Have you seen the most recent updates to the Appraiser Independence Requirements? This is something worth paying attention to. These guidelines affect loan officers and how closely AMCs can work with mortgage brokers and lenders moving forward.
Lenders have previously been scrutinized for how they have interpreted the Appraisal Independence Requirements. But with the recent update, if their role wasn’t clear before, it is clear now. Anyone making money directly or indirectly from a loan origination cannot have a hand in selecting the appraisal services or determining what valuation provider is engaged to facilitate the appraisal order.
Read on to learn all about the updated Appraiser Independence Requirements (AIR). This article will also discuss how loan officers can still advocate for their clients’ appraisals, the selection of AMCs, and how to order appraisals while staying in line with the new requirements.
AIR Updates on AMCs Working with a Broker
Fannie Mae and Freddie Mac published their original Appraiser Independence Requirements in October 2010. They published the AIR updates and some new FAQs in August 2023. The specific updates that apply to how a lender and mortgage broker may order appraisals by working with an appraisal management company (AMC) can be found here.
The most notable update is that the Appraiser Independence Requirements prohibit a mortgage broker from ordering appraisal services.
In light of these most recent updates, many lenders are reconsidering the way they manage the selection of the AMC or the appraisers working on their panel. If you have ever been involved in selecting the AMC or which appraisers are on your direct panel, you may be in jeopardy of losing your current valuation partners.
Moving forward, there will be a clear line in the sand. Lenders cannot allow a loan originator to select an AMC. And they cannot have any input on what appraisers are on a lender-appointed panel.
If you are a mortgage broker or loan officer, you know that this can be problematic because of the relationships you have built over the years. A good valuation provider can make or break a deal, and in this market you cannot afford to lose out on any opportunities. As mortgage lenders and financial institutions consider their options, they will likely be rotating your business out to multiple AMCs.
But the good news is that there are things loan officers can do. For example, they can ensure that the lenders they work with understand what appraisal vendors have historically performed well in their local market.
Follow our tips below on how to stay involved in how lenders choose their appraisal services, even though AMCs and appraisers cannot work with mortgage brokers directly in the selection process.
Be Vocal
Lenders should welcome your input on how well your AMC relationships have performed for you and your clients in the past. If the lender is ahead of the game, they should have the ability to allocate a weighted percentage of your appraisal orders to just a few AMCs that have historically performed well in your market.
To be clear, as a loan originator, you cannot have any say as to which AMC or independent appraiser ultimately receives an order. However, you can help to ensure that the vendors your lender chooses to work with to order appraisals are high-quality professionals who meet the needs and expectations of you and your clients.
Appraisal services are ultimately the mortgage lender’s decision. However, loan officers can still be proactive by giving lenders all the information they need to make the best decisions on who they work with for their appraisals.
Communication Is Key
Make sure you understand how to communicate correctly with your lender and valuation providers about your clients’ appraisals. Of course, you must stay compliant with the Appraiser Independence Requirements. But with that said, it is critical that you still receive timely updates and get answers to your questions when concerns arise.
The Appraiser Independence Requirements do not prohibit loan officers from communicating directly with a third party about any questions or issues. These third parties can be an AMC or anyone not involved directly with the mortgage loan transaction, or parties with a financial interest in the transaction. It is proprietary information that remains off the table, which the AMC has to protect.
Staying within the standards of professional appraisal conduct and communication can save you time and prevent setbacks that keep your client from closing the loan on the date they are contractually obligated to meet.
Having to correct errors can be very costly. A good AMC is always aware of important milestones and is willing to help in any way possible to keep all parties involved in the real estate transaction updated throughout the appraisal process.
Reconsiderations of Value
It is essential to understand the lender’s reconsideration of value (ROV) process. You should ensure that you have appraisal vendors in your rotation with a dynamic ROV process. That’s because you want to ensure that if an ROV is necessary, you have the best chance to convey pertinent information to the appraiser successfully.
Final Thoughts
The updated Appraiser Independence Requirements have set strict limitations on loan officers, mortgage brokers. Any professional who accepts a broker fee or origination fee on any type of loan cannot choose the AMC or an appraiser independent of an AMC. Nor can they recommend that the lender work with a specific AMC or independent appraiser.
However, they should be able to communicate their observations in the best interest of all parties involved. With this in mind, Kairos Appraisal Services has knowledgeable staff members who are able to answer any questions loan officers may have related to the appraisal process. Feel free to reach out to us here.
