5 Reasons to Shift the Appraisal Process to an AMC Model

Record mortgage activity in 2020 has inspired many lenders that have traditionally managed their appraisal processes to look at working with an appraisal management company, or AMC.

Working with an AMC allows lenders to focus on their core competencies, which is essential in this demanding environment. While some are shifting entirely to an AMC model, others are considering a hybrid approach that utilizes their original panel but leverages the innovative technology of an AMC. Lenders can benefit from working with an AMC in the following areas:

1. National AMCs dedicate significant resources towards risk management and regulatory compliance
Keeping up with evolving statutes, regulations and industry standards requires an extraordinary level of diligence and investment from institutions. For example, lenders with in-house panels must be able to demonstrate to regulators that the individuals managing their panel are isolated from the sales, operations and production functions of their businesses so there can be no question as to their impartiality. Lenders that use an AMC are relieved of this burden, because AMC appraisers are independent of the lending organization.

High-quality AMCs constantly invest in risk and compliance measures, including developing and implementing technology, systems and protocols to address a whole host of compliance needs. The best AMCs are poised to respond quickly to regulatory changes and incorporate new lender-driven requirements, policies and procedures.

2. AMCs reduce administrative oversight responsibilities
Partnering with an AMC relieves lenders of the responsibilities and overhead related to maintaining and managing an appraiser panel, such as screening, selecting and boarding new appraisers; auditing for certifications, licenses and insurance; and scoring appraisers to ensure  the most qualified appraiser is assigned to each order.

In addition to screening, onboarding and ongoing ranking, the best AMCs will require errors and omissions insurance. They also require or supply state and federal background checks for every appraiser. Premier AMCs go even further and invest in sophisticated score-carding across multiple disciplines to ensure that a highly qualified appraiser with the requisite skills and experience is selected for each appraisal.

3. Lenders benefit from the AMC’s technology and infrastructure
The best AMCs tend to be on the leading edge of technology. They make ongoing, sizable investments into developing and implementing technology, streamlining their own processes and providing a better experience for clients. AMCs with a national presence work closely with their lender base, which helps them anticipate and quickly react to emerging challenges.

When clients across the country share their insights into what they want and what their customers expect from a technology perspective, AMCs can identify trends that might take an individual lender a little longer to recognize, and help them keep their technology ahead of market- and quality-specific challenges.

For example, lenders can benefit from working with an AMC that offers real-time, digital scheduling. This technology provides consumers, loan officers and real estate agents with increased convenience and transparency. It improves lenders’ processes by eliminating phone tag and scheduling delays. Instead, the user can select an appointment date and time and receive instant confirmation. This adds to the lender’s credibility as a partner focused on customer satisfaction.

Now more than ever, banks are tasked with ensuring data security – not only their own, but that of their third-party suppliers. The top AMCs constantly invest in best-in-class security infrastructures and prioritize data security through advanced controls and regular audits of their facilities, systems, communications, and internet protocols.

4. AMCs help lenders scale
Many lenders needed to quickly recruit appraisers this year, as refinance volume spiked to a 17-year high. AMCs were able to accommodate these volume fluctuations because they had deep appraiser panels in place with nationwide coverage.

Because AMCs manage volume from lenders around the industry, they build scalability into their capabilities. In addition, this deeper pool of talent offers a wider range of knowledge such as specific property types and value ranges.

5. AMCs offer options
While some lenders may opt to shift fully to an AMC model, others elect a hybrid approach. This might take the form of adopting the AMC’s technology but not its panel management, allowing an AMC to manage a bank’s existing panel as an independent entity, or leveraging an AMC when handing off volume outside of the geographic footprint or area of expertise.

When a lender has a trusted panel they want to keep but not manage, it can allow the AMC to manage those appraisers in their system. The lender benefits from the AMC’s technology, experience and appraiser oversight, score-carding and recruitment capabilities, while eliminating their operational and fixed-personnel costs. The financial and operational benefits of this type of model can be exceptional.

To learn more about ServiceLink, visit svclnk.com.

*ServiceLink Valuation Solutions, LLC, (“ServiceLink”) is a registered Appraisal Management Company (“AMC”) in all states with AMC licensing requirements. ServiceLink’s AMC license numbers in states that require disclosure on these instructions are: NV # AMC.0000118, VT # 077.0067954-MAIN, WI #2-900.

Pandemic Presents Technology Ecosystem Opportunities for Banks

Historically, banks have relied on a small number of monolithic suppliers and systems to provide them with broad capabilities, augmenting their own internal development, to provide all their infrastructure.

These systems are patched to add features as banks grow and markets evolve. Mergers can lead to overlapping, incompatible systems; the bank’s infrastructure can make these systems brittle, costly and time-consuming to change.

Still, this suits the entrenched oligopoly of suppliers: locked-in customers unable to sunset anything but stuck paying substantial recurring license fees. Interfaces between systems are often proprietary, making integrations multi-year projects. Most of these are undertaken by a select group of implementation firms that are incentivized to install systems that maximize billable hours and ensure years of lucrative integration work.

Covid-19 and the subsequent government interventions, however, are forcing banks to move quickly: multi-year projects would never adequately address the emergency needs of customers and existential challenges of businesses. The crisis comes at a seminal moment for the industry, when many banks are beginning to experiment with cloud infrastructure. These solutions are able to provision (or decommission) infrastructure in seconds what previously would have taken years, and are well suited for rapid experimentation. This has led to an appetite at banks to try new things and “fail fast.”

The Darwinian effect of running multiple parallel experiments lends itself to thinking of a bank as an ecosystem, where the best providers can be brought in for each functional area. Meanwhile, the bank’s own technologists can focus their people and budgets on key priorities, rather than spending large portions of ever-shrinking budgets patching a leaky ship.

This requires a change in emphasis for financial technology firms: Rather than attempting to disrupt incumbents, there is now a unique opportunity to cooperate with them, providing a much-needed injection of innovation and dynamism at a crucial moment for the economy and communities. Fintechs need to be able to prove their value fast, so the emphasis is on deep vertical expertise that can be deployed rapidly in a variety of environments. Having open APIs and the ability to play a part in a diverse ecosystem of providers is an absolute necessity. Suppliers with “Mechanical Turk” solutions that paper over missing functionality with services will battle to scale rapidly enough and struggle to meet the demand from multiple client banks.

The qualities required to thrive in this new order already exist at banks and fintechs; the winners will be those that can get out of their own way and utilize these strengths. Over the last few years, banks have learned how to integrate disparate systems. The pandemic is forcing them to learn how to do to this quickly.

They need to remove obstacles in their purchasing processes that entrench large suppliers and prevent them from building tech stacks made up of agile and best-in-class solutions. If they back their own ability to craft a cohesive and comprehensive ecosystem, they can tailor this end-state to achieve their desired results. Fintechs are used to bringing innovation and dynamism to the table. Creating lasting impact requires them to follow through and turn this into tangible products. There will be no shortage of opportunities for them to prove their value.

The extraordinary circumstances brought about by the coronavirus have led to a moment of unique opportunity for both banks and fintechs. The economic environment and policy responses by the federal government has meant that banks are forced to act with surprising resourcefulness and agility. They are now seeking to carry this momentum to radically transform projects that seemed previously destined to move at a snail’s pace.

To do this at speed and at scale, they have had to look beyond the short list of traditional vendors and implementation partners more accustomed to project timelines of several years, to a constellation of smaller, more agile fintechs that are able to meet specific needs at a rapid pace. The Davids and Goliaths are finally working together — so far, the outcomes have been pretty phenomenal.