Lenders face considerable challenges managing their in-house panels in the current mortgage environment. AMCs offer solutions.
Today’s mortgage volume has inspired lenders to look at opportunities for efficiency gains. This includes shifting from self-management of appraisal services to working with an appraisal management company (AMC) that provides access to technology, transparency, financial strength and stability, customer service and expertise. This shift allows lenders to reduce annualized costs, while preparing for the future of the industry.
How can lenders benefit from working with an AMC?
“Lenders want to be free to focus on their core competencies right now,” says Phillip King, vice president of product management, EXOS® Valuations, at ServiceLink. “When they realize that an AMC can provide a strong team to manage risk and compliance, technology that elevates the customer experience, and a deep focus on performance and quality assurance, they start to look at their own processes and overhead in a new light. Working with an experienced, financially-sound AMC with a national footprint can lead to improvements in a variety of areas.”
Keeping up with evolving statutes, regulations and industry standards requires an extraordinary level of diligence and investment. National AMCs can dedicate resources to these issues at a level few lenders can match.
“As an AMC, we have the ability to constantly invest in compliance measures,” says Matthew Woodhouse, managing director, Originations Valuations, at ServiceLink. “Our clients rely on us not only for compliant appraiser selection and management, but also for developing and implementing technology, systems and protocols to address a whole host of compliance needs. We are always poised to respond quickly to regulatory changes and to incorporate new lender-driven requirements, policies and procedures.”
When an AMC takes over, the lender is relieved of the responsibilities and overhead related to maintaining and managing the appraiser panel — e.g., screening, selecting and boarding new appraisers; auditing for certifications, licenses and insurance; and scoring appraisers to ensure a qualified appraiser is assigned to each order.
Woodhouse says that AMCs need to go the extra mile in vetting these individuals. “At ServiceLink, we have standard policies requiring E&O [errors and omissions] insurance, plus state and federal background checks for all our appraisers. We invest in sophisticated score carding to help us monitor performance levels and ensure that a highly qualified appraiser with the requisite skills and experience is selected for each appraisal, ” he says.
Technology and the customer experience
The best AMCs tend to be on the leading edge of technology. Since their solutions are built on technology, they make ongoing, sizable investments into its development and implementation, and they hear from lenders throughout their footprints, which helps them anticipate emerging challenges.
“We can provide lenders and consumers alike with an exceptional digital experience because our clients across the country share their insights into what they want and what their customers expect from a technology perspective,” says King. “We identify trends that might take an individual lender a little longer to see and help them keep their technology ahead of market- and quality-specific challenges.”
One of the needs ServiceLink identified early on was for real-time scheduling. “Our scheduling platform provides consumers, loan officers and real estate agents with increased convenience and transparency,” King says. “No more phone tag or delays — the user can select an appointment date and time, receive instant confirmation and have the assurance of knowing who’s coming, because they immediately receive the appraiser’s name, contact information, photo and car make and model. All of this adds to the lender’s credibility as a partner focused on customer satisfaction.”
Scalability and diversity of expertise
Today’s mortgage market is volatile and within the past five years, lenders navigated both peaks and valleys in volume. Partnering with an AMC allows for frictionless adaptation to changing volume – without changing operating expenses or operational structure.“ Because AMCs manage volume from lenders around the industry, we have built scalability into our capabilities. In addition, this deeper pool of talent offers a wider range of knowledge,” says King. “Working with 15 or 20 lenders in a particular market gives our appraisers greater insight into that market. Factor in their expertise in specific property types and value ranges, and you can see the benefit to lenders of having a panel of this scope working for them.”
AMCs offer cost savings
According to Deloitte, “Outsourcing of business functions has become an integral part of [lending] operations.” Today’s market rewards specialization and partnering with an AMC allows lenders to hone in on the functions that contribute to their topline revenue. Because of their specialized focused, AMCs can easily eliminate lenders’ need for expenditures on the items outlined above, including technology and compliance. This model, whereby both AMCs and lenders specialize and focus on core competencies, eliminates extra costs that would be incurred otherwise.
How to select the right AMC partner
Simply using an AMC does not automatically guarantee compliance, tech expertise, cost savings, etc. Selecting an AMC to adhere to that commitment is the lender’s best course of action. How do you know which AMC to choose? Start by making sure that they’re strong in the following areas. Then talk through your specific goals with them to find your best fit.
