What Is an Appraisal Management Company (AMC)?
Let me explain directly: An Appraisal Management Company, or AMC, is an independent entity that mortgage lenders use to order residential real estate valuation services for properties they're considering for loans to homebuyers.
In this setup, AMCs handle the administrative side of the appraisal process—you know, things like selecting an appraiser and getting the appraisal report to the lender. But remember, it's the individual appraisers working for these AMCs who actually perform the property valuations.
Understanding Appraisal Management Companies (AMC)
AMCs have been around in the real estate world for about 50 years, but they didn't become widespread until the 2007-2008 financial crisis hit.
Back in 2009, the New York Attorney General, along with Freddie Mac, Fannie Mae, and the Federal Housing Finance Agency, put together the Home Valuation Code of Conduct (HVCC) appraisal guidelines. These aren't active anymore, but they set the stage for appraiser independence rules in laws like the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Truth in Lending Act. These regulations forced lenders to use independent appraisers, which caused a big increase in AMCs.
The whole point of HVCC and the follow-up federal rules was to cut down on direct contact between lenders and appraisers. The U.S. government stepped in to create these independence requirements to stop lenders from pressuring appraisers to pump up property values—a issue that helped fuel the housing crisis.
When you involve an AMC, neither mortgage brokers, loan officers, nor homeowners get to pick the appraiser for the property in question. That's because these parties have a financial stake in the deal, and there's a real risk they'd try to sway the appraiser to overvalue the property just to make the transaction happen.
Important Note on AMC Functionality
When everything runs as it should, the AMC picks an appraiser who knows the local market for the property being valued—that's key to getting an accurate assessment.
Appraisal Management Company (AMC) Requirements
AMCs keep a pool of state-licensed or state-qualified appraisers ready to handle requests from lending institutions. Once a request comes in, they assign an appraiser to create the appraisal report for the property.
These appraisers don't get any prior info about the property, and they're not put in touch with the lending institution. Their assessment has to follow the Uniform Standards of Professional Appraisal Practice (USPAP) guidelines. If problems come up, the AMC can step in legally to help resolve them.
Key Takeaways
- An Appraisal Management Company (AMC) is an independent real estate appraisal company hired by a lender to perform valuations on potentially mortgaged properties.
- AMCs select state-licensed or state-qualified appraisers to valuate properties and deliver appraisal reports to lenders.
- Customers seeking a mortgage on a prospective property, lenders, and mortgage brokers cannot choose the appraiser.
- The U.S. government developed appraiser independence guidelines, restricting the influence lenders have on appraisers.
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