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Compliance with the Home Valuation Code of Conduct (HVCC) and the Interagency Appraisal and Evaluation Guidelines (IA&EG) including Appraisal Independence

There are two means by which a financial institution can comply with HVCC and the IA⪚

1) Require internal appraisal administration staff to read, understand and comply with these regulations, or

2) Outsource appraisal administration to a compliant Appraisal Management Company (AMC)

Briefly, if appraisal administration is internalized, the lender must segregate the individuals that evaluate, approve, oversee, and select appraisers from those that are compensated based on loan production. Generally those internal appraisal administration people report to the compliance officer.

When outsourced, the appraisal procurement and all systems and procedures of the AMC must be HVCC and IA&EG compliant and meet the stringent guidelines of the financial institution’s primary banking regulator.

The differences:

• When internalized, the time and direct expense of appraiser and appraisal administration cannot be allocated and passed on to the borrower.
• Because the typically financial institution does not have sophisticated software and other appraisal management tools to expedite and document the many steps associated with identifying, evaluating and approving appraisers, determining the availability of each appraiser, determining the fee that each appraiser might charge for an assignment, their availability and their turn-around time, etc., it typically takes 1.5 to 2 hours and the involvement of many persons and departments in the bank to bring an appraisal assignment to fruition.
• Outsourcing appraisal administration to GAMco affords the bank access to highly skilled, frequently designated, professional appraisers that are geographically competent. And, with GAMco’s fully secure, on-line, password protected ordering system, it takes the banker about five (5) minutes to Order an appraisal. From that point, until the appraisal report is delivered (usually if pdf format) , the banker is free to do banking while GAMco’s highly skilled staff evaluates and approves appraisers, selects appraisers to bid assignments (based on their licensing, experience and qualifications, availability and geographical competence) and tracks status. Ultimately, GAMco receives and reviews the report. If GAMco finds errors or deficiencies in the report, it is returned to the appraiser. Ultimately the corrected report is delivered to the client with the invoice.
• GAMco efficiently manages appraisal procurement because that is what we are set up to do. GAMco’s administration fee is included in the cost of the appraisal so when the cost of the appraisal is passed on to the borrower, the administration expense is also passed on.
• When regulators examine loan files, they try to determine how and why the appraiser was selected, if the appraiser is competent and if the appraisal report, conclusions and opinions are logical and well supported.
• If the appraiser was selected by a bank employee, the regulator must be satisfied that person is knowledgeable, has access to skilled, veteran, geographically competent appraisers, is independent of loan production and will not interfered with the appraiser’s independence or attempt to influence the appraisal process. It is difficult for regulators to verify the bank person’s knowledge, the appraiser selection process, etc. and this sometimes leaves regulators with a level of uncertainty.
• When regulators have read GAMco’s Appraisal & Administration Systems & Procedures, learns that all appraisal procurement is managed by GAMco, they have no concern.