Our friend Jay Vorhees at JVM Lending wrote a blog recently about Apprisal Management Companies (AMC’s) that I found really interesting. Jay wrote about the mess that usually comes out of a broker-lender relationship due to appraisal issues.
After the mortgage melt down the laws changed that required lenders to use AMCs instead of cherry picking their appraisers directly. This past practice created an opportunity for dishonest practices. However, creation of AMC’s created a separate list of issues and caused the cost of appraisals to increase. The AMC’s usually paid the appraisers too little and decreased motivation by appraisers to do a good job or they hired inexperienced appraisers because the seasoned appraisers got out of the business as their salary decreased. Initially there was no parameters in place for the appraiser you got. Many times, I got an appraiser from Sacramento appraising a property in the Walnut Creek School District and would get a low value because the comps they pulled were parts of Walnut Creek not in the school district. As you can imagine, this led to some huge problems
As time passed, mortgage brokers such as JVM have moved to a “mortgage banking channel” to avoid using AMC’s and now utilize their own internal AMC that is still compliant but staffed by competent, local, highly-skilled appraisers of JVM’s choosing. The lender still can’t talk to the appraiser, but at least they have control of the quality of appraisers and know the area they are appraising.