders accountable for making sure that the policies and practices of the AMCs they use meet requirements for appraiser selection, appraisal review and reviewer qualifications. But the agencies and regulators don’t examine AMC operations.
The Dodd-Frank act assigned responsibility for the supervision of AMCs to the individual states.
The report noted that several states began regulating AMCs in 2009, but the requirements vary by state.
“GAO recommends that federal banking regulators, the Federal Housing Finance Agency and the Bureau of Consumer Financial Protection consider addressing several key areas, including criteria for selecting appraisers, as part of their joint rulemaking under the act to set minimum standards for states to apply in registering AMCs,” the study said. “The federal banking regulators and FHFA agreed with or indicated they would consider the recommendation.”
The report concluded that setting minimum standards that address the key functions performed by AMCs would enhance oversight of appraisal services and provide greater assurance of the credibility and quality of AMC appraisals.
