Effective July 17, 2022, Freddie Mac transitioned from offering automated collateral evaluation (ACE) appraisal waivers to offering ACE+ PDR (property data report) for cash-out and certain no cash-out refis. For details, please see Freddie Mac Single-Family Seller/Servicer Guide Bulletin 2022-13.
It seems like every TV channel I flip to, I see CarShield commercials… essentially insurance hedging against costly vehicle repairs. That got me thinking about how lenders can hedge against the costs of poor efficiency, quality, and cycle-time from their Appraisal Management Companies (AMCs). The risks are very real and damaging to lenders everywhere. While there is no such insurance (or assurance) per se, there are plenty of leading indicators to look for – none more prominent than technology.
July 21, 2020, marked the 10th anniversary of signing the Dodd-Frank Wall Street Reform and Consumer Protection Act (aka 'Dodd-Frank') into law. The financial crisis of 2008 prompted the 350,000-word bill, which had far-reaching impacts, some foreseen and some not.
As it turns out, Kindergarten may have provided the most prophetic life and business lessons. This is most certainly true in running an appraisal management company (AMC). Sure, business school provided a wide-ranging foundation that has made a tremendous difference, but nothing compares to the wisdom of Ms. Parker in the early 1970s.
What Does an Appraisal Management Company (AMC) Do?
Short answer – the most capable and best-performing AMCs step in to remove the following burdens off mortgage lenders:
I used to know how many Appraisal Management Companies (AMCs) there were, but so many come and go; it’s impossible to keep track. That leads me to an intriguing thought — Why? And, if I were an appraiser in today’s environment, how would I navigate my options? What would I need from an AMC?
I’d want what we all seek — to maximize my income with the least amount of hassle and frustration. An enjoyable and reciprocal professional relationship.
It was a much different world before the days of HVCC and Dodd-Frank. Before this legislation, about 80% of appraisal assignments came directly from lenders and local sources. Today, it has flipped to the exact opposite. Therefore, engaging in the AMC model is imperative for most appraisers.
While not everyone likes Dodd-Frank, appraisers do benefit from it, for example:
- Seeking consumers with financial needs
- Developing products
- Underwriting and funding loans
- Navigating legal, regulatory, and compliance frameworks
- Servicing portfolios of loans
This skinny-down trend has steadily dismantled prior decades of the seismic sized scope-creep pursued by lenders, especially the big ones, trying to do absolutely everything in-house. It’s not our place to judge how well that worked, although the industry-wide retreat from those days likely tells the tale.
Today, almost every internal department and function can be up for consideration for outsourcing, even underwriting. Some of the areas that often loom large in such evaluations are loan servicing, IT, operations, and appraisal management. Being an AMC, we shall focus on the dynamics in play that generally cause lenders to outsource to AMCs.
With more and more homeowners wanting to "go green" and California's solar panel requirement for new homes set to take effect in 2020, many in the mortgage industry have been working to figure out how solar panels impact home values. As with most elements to consider in real estate valuation, it is not a cut and dry dollar for dollar value. Some of the key items an appraiser must consider are if the panels are leased, owned, or financed, what is the typical buyer motivation, cost vs. savings, and of course the expected life of the technology.
We all know how much lenders and borrowers care about getting a fast turn time on their appraisals. This could mean making the appraiser's task simpler and easier, but it could also mean streamlining the appraisal review step as well. At United States Appraisal we use technology, to improve this important part of the process.