The enhanced regulation in the mortgage lending industry is not limited to lenders and brokers. Indeed, professionals in all aspects of home sales are being called to task for the current state of the real estate industry.
One group of service providers facing heightened regulation is appraisal management companies. With six states requiring AMCs to obtain registration certificates and approximately 25 others considering legislation to do the same in their jurisdictions, AMCs may be the next group to see nationwide licensing become an operational reality.
While the provisions of active and pending laws requiring registration of AMCs vary, there is a model AMC act requiring registration of AMCs that sheds some light on what the regulatory landscape may look like in the coming years. The Appraisal Management Company Registration & Regulation Model Act, issued late in 2008 and last revised in the fall of 2009, sets forth some basic requirements for AMC registration and operation.
The act defines AMC as anyone who directly or indirectly performs appraisal management services, which include administering and assembling an appraisal panel; taking orders from one person and placing that order with a member of an appraisal panel; managing appraisal orders; conducting quality control of appraisals prior to delivery to clients; and delivering the completed appraisal to clients.
An “appraisal panel” is a group of certified appraisers who are independent contractors to the AMC who comprise a pool of eligible appraisers from which the AMC orders appraisals on behalf of clients.
The act requires AMCs to register unless exempt. Among the exemptions available are AMCs that order 10 or fewer appraisals in a particular state in a calendar year; AMCs that maintain an appraiser panel of 15 or fewer appraisers; and persons that exclusively employ appraisers on an employer/employee basis for the performance of appraisals, provided the employer is responsible for ensuring the appraisals are performed in accordance with Uniform Standards of Professional Appraisal Practice and the employer accepts all liability associated with the performance of the appraisal by the employee.
The act places various responsibilities on AMCs, such as an ongoing obligation to ensure that the assigned appraiser is properly licensed or certified and in good standing in the applicable state and the duty to ensure that appraisers are paid for the completion of an appraisal within a certain period of time after completion, unless there has been a breach of contract or substandard performance of services. It also governs fees the AMCs pay to appraisers and the maintenance of independence between AMCs and appraisers.