AMC vs. In-House Management

While lenders are not required to use AMCs, they must ensure that appraisers are engaged independently and not unduly influenced. As a result, many lenders use Appraisal Management Companies to fulfill that role.

Compliance Risks

While the lure of having control of the process in-house may be appealing, it comes along with inherent compliance risks. Mortgage banking is a highly regulated industry with ever-changing guidelines from a myriad of government agencies. It has become a full-time job for bank Compliance teams just to keep abreast of all the new regulations.

Appraiser Independence

Lenders must be aware of the Appraiser Independence Requirements, which draw a clear distinction between loan production/origination staff and panel management staff. An employee's title alone does not take them out of any involvement in production/origination. Consideration must be given to internal or external audit requirements necessary to pass an "independence test" showing clear separation of the processes.

Cost Considerations

It is important for lenders to note the fixed costs associated with an internal panel that cannot be quickly curbed in a shrinking market. These include employee salaries, potential office space required to assure separation of production and panel staff, ongoing benefit expenses, and more. With a dependable AMC, costs always fluctuate evenly with production.