All sort of activity is swirling about at the State level. The background check issue also continues to cause anxiety and confusion so it comes as no surprise to me to see this recent bit of legislation popped up in North Carolina. Read the bill here.
In summary, North Carolina is offering some relief to appraisers in the form of a “statute of limitations”. It gives appraisers relief from civil liability from what currently seems like exposure into infinity. I think that is a good thing. Hopefully it will force some due diligence on the front end of the appraisal process.
Another part of the bill aims at protecting appraisers from having to deal with multiple background checks. I also understand the motivations to be admirable ones. But I think this aspect of the law begs some attention. The practical execution of this seems virtually impossible.
There is mass confusion by just about every stakeholder about background checking. Attention was drawn on the States for not having properly vetted the current crop of appraisers in light of the current financial crisis. Many voiced strong opinions that appraisers contributed, in part, to the financial crisis. Everyone can find examples of appraisers with a criminal background. Some of the loudest protests come from within appraisers’ own ranks. It is no fun to compete with a criminal and have them taint an entire profession.
Pressure was exerted to clean up the ranks. Lenders and AMCs are ramping up their due diligence not only for compliance but for risk management reasons. Fannie Mae is looking very closely at appraisal reports and are removing appraisers from the gene pool, albeit slowly.
So, back to North Carolina. The law reads that an AMC, that may require a background check, must accept a criminal background check that has been ordered within the last 12 months. OK. How does that work? If 130 AMCs need a background check on 3000 NC appraisers where do they actually get it? If the NC Appraisal Agency administers this it will create a burden. The costs of which must be passed on to someone.
What happens if the client has more expansive background check requirements than the State of North Carolina? It would seem that the expectation that a State perform the due diligence of the AMC and/or lender is an unrealistic one. The mission of the State is to ensure that the appraiser has met minimum license criteria and to protect the public. Lenders on the other hand must go deeper. They must protect their interests and satisfy the standards of their regulators and engage a competent, ethical appraiser for each assignment. A lender who engages a third party AMC passes these requirements on in the form of a Service Level Agreement (SLA).
While my daughter never appreciates this analogy, it does illustrate the point. She maintains a valid drivers license yet her insurance company suggests she is a high risk driver. They have data to support their conclusion. It isn’t just my rather emotional opinion. Don’t confuse the possession of an appraiser credential as due diligence to your clients on a go forward basis. I know for 20 years it has been working for you. That was then, this is now. Keep your eye out for the rule making process in North Carolina on this issue. I see it as one that will be both costly and difficult to administer. I know what won’t be acceptable to clients is a background check submitted directly by the appraiser. Look for many more of these battles to emerge as State’s rights meets Federal rules. It is going to get very complicated.
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Written by : Joan Trice
Joan N. Trice is the founder and CEO of Allterra Group, LLC, publisher of Appraisal Buzz, and host of the annual Valuation Expo, the largest conference for the valuation community. Joan also hosts the Collateral Risk Network, a members-only group of more than 500 dedicated chief appraisers, collateral risk managers, regulators, and valuation experts who are focused on resolving the many challenges facing our profession.
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A person wants to purchase a firearm (I know it’s not related); Immediately the Firearm dealer inputs that information to the FBI for a NAC (National Agency Check). This is very quick and one can find out if the appraiser has a clean background. AT NO COST to the appraiser and I don’t believe any cost to the AMC. Then the AMC can track if/when they need a BI/BU. Background investigation/Brought up (updated). This is accomplished for the military who require a security clearance for their job. I know, I’ve had several over the course of my 20 plus years in the Navy.
To jd1958. There are fundamental problems with your solution. #1)It makes sense. #2)It eliminates the need for AMC’s to charge appraisers more fees when they are looking for business. #3Using this method, lenders can’t force appraisers to use their own choice for the source of background checks(more than likely a wholly owned subsidiary of the lender)and will miss out on additional revenue from supplying the background checks. With these glaring faults, your idea will never fly!
When common sense make no sense (to the AMC) the appraisers are going to have to pay, pay and pay.
