Regulatory compliance; an ominous concept to ponder, particularly amongst the heightened regulatory environment, which has ensued in the wake of the “Great Recession”. Yet the fact of the matter is that this term or concept, foreboding as it may be, presents a new opportunity for appraisers to prosper. In recent years, many states have instituted rules and regulations governing the operations of AMCs procuring appraisals for federally related transactions. Within these rules and regulations, several states have dictated specific and mandatory periodic audit requirements for AMCs to ensure the quality of the appraisals produced by their panels, as well as the appraisals’ accordance with minimum USPAP Standards. Translation – AMCs need to develop defensible compliance protocols, and this need creates an opportunity for appraisers to engage in new assignment types, diversify their businesses, and assert the demand for appraisers as licensed or certified real estate valuation experts. Axis Appraisal Management Solutions is seizing this opportunity with the advent of our Appraisal Quality Compliance (AQC) report.
In short, AQC is a proprietary USPAP Standard 3 compliant desk review product designed to meet or exceed various state AMC audit requirements. AQC does not provide a value conclusion; AQC does not opine on the value conclusion of the appraisal under review; AQC is not an appraisal. OK so what is AQC? AQC is a qualitative desk review intended to evaluate the accuracy, reasonableness, and overall credibility of an appraisal’s analysis and conclusions, and score an appraisal based on a very straightforward scholastic grading system; i.e. A, B, C, D, or F.
Of course the obvious question is often raised; “how do I evaluate the credibility of an appraisal without opining on the value conclusion?” While value is a key component of a traditional appraisal utilized for loan origination, it is but one of several conclusions derived from the appraiser’s analysis of the subject and its competitive market as of the valuation date. There are a multitude of data points, assumptions, and analyses reported throughout a given appraisal which coalesce in a reconciliation and ultimately a value conclusion. In this sense, the appraisal process and the value conclusion can be differentiated; AQC’s core focus is to evaluate the process or methodology employed in developing the appraisal report’s overall conclusions. For those familiar with typical Field Review work, the traditional Fannie Mae Form 2000/Freddie Mac Form 1032 has 10 questions on the first page of the form; the first 9 questions relate to accuracy, methodology, process while only the 10th question addresses value. While the scope of AQC is more limited than traditional review work, the underlying premise and emphasis on the development process should not be foreign to appraisers accustomed to appraisal review.
Understanding the context in which AQC may be utilized is also important in understanding its limited scope. In general terms, compliance standards seek to ensure AMCs not only deliver credible and reliable appraisals, but have systematic issue resolution and panel management measures in place as well. Within this context, AQC represents an integral part of a larger process aimed at preserving and promoting sound appraisal practices. The AQC report serves as an issue spotting function either corroborating the analysis and methodology of a given appraisal or identifying material deficiencies which undermine the overall credibility and reliability of the appraisal which may necessitate further due diligence. In the event an appraisal is found to be deficient within the scope of an AQC analysis, the AQC is not intended to represent the final word on the matter, but rather alert the intended user that an expanded examination of the subject appraisal may be necessary.
Another obvious and frequent inquiry; “how much work is involved…what do I have to do to complete an AQC?” As with any appraisal work, the short answer is, “it depends”. However, AQC is a streamlined process conceptualized by appraisers and mortgage industry veterans with the design implemented by a seasoned crew of developers with expertise in real estate valuation applications. Future posts will deal with what AQC entails from start to finish and typical time requirements in more comprehensive fashion, however, in the meantime, suffice it to say we believe we have created a win-win for appraisers and AMCs. Appraisers enjoy the convenience of working from wherever they so choose whether it be home, office or local coffee shop, and AMCs get the benefit of local expertise to satisfy their compliance demands and strengthen their quality assurance protocols.
If AQC is of interest to you and your appraisal business, please visit www.axis-amc.com for additional information on the product, as well as our contact and panel registration information. And stay tuned for future posts on AQC for some more in depth discussions on the product.