Understanding Appraisal Compliance

Appraisal compliance is a must for any company doing mortgage lending today. From the Home Valuation Code of Conduct, FHA’s recent appraisal changes as well as the OTS and OCC appraisal requirements there is simply no way of getting around ensuring an arm’s length appraisal process.One of the most important things about dealing with appraisal compliance is that because everyone has to play by the same rules now, as a mortgage lender you can truly have a competitive edge by knowing the rules and taking advantage of the level playing field.This guide is designed to give you the edge by educating you and your company on appraisal compliance, solutions available as well as a best practice guide to managing the appraisal process day-to-day.

Everyone who has been in the mortgage business for a few years can understand the conflict of interest associated with having a member of the production staff order an appraisal directly to an appraiser. Most of the production staff have little or no training in appraisals as well as the importance of an accurate appraisal and the negative ramifications of inaccurate or inflated values. Most production staff only care about that the number on the appraisal is at our above what is required to get the loan approved. The appraiser that enables them to make the most amount of money is the appraiser they will use. For obvious reasons this could be a problem if your goal as a financial institution and mortgage lender was for the most accurate valuation of a property for your loan portfolio or to sell. What appraisal compliance does is ensure there is no influence is placed on the appraiser to obtain a specific value, misrepresent the property or exclude certain things that an investor could or would want to know about when deciding on making a loan. In theory achieving appraisal compliance sounds very simple, essentially you are putting a wall between the production staff and appraiser to ensure an uninfluenced value. There are plenty of companies that offer appraisal compliance solutions which meet and exceed the industry regulations for appraisal compliance and we will go over these types of companies in a later chapter.