FAQ about AMCs
What is the role of an AMC?
AMCs are hired by lenders and/or other financial institutions to manage an independent and compliant process to determine the price and/or value of a residential real estate. Valuation tools include Appraisals, Broker Price Opinions (BPO) and Automated Valuation Models (AVM), among other products. AMCs work with certified appraisers and other real estate professionals across the nation to get this work accomplished.
AMCs existed well before the 2008 global financial crisis, and today they play an increasingly important role as a third-party service providers in the consumer mortgage process. AMCs have become increasingly popular by lenders to ensure federal and state regulatory compliance and independence between lenders and appraisers as required by Dodd-Frank.Today, more than 60 percent of all U.S. residential appraisals performed each year are obtained through AMCs; residential lenders consider AMCs highly-valued partners due to the many essential valuation-related functions they fulfill:
- AMCs continually maintain a qualified panel of licensed appraisers ready to execute lender valuation assignments.
- AMCs protect appraiser independence and safeguard against undue influence in the valuation process.
- AMCs conduct quality assurance processes to ensure delivery of final appraisal and valuation products.
- AMCs support and promote a smooth, timely and responsive mortgage process.
- AMCs promote safety and security by overseeing the completion of appraiser background checks and ensuring the satisfaction of related lender requirements.
- AMCs certify that they comply with federal and state laws governing valuation products and services.
Are lenders required to use AMCs to receive a real estate valuation/appraisal?
Lenders are not required to use AMCs. However, by law lenders must ensure that appraisers are engaged independently and not unduly influenced. As a result, many lenders choose to use Appraisal Management Companies (AMCs) to ensure independence and provide compliant valuation services.
Are AMCs regulated?
Absolutely! AMCs are regulated at the federal and state levels, both directly as a business and as a third-party vendor to lenders.
AMCs are under the purview of the Appraisal Subcommittee, a federal agency with a board of directors comprised of the Consumer Financial Protection Bureau, Federal Reserve, Office of the Controller of the Currency, Federal Housing Finance Agency, FDIC, National Credit Union Administration, and the U.S. Department of Housing and Urban Development.
The 2010 Dodd-Frank Act required that the Federal Financial Institution Examination Council (FFIEC), comprised of the Appraisal Subcommittee and the agencies above, promulgate rules that set minimum requirements for states to register AMCs.
Today, 40 states have passed AMC legislation. It is anticipated the remaining 12 states will seek to pass AMC legislation within the three year window required in the final federal rules.
Further, In addition to the legislative and regulatory appraisal requirements, many lenders have established additional stringent requirements to ensure compliance and quality.
How do AMCs qualify appraisers?
AMCs have a rigorous screening process including license certification, background checks and ongoing assessment of individual appraisers against defined performance benchmarks.
How does a lender or investor work with an AMC?
The lender/client places an order with an AMC, who then places the order with an appraiser or professional who will complete the project. The AMC ensures independence and compliance while managing the valuation process. Once finished, the valuation is provided to the AMC who, in turn reviews the product and provides it to their lender / client.
How is an appraisal / valuation assigned by AMC?
An AMC assigns an appraisal / valuation using a wide range of criteria to determine the most appropriate fit. Criteria may include local experience and proximity to the subject property, license level, education, access to the appropriate MLS, appraisal quality history, timeline performance and capacity at the time of order assignment.
What happens if a party disagrees with the appraisal / valuation?
If a party disagrees or wishes to challenge the appraisal / valuation, AMCs have a process in place. While it may vary by company, requests are typically made through the lender where additional data or perceived errors in the report are reviewed for reconsideration by the appraiser. After review, the appraiser / professional may, or may not, revise the report and or value.