Community Banks: How Appraisal Management Companies Can Help

Early on in my college years, I was introduced to the concept of Just-in-Time management, a concept embraced by foreign automobile manufacturers. The idea was that raw materials necessary to produce an automobile would be delivered to the factory ‘Just in Time’ to transform them into an automobile; thus, reducing waste and increasing efficiency. Our team of commercial appraisers at Russell Roberts Appraisals have embraced the same concepts, enabling us to reduce our delivery times and increase production.

On rare occasions, we encounter similar companies working to streamline the appraisal process. One such company, Valuation Management Group, is headquartered in Marietta, Georgia, and led by Mrs. Vicky Thompson, President & CEO. Their effort to provide an efficient, end-to-end solution for community banks and others involved in commercial and residential lending have led to a first-class business, stretching from coast to coast. We invited Mrs. Thompson to tell you about her company. In the interest of full disclosure, we provide appraisal services for them. Here’s a copy of our interview:

Russell: Mrs. Thompson, what is an AMC and what types of clients use AMC’s?

Mrs. Thompson: An appraisal management company (AMC) manages the appraisal process between financial institutions and appraisers. The purpose of financial institutions utilizing an AMC is to ensure appraiser independence. Dodd Frank and Interagency Appraisal Independence and Evaluation Guidelines indicate anyone selecting or ordering appraisals should be independent of the loan process.

Banks, mortgage bankers, credit unions, and other institutions utilize AMC’s as an opportunity to ensure they are following guidance for appraisal independence and the appraisal review. The majority of AMC’s manage only the residential appraisal process and a limited number handle residential and commercial.

Russell: You mentioned Dodd Frank. There’s been a lot of consolidation in the community banking industry recently. Some lenders I’ve spoken with think Dodd Frank places an undue burden on smaller banks with respect to regulatory compliance. What are your thoughts?

Mrs. Thompson: I am not an expert on banking regulatory compliance other than what is appraisal related; however, the burden placed on financial institutions to remain regulatory compliant has definitely increased. Banks and other institutions that choose to handle the appraisal process in-house do have to have someone on staff independent of the loan production personnel to manage the appraiser selection, engagement, and all aspects of the appraiser approval process and maintaining the vendor due diligence.

Also, the cost of someone who is qualified to do the appraisal review that is independent of the lending process. Institutions who outsource the appraisal process do not have to absorb the cost of the compliance as it becomes part of the appraisal process. VMG is a cost plus AMC, meaning we pay the appraiser reasonable and customary and our fee is included in the total appraisal fee. On commercial appraisals it is always a bid process and our fee is added to the appraiser’s bid fee, so there again is no cost to the institution. It is my understanding that many smaller institutions outsource many aspects of the risk management process to ensure they are regulatory compliant.

Russell: As I have indicated to the readers, I do work with Valuation Management Group and am impressed with the systems you have in place to process appraisals. For the sake of those who read this blog and may need your services, which areas of the country do you provide service?

Mrs Thompson: Valuation Management Group is one of only a few Appraisal Management companies that handles residential and commercial appraisals in all 50 states. We have handled assignments in Mexico and Puerto Rico, also. We have over 12,000 appraisers on panel. Russell, thank you for interviewing me for this blog. It is a great compliment when an appraiser has positive things to say about an AMC. It is our goal to develop positive relationships with appraisers and our clients.