AMC Regulation and the Decision to Opt In or Opt Out

The opinions expressed in this article are the authors only and do not necessarily reflect the opinions of other state board members or the Florida Real Estate Appraisal Board (FREAB).

The decision of whether or not to regulate Appraisal Management Companies (AMC’s) is one currently facing state legislatures across the country. The plain language of Dodd-Frank initiated a regulatory construct that would be implemented by the states. Dodd-Frank assigned rule-making authority for the implementation and parameters of the regulatory system to the Interagency Institutions. Earlier this summer, those rules were finally published. Each state regulator I’ve spoken with across the country understood Dodd-Frank in the same manner I did. This understanding was that each state would be required to establish a licensing and enforcement program for AMC’s and there would be no real choice on whether or not a state could participate. Once the final interagency rules were published this summer, it became clear that the choices for each state are more nuanced. In my opinion, at this point, a state would be better served to not participate in the AMC regulatory construct.

The Final Rule (seen here) clarifies that states may choose to participate, or not, in the state-level regulation of AMC’s. Further, there is no penalty to a state that chooses to not have a regulatory structure. However, if a state does not have an AMC regulatory program, AMC’s are barred from providing appraisal management services for Federally Related Transactions (FRT’s) in that state. Again, this is, in my opinion, a clear departure from the plain language of Dodd-Frank and state regulators’ understanding of what would be the federal requirements surrounding it. While the federal government was likely just trying to avoid creating an unfunded mandate, the implications are, nonetheless, still clear. Essentially, the federal government has ‘punted’ and told states that it’s our job to figure out how to regulate them, or else AMC’s can’t participate in FRT work.

According to some estimates, 60% of FRT work currently filters through an AMC. If a state decides to not create a regulatory structure, lenders would have three avenues for completing these appraisals:

  • Engage appraisers directly (through an internal department separate from loan origination);
  • Employ an AMC under the panel threshold (the AMC can’t oversee more than 15 appraisers in a state or 25 in two or more states);
  • Utilize an AMC that is wholly owned and operated by a lending institution already overseen under federal law.

To be clear, if the 60% AMC involvement estimate is accurate, that means 40% of the work is already completed by engaging appraisers directly.

Opponents of my position argue that this would be dangerous for consumers and appraisers, or worse, that this is simply an attempt to enact a policy that would eliminate AMC’s from mortgage lending appraisal work. To the contrary, I believe that consumers are best protected by enforceable regulation and should not be misled that effective regulation is happening when, in my opinion, it is not. I also believe that appraisers should be aware that the protections they seek regarding appraiser independence and customary and reasonable fees already exist in federal law. Finally, the elimination of AMC’s from FRT work is a debatable consequence, but ultimately is not one that is imposed by state law. That’s an imposition borne of federal law.

Again, states do not have to participate in this construct, but if they do, they’re responsible for ensuring that their enforcement program meets the minimum requirements of the AMC Final Rule. These requirements, among other things, require states to ensure that AMC’s conduct their practices in accordance with section 129E(a)-(i) of the Truth in Lending Act (TILA). This section of TILA addresses ensuring appraiser independence and the payment of customary and reasonable fees by creditors and their agents. Again, these requirements are in place at the federal level regardless of whether or not a state chooses to have a licensing and enforcement program. Also, the Appraisal Subcommittee (ASC) Hotline ( is and will remain available to appraisers who feel their appraisal independence is being jeopardized by a lender or AMC, regardless of the existence of a state regulatory program. There is tremendous third-party oversight already existing at the federal level for AMC’s by extension of their vendor/agency relationship with lenders.

In Florida, House Bill 303 was signed into law in June of 2010 and became effective on July 1, 2011. This law required the registration of AMC’s and created a new licensing category for them. The FREAB entered into rule-making and developed Rule 61J1-9.002 (seen here) in 2013. If you visit the rule, you’ll see the basic measures Florida has taken attempting to regulate AMC’s. As of August of 2015, AMC complaints at the state level in Florida have been almost non-existent, and not a single complaint has reached the board level. Either the regulation is unnecessary, or it’s ineffective.

To be clear, I am aware of other states taking action against an AMC at the state level. I believe that part of the reason for the lack of complaints is a complete lack of clarity on the role an AMC plays. I’ve still not heard a clear distinction of whether or not AMC’s are a client extension or purely serving in an agency role. Is that not a core-level question to answer prior to attempting to regulate? The federal rules seem to suggest an agency role, however, the bankruptcy case of Evaluation Solutions/ES Appraisal Services describes the AMC in a client role. With this basic level of ambiguity, how can states enforce an effective regulatory program?

