With regulatory concerns and overworked operations staff, more lenders may consider outsourcing appraisal operations to an appraisal management company (AMC).
If you’re thinking about outsourcing to AMCs, it’s important to consider how you will manage those relationships. Be sure you’re familiar with the new third-party oversight requirements so you can properly vet your AMC vendors and comply with the CFPB, OCC, FDIC, and investor mandates. We’ve found the mandates aren’t just extra layers of regulation, but should also be considered best practices that will help you protect your revenue and deliver excellent service to borrowers.
In the regulations, there are a few issues that aren’t as widely known as others, so I wanted to share some highlights here:
>>The CFPB says the lending institution is not absolved from responsibility of the third party’s compliance and the third parties (in this case, AMCs) are subject to the same CFPB supervision as the lending institution.
>>The OCC mandates due diligence in selecting third parties and requires ongoing, consistent monitoring of activities and performance throughout the relationship life cycle. In addition, the same bulletin specifies responsibility for compliance with regulations, including provisions of the Gramm-Leach-Bliley Act for consumer privacy.
>>Investors also have requirements for third party oversight. Fannie Mae requires implementation of a pre-funding appraisal quality control process and outlines the expectations for third party appraisal service providers.
>>Since you’re ultimately on the hook for what your AMCs do, oversight is critical. It’s required for compliance, but it will help you select and maintain relationships with the AMCs that are best for your business.
When you’re ready to outsource to AMCs, you can select a single technology platform that’s connected to several AMCs to significantly streamline your due diligence burden. Otherwise, you will have to conduct technology audits on individual AMCs, not to mention your operations staff or originators will be using different ordering portals for each vendor they engage.
Without a single technology platform to manage all your AMC partners, it will also be more challenging to compare vendor performance, and add or remove vendors when your business needs change. It’s much easier to compare and report on vendor performance if you are tracking everything in one technology system.
When you’re ready to start selecting the AMCs you want to use, visit www.MercuryVMP.com/TPO to download a due diligence white paper with comprehensive recommendations for vetting your partners. More than 600 lenders and AMCs rely on Mercury Network to power their appraisal operations, so we have extensive experience in due diligence audits and are happy to help. If you have any questions, feel free to reach out anytime.
About The Author
Jennifer Miller is president of Mercury Network, a web-based software platform used by more than 600 lenders and AMCs to manage compliant collateral valuation workflow. Jennifer can be reached at Jennifer@MercuryVMP.com.