Building a successful appraisal management program is similar to figuring out which puzzle pieces connect. Each piece will eventually fit perfectly in its specific spot to create the finished product, you can say the same for the checks and balances in the appraisal process. Understanding the proper policies and procedures, documenting the necessary information, how the AMC works, and more, all help the lender and the appraiser to create a positive and effective work relationship.
We spoke with Joshua Walitt who shared with us the components of a successful appraisal management program.
Buzz: Josh, thank you for joining us today. You spoke at the CRN meeting in Reston and discussed components of a successful appraisal management program. Can you tell us a bit about the four main focuses in the presentation?
Josh: The four top-of-mind topics that were central to the seminar related to policies and procedures to fulfill compliance obligations.
Policies and procedures must be:
- carried out day-to-day.
Activities must be:
- documented with evidence necessary to demonstrate compliance with policies and procedures and
- examined to measure compliance and to consider making future changes.
For example, if a company has procedures related to adding an appraiser to the panel, removing an appraiser from the panel, or selecting an appraiser for an assignment, yet is not actively following those procedures or is not retaining adequate evidence to show compliance with the procedures, significant consequences from clients and regulators can result. Policies and procedures may look great on paper – but if they are “in writing only”, that can be a problem.
The examination of the company’s performance and the measurements of success and failure are sometimes pushed aside, perhaps viewed as an additional and unnecessary expense. However, with no internal monitoring, the effectiveness and integrity of the entire appraisal management program is unknown and, therefore, compromised. Without self-policing steps, to ensure policies are written, followed, and supported by documented, the risk to the AMC and the client increases exponentially, in a snowball effect over time.
It is common for E&O companies, clients, and state regulators to require a copy of policies and procedures. But some clients and regulators do not stop at asking for the written documents – some make site visits to AMCs, in order to observe whether procedures are truly being carried out and to examine records for evidence of compliance. Of course, in the end, the policy should be followed – whether there is a site visit or not!
Buzz: Why is it so critical that clients understand the workings of the AMC they outsource to?
Josh: Lenders can outsource many tasks, including panel management, appraiser selection, payments to appraisers, quality control, and other similar tasks, but they cannot outsource the compliance – the responsibility – itself. In other words, the lender’s regulator will still hold the lender responsible for compliance failures. It’s for this reason that it is critical for a lender to understand the operations, policies, and practices of the AMC it uses. The AMC’s reputation and performance reflect directly back on the lender.
Buzz: From your experience, how have you found a compliance program to be most successful?
Josh: If I had to choose one key component to making a compliance program successful, it would be training. It is easy to assume that since a memo was distributed, a training meeting was conducted last year, or a teleconference was held last month, that all staff are performing perfectly according to policy and procedure. Even when staff have the best intentions, time fades training and mistakes will occur – we’re all human. So, ongoing training needs to be part of any appraisal management program and must include all critical components that speak to compliance with regulations and client expectations.
Training frequency should be determined by the nature of the topic itself, the company’s or individual’s prior performance including performance breakdowns, clients’ needs and expectations, and regulatory requirements. The delivery methods often vary, customized to the topic and the staff involved: an online quiz or interview might be adequate for a top-of-mind review of standard policies, but a deeper-dive in-person meeting or event may be necessary for more-complex or client-specific needs. The spectrum of training options is nearly endless.
Other than training, other factors that affect the success of an appraisal management program include ongoing dialog with clients, communication with regulators, and – perhaps most important – top-down leadership at the AMC in support of the appraisal management program. Regulators and clients need a go-to person at the AMC who is accountable for the overall performance.
Buzz: How does having a strong appraisal management program benefit the relationship between the client and appraiser?
Josh: If the AMC staff is properly educated, behaves appropriately, and knows how to communicate with all parties, the client and appraiser relationship is, logically, strengthened. Having an appraisal management program is not optional for lenders – so it is in the lender’s immediate and best interest to work with an effective AMC who has a good track record and can function as an extension of their own compliance and valuation departments. In the end, when all parties are playing by the rules, it’s generally a win-win. When there is a breakdown in communication and in compliance with established rules and regulations, both the client and appraiser suffer.
Buzz: What advice would you give to an appraiser who is interested in becoming part of a new appraisal panel?
Josh: Ask colleagues to recommend which companies communicate well and respect the appraiser and their work. Then, follow through and deliver good-quality work each time.
With all the talk of AMCs’ appraiser panels, I am always surprised when appraisers don’t have their own “client panels” – a list of clients they will or will not work with, based on their prior experience or the experience of close respected colleagues.
Buzz: Josh, thank you for taking the time to share the experience of this presentation.
Josh: Thank you. It was an excellent experience. I encourage anyone who has questions about an appraisal management program to reach out to me.
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