Mentioned above is Florida Rule 61J1-9.002. This, again, is the rule addressing standards of professional practice for AMC’s. Florida Rule 61J1-9.001 is the rule addressing standards of practice for appraisers in Florida. I’ll save you any time in looking up the latter. It effectively says, see USPAP. Why is that? Because there are recognized standards of practice within the appraisal industry, established by industry participants, and updated from time to time. There are no recognized standards of practice for AMC’s. USPAP does not apply to AMC’s. There’s federal law that extends to AMC’s as third-party vendors of lenders, but not standards of practice. When an industry seeks legitimacy and moves from a trade to a profession, they create standards of practice by which they can be effectively understood, managed, and if necessary, regulated. After all, that was the evolutionary course of the appraisal industry. It would seem to me that commonly accepted standards of practice should be a precursor to any effective regulatory structure.

The federal definition of an AMC and Appraisal Management Services are provided within the Final Rule (see Final Rule link above). The description of Appraisal Management Services refers to recruiting, selecting, retaining, and contracting appraisers. Further, the definition describes services as “Managing the process of having an appraisal performed, including providing administrative services such as receiving appraisal orders and appraisal reports, submitting appraisal orders and appraisal reports, submitting completed appraisal reports to creditors and secondary market participants, collecting fees from creditors and secondary market participants for services provided, and paying appraisers for services performed.” Does this sound like a regulated profession? Do these sound like state level regulated activities? The definition continues that appraisal management services may include “Reviewing and verifying the work of appraisers.” If this final ‘review’ activity is a technical review as opposed to a compliance review, that work is already regulated under Standard 3 of USPAP and would require that a licensed appraiser complete that task. So in essence, the only activity not already regulated at the state level are the nebulous activities above that include contracting appraisers, managing processes, and performing administrative tasks. What’s fascinating in this discussion is that my opinion on this is the same position AMC’s shared when rule-making was undertaken in Florida two years ago. But now that the federal rules place a regulatory compulsion on the states in order for AMC’s to participate in FRT’s, AMC’s are advocating for state regulation.

I’ve come to this position not out of some disdain for AMC’s or in an attempt to eliminate them from FRT work. In my private practice, I have several AMC clients (or agents…) and have a good working relationship with them. In fact, as previously stated, the actual implication of an AMC being barred from FRT work is as clear as mud. The ASC is seeking interagency clarification on the FRT definition, and it’s quite possible that very few transactions actually meet the definition of an FRT.

My position is also time-specific. If there were greater clarity on some of these basic questions or standards of practice, perhaps a regulatory construct would be appropriate. And states are not precluded from launching AMC regulatory programs at any point moving forward, including after the 36 month implementation period following the Final Rule. However, states that do have a licensing program will begin to have their program included in their compliance review process immediately after the establishment of the AMC national registry. Should the national registry be established in 2016 (though the actual date and corresponding fees are still unknown), states with existing programs that are in the review cycle prior to 2018, will not have a full 36 months to implement their program before the ASC reviews them. To their credit, the ASC has suggested that states in this category (of which there are many) will not have their AMC programs truly reviewed in a consequential way until after the 36 month implementation period.

More regulation does not equal better or even effective regulation. That’s a false choice and an easy trap. Federal regulations exist and will continue to exist regardless of the decisions of individual states. What concerns me more as a state would be making a reflexive decision to regulate a business simply to ensure that business’ participation in statewide activities. That’s backwards and sounds more like cronyism than a principled approach to state regulation. The issuance of a state credential, license number, and collection of a fee is not effective regulation and sends a false message of security to consumers. And while this is a decision that will ultimately reside with state legislatures, regulators and interested industry participants should serve as subject matter experts on this complicated issue and make their opinions known to lawmakers.

I see this as a matter of principle. The decision to introduce regulation into private industry is not one to be made lightly. And that decision should not be made by trying to maintain the status quo or back-into a regulatory structure for the purposes of propping up a single trade or profession. The Appraisal Management Services definition above does not meet the high hurdle I believe a state should have for identifying professional practices and choosing to regulate them. Period. It’s as simple as that. Legislators, do you really think additional Dodd-Frank-induced regulation is the answer? States should not allow themselves to be ‘strong-armed’ into choosing to regulate this practice simply because the alternative is that AMC’s would not be able to participate in FRT work. The states didn’t create that problem for AMC’s. The federal law does. To borrow the old quip, ‘Lack of planning on your part does not constitute an emergency on my part’. States, don’t be leveraged into regulating something that you otherwise would not choose to regulate.

