APPRAISAL COMPLIANCE
Eric Thompson Regional sales rep for Mercury ● 20 years experience with appraisals and ● appraisal technology Several years at a la mode as VP of Sales, ● then VP, Corporate Sales Aided in product development strategies with ● appraiser and lender facing technologies Owned and operated an AMC (appraisal ● management company) Eric.Thompson@MercuryVMP.com ●
4 Common Compliance Challenges
4 challenges 1. Appraiser independence requirements (AIR): There can be no pressure on vendors to "hit value" and collateral valuation operations must be isolated from commissioned staff 2. Due diligence on service providers: You must conduct thorough due diligence on your appraisers, AMCs, and third party service providers 3. Compliant delivery to the borrower: You must deliver copies of the appraisal within a certain timeframe, and in compliance with privacy laws 4. Appraisals and TRID: Appraisal fees are a zero tolerance item. Borrower can’t be charged for appraisals until “Intent to Proceed” is given
AIR FAQ: How does Fannie Mae audit compliance with AIR? “Compliance with AIR will be part of the Fannie Mae’s operational review of the lender. By selling us the loan, the lender represents and warrants compliance with all of the Fannie Mae Selling Guide requirements, including compliance with AIR.” Fannie Mae guidance from Appraiser Independence Requirements https://www.fanniemae.com/content/faq/appraiser-independence-requirements-faqs.pdf
AIR FAQ: When selecting an appraiser, may lenders use a pre-approved appraiser list or panel? “Yes. Lenders may use a pre-approved list or panel to select a residential appraiser, provided that (1) any employees of the lender tasked with selecting appraisers for the list are independent of the loan production staff; and (2) the loan production staff is not involved in selecting appraisers off the list for particular appraisal assignments.” Fannie Mae guidance from Appraiser Independence Requirements https://www.fanniemae.com/content/faq/appraiser-independence-requirements-faqs.pdf
AIR FAQ: How does Section I.B.(8) impact how lenders may remove appraisers from a list of qualified appraisers? “Section I.B.(8) addresses the removal of an appraiser from a list of qualified appraisers in connection with influencing or attempting to influence the outcome of an appraisal. However, Section I.B.(8) does not preclude the management of appraiser lists for bona fide administrative reasons based on written, management-approved policies. Also, Section VIII provides for lenders to have written policies and procedures implementing AIR, including rules on appraiser independence, and to have mechanisms in place to report and discipline anyone who violates these policies and procedures. ” Fannie Mae guidance from Appraiser Independence Requirements https://www.fanniemae.com/content/faq/appraiser-independence-requirements-faqs.pdf
AIR FAQ: Some lenders have proprietary automated origination systems that include a process for ordering appraisals. How does AIR impact those systems? “The lender must review its systems to ensure that the selection-of- appraiser process is in compliance with AIR. ” Fannie Mae guidance from Appraiser Independence Requirements https://www.fanniemae.com/content/faq/appraiser-independence-requirements-faqs.pdf
AIR FAQ: May a person on a lender’s staff who is not part of the loan production staff and does not receive a bonus or commission based on loan closings provide an appraisal management company a list or panel of appraisers to use for loans involving a specified mortgage broker, real estate agent, or loan officer? “No person on a lender’s staff may provide an appraisal management company a list or panel of appraisers to be used for loans involving a specified mortgage broker, real estate agent, or loan officer. AIR specifically prohibits lenders from accepting appraisal reports completed by an appraiser selected, retained, or compensated in any manner by mortgage brokers and real estate agents. Mortgage brokers and real estate agents must not be involved in the selection of appraisers for an approved panel or specific assignments under any circumstances. Please refer to Section IV.A for further information regarding who is authorized to select and retain appraisers.” Fannie Mae guidance from Appraiser Independence Requirements https://www.fanniemae.com/content/faq/appraiser-independence-requirements-faqs.pdf
Just to confuse you, Fannie Mae also offers this...
