Wholesalers Lenders Start Using AMC’s to Ensure Appraiser Independence

Earlier this year the Federal Housing Administration announced that it would adopt the language from the Home Valuation Code of Conduct (HVCC) to ensure full alignment with the Government Sponsored Enterprise (GSE) standards. 

While FHA is not requiring the use of an Appraisal Management Company (AMC) or other third party providers, it does require that reverse mortgage lenders take responsibility to ensure appraiser independence.

With a proposed rule putting the responsibility of correspondents on FHA mortgagees (lenders), wholesalers like MetLife are requiring that brokers use AMC’s to ensure they remain compliant.

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According to a notice MetLife sent to brokers:

Effective on all loans with case #s assigned on or after December 18th, 2009, the appraisal orders must be placed with an Appraisal Management Company (AMC) to ensure that the appraisal reports are prepared by an FHA Roster appraiser who has not been selected, retained or compensated in any manner by the mortgage broker or any member of the lender’s staff who is compensated on a commission basis tied to the successful completion of a loan.

The company is requiring that appraisals be ordered through ServiceLink, Equifax, or National Real Estate Information Services.  MetLife isn’t the only wholesalers who is requiring that brokers use an AMC.

Other wholesalers like Live Well Financial will also be utilizing AMC’s to ensure compliance with FHA guidelines.  In an email to RMD, Brett Ludden, Senior VP at Live Well Financial said the appraisal ordering process will be integrated directly into its proprietary origination system to make the process easy for correspondents. 

Even if wholesalers can make the new process easy, many reverse mortgage brokers are concerned that the AMC requirement will increase the costs of an appraisal for their customers. 

“The costs on AMC managed appraisals for conventional-forward mortgages has gone from $225 to a minimum of $405 up to $680,” said Jack Belles, President of Reverse Mortgage of New England.  The company does a few “forward” loans and said he sees no reason why the costs won’t go up when wholesale reverse mortgage lenders start requiring the use of AMCs.

Most wholesalers are requiring the use of AMCs starting January 1st, 2010.

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  • By the way, if anyone wonders why I'm concerned about this problem…..I had my butt chewed out royally the other night by a very spry 80 year old
    Husband whose Wife was scheduled the next day for life threatening surgery (which undoubtedly played a roll in his attitude). Seems I was the fifth L.O to give him different FHA Formula numbers. I told him as politely as I could that I had previously emphasized that all of the numbers anyone gave him were meaningless until an actual FHA Appraisal is done. My numbers had been based on a home value and mortgage debt he had given me! And, even then, the numbers could change right up to when the final documents were provided for signature at closing..

  • If a customer or lender orders an appraisal without knowing if it will qualify for a reverse mortgage in advance (the value is not high enough to cover their mortgage) then they will get stuck with the cost of an appraisal that was unnecessary. Seniors should not be subjected to this. HUD should allow appraisers to at least give a rough estimate of value otherwise the customer will be paying for an appraisal when they do not qualify for a reverse mortgage.

  • This will not work for all the valid reasons listed above. In four years doing RM's I have only had 4 deals fall apart due to under-appraisal…all with AMC's…all with the same “Top 5 ” lender. I will leave the business before I will turn my financial future over to an appraiser who discount a fee by 50% just to find work.

    This is causing a downward spiral of valuations further compounding the collapse of home values. Congress knows this and if the bureaucrats can't fix it they will rewrite the rule themself.

  • I am an appraiser for 15 years now. This is the worst I have ever seen this business. About 3/4 of my work is from management companies now. The pay is horrible. I am a father of 4 little children, and am being greatly impacted by all of this. HVCC should be completely reversed. There just needs to be tougher licensing requirements. I see probably 2-3 reviews a week, and usually 1-2 are terrible reports. There are a lot of bad appraisers out there, but this is not the way to get rid of them. A friend of mine who is a loan officer asked me to look into this property for him. Through their management company, the appraiser valued the house at 340k. He did not even use a comp that sold on the same block that was smaller, and sold recently for 380k. The house was underappraised, and now they are stuck and it is a dead deal. Meanwhile the homeowners don't know what to think. HVCC is killing this business.

  • Good appraisers will walk away from HVCC and leave the culls who are already in there hurting seniors with bad valuations. The lender UWs are devaluing homestead property appraisals and violating the law while they do it. Seniors don't get to see the appraisal they paid for in most until the closing which prevents them from making clear decisions on whether the reverse is a good thing for them. Add to that the huge number of seniors who will walk away from reverse because they cannot pay for an upfront appraisal cost (a discriminatory policy) and it becomes an unworkable process. Every LO/Broker and Appraiser needs to be screaming at the top of his/her lungs to their congressional folks that they have lost their vote until this thing is fixed. You'd think the media would have picked up on this months ago.

    • Merry Christmas!!
      Important FHA Changes

      HUD is delaying Mortgagee Letter 209-28, Appraiser Independence until February 15, 2010. Mortgagee Letter 2009-28 was originally planned for January 1, 2010.
      The original Mortgagee Letter has two parts: a) prohibition of mortgage brokers and commission-based lender staff from the appraisal process, and b) appraiser selection in FHA Connection.
      The effective date for both sections of this Mortgagee Letter will now take effect for all case number assigned on or after February 15, 2020. This extention will provide FHA and lenders additional time to adjust systems to accommodate the changes.
      Detailed instructions on changes to FHA Connection will be issued in a new Mortgagee Letter.

      In addition, HUD is delaying Mortgagee Letter 2009-51 which adopts the Appraisal Update and/or Completion Reports. The effective date will now apply to all case numbers assigned on or after February 15, 2010.

  • As predicted we are beginning to get a glimpse of the HVCC program; a double dip into recession led by another housing slump. It's not like we couldn't predict it. Run experienced appraisers out of the business and rely solely upon freshly trained experienced appraisers who have never seen a recession much less a major housing decline.

    I hate to say I told you so but I've been predicting this for over a year. Enjoy your new recession Andrew. It's only a matter of time before it's traced back exclusively to your greedy little scam.

  • I have a question. I was considering building a custom home, which I couldn't afford with a conventional mortgage. I was told by the builder that since I am over 62 and have no heirs, a reverse mortgage would work well for me to pay off this new home. The bulder said that the appraised value would increase between the construction loan and the mortgage, so the lump sum from a reverse mortgage would pay off the home. I'm not convinced that a reverse mortgage was designed to buy something one can't otherwise afford and I decided not to go ahead because it all seemed too risky for my retirement, but I haven't been able to find out the answer to my basic question. Is it true that the appraised value of a custom built home automatically increases between the start of the construction loan and the conversion to a mortgage?

  • I have a question. I was considering building a custom home, which I couldn’t afford with a conventional mortgage. I was told by the builder that since I am over 62 and have no heirs, a reverse mortgage would work well for me to pay off this new home. The bulder said that the appraised value would increase between the construction loan and the mortgage, so the lump sum from a reverse mortgage would pay off the home. I’m not convinced that a reverse mortgage was designed to buy something one can’t otherwise afford and I decided not to go ahead because it all seemed too risky for my retirement, but I haven’t been able to find out the answer to my basic question. Is it true that the appraised value of a custom built home automatically increases between the start of the construction loan and the conversion to a mortgage?

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