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» in 2008 and oversees quality control, human resources, facilities, and vendor relationship management. V A L U A T I O N JOHN R. RECSER VP, OPERATIONS DIRECTOR, AND CHIEF APPRAISER First American Mortgage Services Appraisal management companies (AMCs) will continue to be challenged by market interpretations of Interagency Guideline revisions, DoddFrank legislation, and initiatives proposed by the Consumer Financial Protection Bureau (CFPB) as we head into 2013. Additionally, licensing applications, requirements, and fees at the state level will continue to place demands on the AMC industry. AMCs are facing more regulatory requirements than ever before. As a lender, it's important to communicate with your AMC to find out how new regulations are being implemented and managed. There are five questions that every lender should ask their AMC in today's regulatory environment. What are you doing to comply with current AMC regulations? | It's important to understand how seriously your AMCs treat regulatory compliance in each state and the risks associated with not meeting requirements—especially when reviewing your AMC partner's future ability to provide appraisal services in the states in which you do business. How do you monitor new legislation? | Take note of the resources your AMC dedicates to the timely monitoring and efficient response to state-specific AMC regulatory requirements. Simply asking what legal and operational resources an AMC dedicates to compliance can open valuable doors to understanding risk. As each state adopts, implements, and enforces new regulations, it's important to know who is accountable. Removal of an AMC in one state could impact an entire servicing footprint. Will you be approved and licensed to operate in states within my lending footprint? | In many cases, AMC licensing was crafted around appraiser-based regulatory platforms. Some states require an AMC officer to be a licensed appraiser, be in good standing, and if managing the AMC operations, have no prior convictions. This initial step toward credentialing and reviewing an operating officer may receive additional scrutiny. One bad applicant or operating officer could negatively impact your AMC's ability to operate in an individual state. What quality control measures and stafflevel expertise do you employ? | Understanding who is reviewing the appraisals, the reviewer's level of expertise, what tools they use, and how they are communicating errors may help you gauge how that AMC's panel of approved appraisers might view an inquiry. An AMC that presents errors to their network of appraisers could open the door for future complaints and cause assignment difficulties and delays. How are you positioned financially to satisfy state-based complaints? | You must be aware of how your provider will handle the potential financial burden if it gets inundated with complaints and investigative inquiries. Your AMC must be well positioned for the cost of compliance. AMC regulation is in flux; some states have devoted resources to regulatory enforcement while others have yet to ratify new regulations. It's important to understand the quality control steps your AMC takes in the review of your appraisals and how it moves through dispute resolution. Your AMC should have clear policies in place and a dedicated legal staff to manage situations where an impasse occurs. Each AMC should stay on top of regulatory changes and be ready to address new requirements and legislation with their legal and operational staff. More AMC regulations will be defined at the state level in 2013 and will impact AMC operations. Asking these important questions and understanding your AMC's responses to them is a necessary and vital part of vendor due diligence. John Recser joined the First American organization as chief appraiser in 1999. Since then, he's served in a variety of expanded roles and responsibilities. In his current role, he ensures the company satisfies complianceand policy-related requirements, as well as technical support, operational risk, and customer service needs. Residential property values in August were 35% below peak readings recorded in July 2006, according to the latest S&P/ Case-Shiller index. VISIT US ONLINE @ DSNEWS.COM V A L U A T I O N BRANDON BOUDREAU COO Metro-West Appraisal Co. LLC As we look toward 2013, we expect many of the same challenges the industry faced this year to remain in place. The most enduring of these challenges for the valuation sector include the market dominance of appraisal management companies (AMCs), a shortage of competent appraisers, new technologies, and perhaps most daunting of all, compliance with individual state and federal requirements. It's important to note, however, that there are ways to combat these challenges. While we expect AMCs to maintain their position within the marketplace, potential pitfalls can be avoided by those who are selective about which AMCs they work with and focus instead on appraiser qualifications, market fees, and the common sense scope of work requirements. AMCs' primary focus in 2013 will be maintaining compliance standards on a state level as well as deciding on which states to operate in due to rising cost. The cost of doing business on a national level has increased significantly and will continue to rise. It has yet to be determined if the appraiser, the AMC, the lender, or the consumer will shoulder these cost increases. Many within the industry are also forecasting the exodus of competent, experienced appraisers from the mortgage business to continue, and in 2013, the number of those leaving the industry is expected to be greater than the number of new entrants. When combined with the lending volume increases projected by economists, this imbalance means the shortage of experienced, competent appraisers will be even more pronounced. The adoption of technological enhancements within the appraisal industry has been slower among the more experienced appraisers than the younger generation of entrants into the profession. In 2012, lenders and investors appear to be using technology in quality control processes to a greater extent than general practitioners in the development and reporting of the appraisals. However, in 2013, we expect to see more adoption among the general population of appraisers due to the aggressive marketing and exposure of technology-enhanced valuation products. Furthermore, 2012 surveys indicate the average age of practicing appraisers is 57. A poll taken during the CRN Conference in San Antonio in November revealed that a majority of the attendees have been appraising for more than 20 years. 55

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