The latest buzz in the industry revolves around the updates to the Appraiser Independence Requirements (AIR) and the introduction of the Property Data Collector Independence Requirements (PDCIR) by GSEs Fannie Mae and Freddie Mac.
Issued in August 2023, these revisions mark a significant shift in how Lenders and Mortgage Brokers interact with Independent Parties involved in the valuation process. Let’s take a closer look at these changes and explore their implications for various stakeholders in the lending process.
Overview of the Changes
These policy updates carry three significant objectives:
- Clarifying that Mortgage Brokers, Loan Officers (LOs), and Production Staff are prohibited from ordering or being involved in the collateral valuation process. These entities are classified as “Restricted Parties.”
- Consolidating Appraisers, Appraisal Management Companies (AMCs), and appraisal firms under the same protection as “Independent Parties.”
- Enhancing readability and clarity through content reorganization and improvements.
The AIR has been in place since October 2010, designed to ensure that appraisers remain independent from lenders and other parties that can influence the valuation. However, the August 2023 updates have brought a new dimension to these requirements, closely linked with the PDCIR, which is being introduced for the first time.
One of the key highlights is the clarification of “Independent Parties” and how in the past as well, Lenders were not allowed to interact with Appraiser Management companies (AMCs) or groups of AMCs. The latest update emphasizes that AMCs or groups of AMCs should be included in the category of Independent Parties, which means that a Restricted Party should not directly order appraisals from an AMC. This is a crucial update that ensures fairness and transparency in the appraisal process while also protecting the interests of all parties involved.
What This Means for Lenders
The latest update to AIR will significantly impact major retail, wholesale, and brokerage entities involved in ordering appraisals, especially in their interactions with AMCs. The sales-related staff are not allowed to influence appraiser selection. The updated policy extends this restriction to AMCs and groups of AMCs, meaning sales and production staff cannot directly order from specific AMCs or appraisers.
The updated policy also clarifies that mortgage brokers cannot be involved in the selection process of the AMC. This will impact wholesale lenders which allowed their brokers to either select an AMC or order directly on the AMC’s web portal.
This highlights the growing importance of modern appraisal management platforms for compliance and ensuring that clear lines are drawn between production staff and the operational staff that is involved in the appraisal order process (the appraisal desk).
For smaller lenders unable to create a separate appraisal team, written practices that ensure independence and compliance must be established and enforced.
The updates also clarify that persons involved in substantive appraisal review or in the selection of Independent Parties for inclusion on a list of approved Independent Parties must be appropriately trained and qualified in real estate appraisals. Additionally, the appraisal desk must comprise trained and qualified members, often headed by a chief appraiser.
Finally, the updates clarify that if lenders maintain lists of approved Independent Parties, they need to have a written policy with reasons for maintain the lists. Furthermore, production staff cannot participate in creation or management of the approved lists.
What This Means for AMCs
The updates also have implications for Appraisal Management Companies (AMCs) and brokers who work with them. The update highlighted that Brokers do not have the ability to log into AMC’s web portals/platforms and directly place valuation orders with AMCs.
AMCs need to ensure they’re not using Approved Lists provided by the Restricted Parties and not utilizing Do Not Use lists provided by Lenders. The changes will require AMCs to ensure that they have robust integrations built out with the valuation management platforms being utilized by the lenders’ appraisal desks to ensure seamless ordering and delivery of valuations.
How ValueLink Ensures Compliance
As the recent policy updates to the AIR and the introduction of the PDCIR bring about significant changes, the need for seamless compliance solutions becomes paramount. This is where partnering with ValueLink can prove to be a game-changer for Lenders and AMCs.
ValueLink’s robust platform is pre-aligned with these updated and new requirements, ensuring that all stakeholders remain compliant without compromising operational efficiency and upholding the clear segregation between Restricted Parties and Independent Parties.
Here’s how ValueLink’s feature set helps you stay compliant:
- Automation: Based on real-time data and performance metrics, vendors can be assigned automatically without any user intervention.
- Communication: A double-blind process ensure that Production Staff and the Vendors do not communicate directly, staying compliant with the latest update.
- Audit: Your vendor selection process can be audited instantly to meet GSE requirements.
Lenders can maintain compliance using our ValueLink Direct platform that enables automation of the valuation process from assignment to review and delivery for both traditional and modern valuation products. Clear bifurcation of roles and appropriate access levels allow independent parties to perform their work without influence or needless interaction with restricted parties.
Our solution for AMCs, ValueLink Core, offers enhanced integrations with all major platforms being utilized by the appraisal desks of Lenders and offers a powerful set of tools to efficiently manage the valuation process while maintaining regulatory compliance.
To learn more about how our team can help you embrace modernity and combat appraisal bias, get in touch with us for a customized solution.
ValueLink Software provides industry-leading appraisal management solutions for Lenders, Appraisal Management Companies, and Appraisers