The Big C
By: Joan Trice
The big thing on everyone’s mind this year is compliance. If you are an AMC, an appraiser, or a lender you have been focused on compliance. If this has not been your focus it is akin to running with scissors across a banana peel minefield.
If there is any lesson we may have learned over the past few years it is that denial only works for a while. Compliance is costly. Noncompliance is even costlier.
Denial has been easy. Regulators have so enabled everyone to behave badly. We have institutionalized bad behavior. The standard “everyone is doing it” so why not me has brought our entire nation to a new ethical low. When USPAP defers to “what would your peers do” as the standard, it makes me pause.
Dodd Frank mandates that lenders and AMCs must report appraisers who have violated USPAP to State Appraisal agencies. It is not optional. Lenders… how many complaints have you filed in the past 12 months? Have you audited your AMC? AMCs… how many complaints have you filed? Out of millions of appraisal transactions each year only an infinitesimal have associated complaints filed. Is that because appraisal quality is terrific?
Appraisers of course are concerned with irrational witch hunts. In spite of those fears I have seen no indication that frivolous complaints are actually occurring. In fact Dodd Frank inserts some nice protections for appraisers—independence, customary and reasonable fees, and a safety net from being placed on exclusionary lists for all of the wrong reasons. I know what you are thinking… where is my C&R? That one puzzles me a bit. I am surprised a few enterprising AGs who want to make a name for themselves aren’t modeling their careers after Andrew Cuomo.
But these are risks that both lenders and AMCs face every day. If a lender believes they can outsource their risk they will find that they are woefully wrong. An awful lot of energies are being expended trying to maneuver around the intent of the regulations.
One of the biggest regulatory focuses mandated in Dodd Frank and in Interagency Guidelines is the engagement of the “best” appraiser. As an appraiser when is the last time a potential new client asked you for your credentials? What is your fee, what is your turntime? A call to quality is great for good appraisers, not so great for the rest.
You know the old axiom--- price, quality, service… choose two. We have historically placed turn times above all else. Fees have been commodity driven. Lenders are jumping up and down screaming they can’t get quality yet they are squeezing their vendors for the last ounce of blood and scoring vendors based upon service level agreements.
The new sheriff in town is the consumer. With consumers getting copies of their appraisal report 3 days prior to closing, your report is going to be scrutinized by a new set of eyes. E & O providers are proclaiming that complaints are more likely to be filed by consumers than any other stakeholder. The consumer has become the new defacto regulator.
Regulators, Lenders, AMCs and Appraisers all play in the same sandbox together. Compliance is a symbiotic relationship whereby sound policy, transparent processes, and adherence to best practices create a safe environment. Compliance is contagious so go do the right thing.
Joan N. Trice is the founder and CEO of Clearbox, LLC, publisher of Appraisal Buzz, and host of the annual Valuation Expo, the largest conference for the valuation community. Joan also hosts the Collateral Risk Network, a members-only group of more than 300 dedicated chief appraisers, collateral risk managers, regulators, and valuation experts who are focused on resolving the many challenges facing our profession.