It Is Time to Ensure Your Financial Institution’s Appraisal Management and Review Process Is Compliant – Part II

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Here is the second part of Valuation Management Group’s (VMG) three part blog to provide a better understanding of appraisal management and compliance. In this segment, we will discuss the importance of having compliant quality assurance reviews.

Click here to read Part I: Part I – Selecting and Engaging the Appraiser

Part II –                                       

Many institutions understand independence for the ordering process but do not have a compliant review process. The regulatory guidance requires the appraisal review to be completed by someone not in loan production, nor report to anyone in loan production, and be trained and qualified. Residential and commercial appraisal reviews must be performed by someone qualified. Most financial institutions cannot justify the expense of a real estate appraiser to do the reviews in house. There may be individuals within the institution qualified to complete an appraisal review, but they generally are working somewhere related to loan production. A word of caution: if you are using an Appraisal Management Company (AMC), many states require mandatory review of appraisals by the AMC and in many cases, the quality control “QC” reviews must be performed by appraisers who are credentialed in the state of the property being appraised and reviewed. Not all Appraisal Management Companies utilize appraisers for the QC technical review and most do not get the review appraiser licensed in all the states that require licensure. Valuation Management Group is of the opinion that Alabama, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Mississippi, Montana, Nebraska, Nevada, Oklahoma, Oregon, South Dakota, Tennessee, Texas, Washington, and Wyoming are states that require the QC review appraiser of an AMC to be licensed to complete residential and commercial reviews. Some states require that anyone completing an appraisal review be a licensed appraiser in the state where the property is located.

We have been made aware of banks with mortgage banking departments receiving criticism from the regulators for not having an independent quality review of the appraisal. Even though the loan is being sold in the secondary market, regulators want to see a compliant review process. In most cases, the mortgage underwriters are doing the review, which is not compliant as they are usually considered a part of the loan production.

There should be written documentation of a compliant quality assurance review for every loan before it closes. Many AMC’s do not provide a written review and that process does not give proper evidence of a compliant review. If the financial institution completes the review in house, they should ensure the written appraisal review is part of the appraisal file.

Valuation Management Group is a national, full service appraisal management company that manages the appraisal process for community banks, mortgage bankers and credit unions. We take the process from ordinary to extraordinary.

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