The Appraisal Blog

Back in 2010, after the Great Recession of 2008, Congress signed Dodd-Frank into law.  It was a sweeping financial regulation act designed to prevent the events of the previous couple years from ever happening again.  A lot of the regulation was aimed at banks by requiring "stress" tests to ensure they could remain solvent.  But another part, specifically related to appraisals, required that a 3rd party intermediary be engaged by lenders when ordering an appraisal.  These 3rd parties are called AMC's (Appraisal Management Companies).  So...  the lender has a loan they want to finance.  They place the appraisal order with an AMC, the AMC finds an appraiser, the appraiser conducts the appraisal, gives it to the AMC, and the AMC gives it back to the lender.  It was implemented to stop lenders from pressuring appraisers.  And for the most part, in my opinion, it solved a problem that wasn't really a problem.  I won't say I was never asked to change the value of an appraisal.  But it was rare.

So Dodd-Frank and the AMC's "fixed" a problem that didn't exist and at the same time introduced a series of issues.  First and foremost, they increased the cost of appraisals.  As you can imagine, the AMC's don't provide their service for free.  They take a cut of what the appraiser would typically make ... often 50% or more, and even charge the lender more than the typical appraisal fee for other services.  Basically they review the report before sending to the lender.  Additionally, the model INCREASES the turn time of the appraisal.  The AMC, which like everyone exists to make money, shops the appraisal to their fee panels.  Essentially hunting for the lowest fee.  I've even bid the same assignment for the same AMC a week after the first bid!  If they had just accepted my (reasonable) fee they would have had the report back in a few days!.

But here is the thing... Dodd-Frank, at least the AMC requirement doesn't exist anymore.  It was updated several years ago and the requirement that lender order appraisals through an AMC is gone!

So all you lenders out there... I am ready to accept your order!


https://sf.freddiemac.com/faqs/appraiser-independence-requirements-faq