AIR FAQ: May a lender direct a mortgage broker to a specifically authorized AMC that will receive information from the broker about the loan application and begin the appraisal process? “Yes. The lender may direct a broker to an authorized AMC if the lender has previously arranged for its appraisal process to be managed by the specifically authorized AMC. This process is compliant with AIR because the broker is not responsible for selecting, retaining, or providing for payment of compensation to the appraiser. (Q29)” FAQ: May a lender order an appraisal by directing a broker to select an AMC from among a group of specifically authorized AMCs, one of which would receive information from the broker about the loan application and begin the appraisal process? “No. Such a process would give the broker an element of responsibility for selecting or retaining the appraiser, and therefore would not be compliant. (Q31)” Fannie Mae guidance from Appraiser Independence Requirements https://www.fanniemae.com/content/faq/appraiser-independence-requirements-faqs.pdf
What else was impacted by AIR?
AIR AIR impacts payment for the appraisal: ● Borrowers can’t pay appraiser directly. ● Borrowers can pay the AMC. ● Broker may not be responsible for payment to appraiser. (TRID impacts this now too).
AIR AIR impacts payment for the appraisal, plus... ● You must provide a copy of the appraisal (coming up). ● Appraiser communications (who can talk to the appraiser?) ● Responsibility of Lender (Seller) to ensure third party compliance
AIR Software automation
AIR Firewalls: Customize your vendor selection criteria to suit your business The ideal vendor for each order is chosen automatically Need extra vendors? 29,000 appraisers are already there Pass software fees to vendors, if you wish Set your minimums and preferences Drag and drop your priorities
Vendor due diligence Why and how? “A. Approved Appraiser List If an institution establishes an approved appraiser list for selecting an appraiser for a particular assignment, the institution should have appropriate procedures for the development and administration of the list. These procedures should include a process for qualifying an appraiser for initial placement on the list, as well as periodic monitoring of the appraiser’s performance and credentials to assess whether to retain the appraiser on the list. Further, there should be periodic internal review of the use of the approved appraiser list to confirm that appropriate procedures and controls exist to ensure independence in the development, administration, and maintenance of the list. For residential transactions, loan production staff can use a revolving, pre-approved appraiser list, provided the development and maintenance of the list is not under their control.” - Interagency Appraisal and Evaluation Guidelines AGENCIES: Office of the Comptroller of the Currency, Treasury (OCC); Board of Governors of the Federal Reserve System (FRB); Federal Deposit Insurance Corporation (FDIC); Office of Thrift Supervision, Treasury (OTS); and National Credit Union Administration (NCUA) (collectively, the Agencies). Nov,9,2010” The CFPB, OCC, and FNMA have all issued newer and deeper level guidance. CFPB’s states “ Depending on the circumstances, legal responsibility may lie with the supervised bank or nonbank as well as with the supervised service provider? (http://files.consumerfinance.gov/f/201204_cfpb_bulletin_service-providers.pdf)
Vendor due diligence Why and how? Whether you use appraisers or AMCs, you must prove you’ve conducted thorough due diligence on your vendors (FNMA, FDIC, OCC). You should: Get a system in place to track ● vendor performance Have the ability to easily swap vendors ● when needed Conduct due diligence on your service providers ●
Vendor due diligence Profiles for each vendor with resumes, licenses, insurance, and more, verified DAILY against ASC Vendor performance rating system assists with intelligently assigning your future orders Track stats on each vendor for report revisions, late percentages, order acceptance and filter by products, county and time period
Vendor due diligence Performance reporting
Free download Download the free white paper with links and in depth discussion of relevant regulations. www.MercuryVMP.com/TPO
Borrower delivery All appraisals must be delivered to the borrower promptly after receipt, and no later than three days prior to closing. You must: ● Provide the appraisal to the borrower and prove it with an audit trail (CFPB, ECOA Valuation Rule) ● Comply with all consumer privacy and data security laws (GLBA, eSign Act) ● Provide an easy, professional process that impresses your borrowers - opportunity for your enterprise.
Compliant delivery to the borrower How do you prove it?
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