On August 7th, 2015, I chaired an AMC regulatory workshop commissioned by the FREAB. The workshop brought together industry stakeholders from all over the country to discuss each side of the issue. There was an exhaustive several hour exchange regarding the role of AMC’s and AMC regulation. The following Tuesday, August 11th, FREAB held another day-long workshop addressing this issue and digesting the information from the August 7th meeting. Ultimately, of the 8 board members present, 5 were in favor of opting out of a state level regulatory program, and 3 were in favor of opting in.

We now have the benefit of hindsight and the full and final rules outlining the AMC business and the parameters for a regulatory construct. That knowledge was not available prior to the June 2015 issuance of the Final Rule and was certainly not available when states where initially setting up their AMC regulatory programs. As a regulator of one of the 38 states that in good faith launched an AMC regulatory program prior to having the ‘full picture’, I would simply ask this question to regulators and legislators in those states: Knowing what you now know, if there were no state level regulatory program in place for AMC’s, would you go out and create one? I believe that the answer, right now at least, is ‘No’. And if the answer is ‘No’, then why would you choose to keep it? For the remaining states who are considering creating a regulatory program, make sure to read the fine print.

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About Matt Simmons

Matt Simmons
Matt is a partner with Maxwell, Hendry & Simmons, LLC, a commercial and residential appraisal and consulting firm based in Fort Myers, Florida. He is a Past President of the Real Estate Investment Society and has served as a guest lecturer in the Lutgert College of Business at Florida Gulf Coast University for several years. Matt is qualified as an expert witness in several state and federal jurisdictions and also serves as an expert on value and economic impact for land use and zoning matters. He is a licensed broker and consults commercial and residential investors in income-producing acquisitions. In 2012, Matt was appointed by Governor Rick Scott to serve on the Florida Real Estate Appraisal Board. He is the youngest appointee in the history of FREAB and served as the 2014 Chairman.

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    You are crazy! AMCs do what ever they want and leave appraisers to clean up the mess without “customary pay”. This whole situation has converted me to a believer in regulations. If Dodd Frank is going to attach parasites like AMCs to our industry at least they can put a leash on them. Be it Federal or State level.

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      Saka, you’re wrong. Not all AMCs are the same.

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        David, I think that’s the point, not all AMC’s are the same. Most are terrible and are looking for ways to pressure us into accepting lower fees.

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          I agree. But I deal with one that sent a blank fee sheet and said “tell us what you charge.” They also send corrections from an internal review dept. So maybe 90% are bad, but not all of them.

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            I would put the number at 90% evil as well. Streetlinks allows me to set my own fees too, however in my area unless the number starts with a 2, you will get no work.

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            eStreet has been pretty good with fees. Not sure if they cover your area though.

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        Not to mention, what do they do for us? When I get a correction, it usually comes from the lender, not the AMC.

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    Matt you say “These requirements, among other things, require states to ensure that AMC’s conduct their practices in accordance with section 129E(a)-(i) of the Truth in Lending Act (TILA). This section of TILA addresses ensuring appraiser independence and the payment of customary and reasonable fees by creditors and their agents”. My state board tells me this will give THEM the power to enforce a fair appraisal fee as they don’t have the power now. Issues are now being won at a state level as federal regulations are not being enforced. The lack of formal complaints about AMC’s is directly related to the fact we will get blacklisted for trying to fight (no independence).

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    AMCs suck; period.

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    So in other words Florida has decided to take a position firmly on the fence. No meaningful regulations for AMC’s, no C & R enforcement, no anything. I find it a little disappointing that the supposition that since AMC’s do not have to comply with USPAP then they should not fall under the FREAB reach. However, if these AMC’s are conducting some type of review from their panel members then that activity does fall under a USPAP condition and at that point AMC’s and appraisers are then competitors in the valuation services industry and should share some regulatory burden. So back to the days of the wild west in Florida. Exactly how many trainee appraisers do we currently in process of trying to become certified appraisers ? The lowest in over a decade. Wonder why ?

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      wouldn’t Florida doing this get rid of AMC’s for mortgage finance work and solve the problem in the first place? seems like that’s the implication of the article

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    I’m in that stage of my work career that I don’t have to and won’t accept assignments from AMCs or anyone who is SKIMMING the fee that belongs to me. Borrowers think the fee paid to AMCs is what the appraiser charges. Most don’t realize AMCs SKIM that fee for doing nothing more than ordering the appraisal. I had rather ban AMCs and pass that SKIMMED fee amount to the borrower in the form of lower fees than pay it to AMCs. AMCs do borrowers an injustice in the name of PROTECTING them all the while are fleecing them.
    Jerry Morgan
    Certified Residential Appraiser
    Morgan Appraisal Service since 1983

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    We still don’t have any legislation here in South Carolina. I get calls from amc’s out on the west coast. How can I accept any work from someone so far away. My biggest worry is getting paid. Ever tell an amc, no you won’t change that? Or they tell you to take something out of the appraisal. I only take work from amc’s who have been in the business for many years. There are a few good ones out there.
    I recently had to go to go to small claims court with an amc out of Greensboro, NC. After 3 trips there and 350 miles each way, the Judge awarded me my fee and interest, plus some expenses. Elliott and Assoc. Appraisal Management then filed a complaint with the SC Appraisal Board, this was 8 months after I delivered the report. The Board found nothing wrong with my report. Just shows you what a scum bag amc’s are out there.
    Ever state needs some type of legislation to keep these company’s in line.