Industry experience and stability
Although AMCs have been part of the real estate environment for the past 50 years or so, few existed prior to the establishment of the Home Valuation Code of Conduct (HVCC). Today, real estate lenders must carefully monitor third-party service providers, like AMCs, to ensure compliance with all mandates of The Federal Financial Institutions Examination Council (FFIEC) and the government agencies of which it is comprised. The FFIEC is a group of government agencies that regulates, supervises and enforces federal financial laws on lenders. This group includes the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Federal Reserve Board (FRB or the Fed) and the Consumer Financial Protection Bureau (CFPB). These agencies hold lenders responsible for performing due diligence to control any risk associated with third-party relationships to protect the bank’s safety and soundness.
“Back in 2007, there may have been five of us AMCs; now there are about 600 — a lot of which are small or micro businesses,” says Woodhouse. “It is incredibly important when you evaluate an AMC to look at the company’s history and stability. ServiceLink has been a pioneer in the business for several decades, and we have unfortunately seen a lot of less experienced AMCs shutter their operations overnight. It’s important to look for an AMC that has built up a level of financial strength that allows it to stand behind its work and come through for its clients in any situation.”
Scope of reach and expertise
Before you engage with a particular AMC, it’s important to know whether they have the scope to support your strategic plans and grow with you. Some AMCs are registered to do business in only one state or a handful of states; very few have the financial strength, stability and technology to operate successfully as an AMC in all the various jurisdictions that require registration.
If you are seeking support with a certain property type or value range, ask to see how the AMC has performed in these areas and what level of expertise they have. If you’re looking to work more broadly with an AMC, asking questions about their expertise and capacity in a variety of markets will help you gauge their ability to manage your entire clientele.
While expertise in compliance and technology are table stakes in AMC evaluation, look to see where a company provides more value — in tenure, additional related services, etc.
Lenders recognize the need to be nimble as evolving regulations continually transform the lending landscape. “Regulatory oversight by the OCC and other agencies is always of concern to lenders, who feel the pressure to be compliant and responsive. AMCs need to be ready to adapt quickly when it comes to their technology and processes,” says Woodhouse. “Recognizing the urgency, our ServiceLink team turned these changes around for our customers in just a few days,” Woodhouse shares. “Lenders simply can’t afford delays in this fast-moving market.”
High-quality appraiser network
Your AMC should never compromise on the quality and performance of its appraisers. They should uphold the most stringent standards for background checks, verify that appraisers have adequate E&O coverage, strictly adhere to customary and reasonable (C&R) fee regulations and continually monitor their performance.
Woodhouse shares some of ServiceLink’s best practices: “We have a massive team in our chief appraiser office that provides oversight and panel vetting. This includes several subpanels: our general panel plus panels of FHA experts, new-construction experts, experts in appraising $5 million-plus properties, etc."
Though AMCs are often embraced for their innovative technology, they should never lose sight of the human element — i.e., the lender-AMC relationship. When you have a question, a concern, a challenge or an opportunity you’d like to discuss with your AMC, do you know who to ask for? What depth and speed of service can they and their support team provide?
Engage with an AMC that delivers outstanding customer service, including a dedicated, collaborative relationship manager and a customer service team that’s eager to resolve your issues as quickly as possible. Remember: You are the customer. That means your needs should always come first.
Commitment to compliance
“One of the strongest benefits ServiceLink brings to the table is a large compliance team dedicated to valuations, which is supported by additional legal, risk and audit teams within ServiceLink,” says Woodhouse. “We have a very robust compliance team within valuations that serves as a first line of defense. This team tracks all requirements, implements process changes and controls in response to regulatory changes, trains staff, oversees higher-risk processes and ensures adherence to requirements through monitoring and testing. They’re backed by additional control groups that serve as additional lines of defense, performing audits, identifying risks and ensuring any gaps are remediated to keep our clients safely in compliance.”
Now, more than ever, it is in the best interest of lenders to protect themselves by partnering with an AMC that has a robust, dedicated compliance team facilitating seamless third-party oversight.
(1)Department of Treasury, Office of the Comptroller of the Currency, Federal Register, Vol. 75, No. 237, Friday, December 10, 2010, https://www.govinfo.gov/content/pkg/FR-2010-12-10/pdf/2010-30913.pdf