The current regulatory environment is prompting lots of change for reverse mortgage businesses, and those regulations span the appraisal process as well. Appraisal management companies (AMCs) say they have seen change in recent months—and more is on the way, that could potentially impact the cost of appraisals over the long term.
“There is a lot of new legislation on both the federal and state level,” says Erik Richard, chief operating officer of Sherman Oaks, Calif.-based Landmark Reverse. Richard says Landmark has reached out to HUD, gone through an extensive compliance process and paid for education classes. Still, he says, “There is a lot of speculation as to what’s going on…there’s no clear final understanding as to what the rules are going to be.”
Despite the uncertainty, AMCs are gearing up for changes under Dodd-Frank, if they haven’t already.
“We are already 100% in compliance and took a proactive approach to the new legislation. We have become so accustomed to change now it wasn’t a really big deal,” says Brian Coester, CEO of Rockville, Md.-based Coester Appraisal Group.
Landmark, likewise, has devoted resources to keeping up with rules under HUD’s mortgagee letter 09-28 on appraiser independence, as well as Dodd-Frank’s requirements. However, Richard says smaller appraisal management companies could suffer more than larger, national operations. “It really comes down to financial ability to register and go through compliance for every state,” he says. “Most of the small management companies are going to find it difficult. They may not be able to afford to do business in every state. They become less of a resource if they can’t cover entire service areas.” Richard points to the level of licensing that different states require, and the responsibility of AMCs to communicate with lenders.
“Our job is to be a compliance tool for lenders in making sure there is proper enforcement and due diligence from the lender side,” he says.
Many smaller AMCs may not be able to keep up with the continuing fees.
“The biggest question is, will appraisal costs go up?” Richard says. “…fee after fee after fee could effect end appraisal cost.”
In light of recent changes, however, is increased regulation good for the business?
“It needed to be cleaned up and finally it’s starting to do so,” says Coester. “It’s a totally different industry than it was and we are finally getting to the point where the appraisal is accepted as something out of the lenders’ control.”
“It’s good for us as long as regulation leads to proper oversight,” says Richard.
Written by Elizabeth Ecker