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      I think people may be missing the point of the article. Looks to me like he’s laying out a way to eliminate AMC’s from mortgage finance work. Maybe that’s not his point, but looks like that the result of a state choosing not to license them. Isn’t that a good thing?

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        Who orders the appraisal? I do most of my work direct from banks. This is mostly high end homes which I think the lender’s want to review with in house reviewers, not some amc reviewer with a check list.
        If amc’s are here to stay then we need legislation so we can get paid from amc who are from other parts of the country, or stop amc’s from holding payment until they get what THEY want on the appraisal.
        When I was trying to get paid from the above NC amc, I tried to file a complaint with the NC Board. Talking to the people there, they even said that the amc did violate at least 2 standards. However, since the property and I were out of state they had no jurisdiction.
        Let me be clear here though, NO amc’s is fine with me.

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        Jeff, …Not really. Mr. Simmons is just quoting the law. The scenario he presents is that should AMC’s have no regulator, state or federal, then they could not be involved in federally related transactions come 2017. The reality is this will never happen. From the onset AMC trade groups lobbied for federal oversight only. One regulator and one area to focus lobby efforts and dollars toward. The states that have Independent Appraiser Coalitions pushed for more control and regulations at the state level where independent appraisers had some influence. Illinois, NC, Virginia, Louisiana all have strong state regulation of AMC. They also have taken on several issues on undue influence, C&R fees and maximum payment times of those fee’s. By opting out of any regulation Florida has succumbed to the wishes of the AMC trade groups. I guess the regulator for the AMC’s will be the CFPB but right now they don’t have funding for or any mechanism to properly regulate this kind of activity. Maybe they will in 2017 but my guess is that those regulations and policies will be shaped by the lawmakers that have been purchased by the AMC lobby groups.
        Take a look at Arizona. I believe they also opted out. Then dissolved the State Appraisal Board and folded it into the Real Estate Commission. So there Realtors have more influence in state appraisal matters. Big picture you may want to check out what the NAR has proposed to shore up any future shortfall in appraisers. Their solution is to allow Realtors to satisfy experience credits toward state certification with a number of BPO’s and CMA’s.
        If you are located in a state with a active appraiser coalition I suggest that join it and participate. If you are in Florida then it doesn’t matter because we don’t have one.

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          I’ve read a lot on the issue and am somewhat familiar with the Arizona thing. You say that eliminating AMC’s from mortgage finance work, “The reality is this will never happen.” but why? If a state doesn’t license them, they’re blocked from work in that state. Doesn’t matter that they’re regulated federally or in other states, they’re blocked in that state. And if that happens, doesn’t that make most of the concerns about AMC’s irrelevant because they can’t practice in that state? Appreciate the dialogue

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            No Jeff. They can be regulated at the state level OR the federal level. The law gave the states the option to choose. Florida opted out. The only way an AMC would be out of business is if they had no regulator. Multiple states activity have no bearing. If an AMC meets with federal regulations they will be able to business in any state and registered at the federal level. If a state has decided to regulate themselves they will have to meet with that burden. Smaller AMC’s that only practice in few states will likely proceed under whatever state regulations are in place. I would like to think that this action would ban most AMC’s from practicing in the state of Florida but the law is just not written that way.

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            I really don’t think that’s accurate. If a STATE does not regulate them, then AMC’s are banned from the FRT work. Small AMC’s would be under the panel threshold and still allowed to participate, but those aren’t the offenders anyway. Larger AMC’s would be barred. Doesn’t matter that they are licensed in another state. And I’ve been told there’s only 1 AMC that is lender owned/operated and would be exempt due to federal regs. I’ve read this article several times now and if it’s not factually inaccurate, seems clear. What am I missing?

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    I think you guys commenting might be missing the point. You’re all talking about how bad the AMC’s are and want the state boards to get them. Isn’t this the ultimate way to get them?? All of your references seem to talk about purchase or refi work. From what I read here, if states don’t have licensing for AMC’s, AMC’s can’t participate in mortgage finance work. So if states drop their AMC licensing or choose not to start a licensing program, that would block AMC’s from working in those states.

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