Will co-op AMC be appraisers' 'last shot'?

In light of the recent GSE-Cuomo appraisal agreement, a growing group of appraisers have expressed interest in creating their own nonprofit appraisal management company. Valuation Review spoke with one of the group's organizers to learn about the appraiser-owned AMC's goals, how it would differ from others and why she thinks the venture is “the last shot for competent and ethical appraisers.”

Some appraisers decided they couldn’t beat them, so they joined them -- sort of.

The “them” in this case refers to appraisal management companies (AMCs). Nearly 1,000 appraisers have expressed interest in banding together to create an appraiser-owned, nonprofit co-op AMC with a Web site where lenders could place and appraisers receive orders through a restricted portal.

"This portal can ensure proper procedure and fulfillment of all regulatory guidelines as it relates to the appraisal process," the group stated on the Web site.

Leaders of the project are encouraging appraisers to sign up at http://www.nationalvaluationservice.org

Project organizers say it would help eliminate what she perceives as the shortcoming of AMCs and promote independence in the appraisal process.

"Our collective commitment to the industry and the utilization of superior technology will enable us to provide better service to our clients while controlling cost," the group wrote on the site. "... The AMCs and other intermediaries have provided services to the financial industry that we could perform as well, maybe better. AMCs are all human owned and operated. ... Why is the idea of a large number of appraisers forming and managing their own organization(s) so radical?"

In the beginning ...

The plan for the appraiser-owned, AMC-like co-op, tentatively called National Valuation Service (NVS), is only in the beginning stages, according to Pamela Crowley , one of the appraisers leading the effort. Crowley drew national attention last month when AMC eAppraiseIT dropped a defamation suit against her for her comments about the company’s business practices. Crowley moderates AppraisersForum.com and maintains the www.mortgagefraudwatchlist.org Web site.

Still, Crowley labeled the NVS effort as “the last shot for competent and ethical appraisers.”

She said NVS could get appraisers out from under the thumb of AMCs, which Crowley called “horrible” and which are a frequent target of barbs from appraisers.

“The fees they offer are ridiculous,” Crowley said of AMCs. “The turn times they demand don’t allow for proper due diligence and the demands they make for ‘corrections’ are ridiculous.”

She also complained that AMCs often unlock and alter valuation reports after appraisers have sent them in.

Crowley said an appraiser-owned AMC had been “in the back of our minds” for awhile, but the recent agreement between the New York Attorney General Andrew Cuomo , Fannie Mae and Freddie Mac and the creation of the Home Valuation Code of Conduct (HVCC) -- which is designed to promote appraiser independence but could heavily favor AMCs, many appraisers fear -- fueled the organizers’ desires to take steps to produce something concrete.

So far nearly 1,000 appraisers have indicated interest in joining the proposed nonprofit on NVS’ Web site.

The venture’s success may hinge on generating interest from the Office of Federal Housing Enterprise Oversight (OFHEO), Crowley said. NVS’ organizers believe the appraiser-owned AMC would be overseen by OFHEO or the Government Accountability Office, according to the Web site.

“This is all going to hinge on whether we can get through to Fannie, Freddie, OFHEO and Cuomo to seriously look at our proposal,” Crowley said.

Plans coming together

Since it’s early in the process, details of what NVS would look like once it’s established remain sketchy. Some appraisers, for example, are voicing concerns in chat forums over issues such as appraiser liability and E&O coverage.

A formal proposal for the co-op will reportedly be circulated among key real estate-industry decision makers soon.

However, Crowley shared a few key points of the plan. For one, lenders would have to pay for their own quality control work, instead of appraisers footing the bill. That, combined with the fact that the co-op would be a non-profit, could translate to higher fees for appraisers, she said.

Under the NVS, appraisers also could not be blacklisted without the chance to challenge allegations. The ordering and tracking processes would be largely automated -- the organization is considering the use of both eTrac and OASIS from GlobalDMS for its appraisal management software.

NVS would feature “review panels” in each state that would determine whether appraisers are qualified to join, she said.

“You’re either approved or you’re not,” she said.

Next steps

Though it already has appeal for many appraisers, it remains to be seen whether lenders will buy into NVS' vision. Appraiser co-ops have been attempted and failed before, she said. How mortgage businesses respond to this one will be the biggest factor that ultimately determines whether the idea of an appraiser-owned AMC becomes a reality or fades away.

Crowley insisted, however, that a decision will soon need to be made on the future of the appraisal industry.

For the program to succeed, NVS will have to take on traditional AMCs in competing for lender business. According to Crowley, lenders must decide whether they want “real,” detailed and thorough valuation reports done by knowledgeable appraisers, and if not, the mortgage industry should throw out human-performed residential appraisals altogether and use automated valuation models (AVMs).

She doesn’t see any middle ground between the two options.

“We’re at a crossroads,” she said.