Yet the lenders who actually lend the money have no such requirements. LOs have to be licensed, but they don’t have a criminal background check. The people who run the major lenders often have sully backgrounds of their own to include all manner of transgressions. The people who hire them know it, too. I have no issue with appraisers have a background check. It’s logical. However, the CEOs and other decision makers need to as well. AMCs are not the appraiser. Passing any responsibility on them beyond verification of licensure and their background check is ludicrous.
Background checks are fine if EVERYONE has to have one. When I apply for work at an AMC, I have sometimes asked for information regarding the principals who run the company and I get no answer, as if this is “classified information”. In other words, I can’t find out who I’m working for, which worries me. What’s up with that? It should be a requirement that AMC’s provide complete background information on their ownership and management people so we can determine whether they are fit to be in their positions. I’ve done work for thieves and criminals(unknowingly)and ended up being drawn into fraud investigations just because my name was on an appraisal used by a company under indictment. That’s always fun even though there was nothing wrong with my appraisal! Somehow the word has to be put out that IT IS NOT ALWAYS THE APPRAISER WHO IS THE CRIMINAL. In fact, it’s almost ALWAYS the lender! I’m sick of being part of a group that is always the scapegoat when others do wrong. Is anyone else?
Here’s the issue Joan, it goes like this. In order to be eligible for the possibility of future assignments you MUST sign up with our background company of choice and pay an annual fee. If at the end of the year the appraiser has worked with 100 lenders from 25 different companies and each has demanded you use their background company of choice, than how does an appraiser recoup the $1,500+/- in expenses? Can the appraiser add a charge of $7.50 per appraisal (200 in a year) to offset the added expense? The answer is of course NO as we are currently not even being paid the same rate from 15 years ago. If the state of North Carolina gives the appraiser the ability to pay for a single background check, have it be good for a year and be able to supply it to anyone that’s asks, then I agree with what they have done. If you state that many think the issues of the past financial crisis can be contributed to the appraiser, then with 7 years since HVCC and 5 years since Dodd/Frank, why are lenders still doing illegal activity and agreeing to multi-billion fines? With history as a lesson (AMC ownership), it would come as no surprise if lenders formed their own background check companies and forced the appraiser into compliance.
I just got an update from NVS (a nationwide AMC) who was insisting that to remain on the appraiser panel that you must use their background company of choice, that they will now accept any approved check from an authorized source as long as it meets their requirements. Although they were sending out daily e-mail reminders, it looks like not enough appraisers gave in to their demands, thus the now open acceptance policy. Now the question, is what background checks meet their requirements? Will this be like a credit report with only a few companies having dozens of differing options/systems that may not be universally accepted? Hold your ground and fight the system!
I am a certified appraiser from North Carolina and commend the state for passing these two bills. The voice of the appraiser was heard and come to find out, we are actually intelligent, reasonable and have much knowledge to offer. Appraisers had to pay for a background check every 12 months for every AMC. This of course was done without a thought or concern for the appraiser which became very costly. Just another xxxxx on us. “Do what we say or you don’t work”. What is reasonable about that? And, what is unreasonable for getting one check once a year and handing it out to every AMC. I don’t see where or why this would cause anyone confusion. It’s pretty clear to me. I also don’t understand what is meant by “costly and difficult to administer”? Who is it costly to? The appraiser pays for one check, once every 12 months. This article refers to how this could cause an issue. An issue for who? Not the appraiser if that is who you are referring to. A lender who engages an AMC passes the requirement to protect the lenders interests to the AMC. Than that means the AMC is responsible to find ways to protect their interest but I failed to read anything in the article about the AMC offering to pay for or, be responsible for what they require. Just like upload fees and fees to join a list, etc… Why is it assumed to be the appraisers responsibility and where does it end?.
And, I know the insurance company did not ask your daughter to pay for a separate test to find out if she is a high driver risk. They pay their own actuaries for that.
Another note: North Carolina also requires the appraiser to be paid 30 days from the day the appraiser delivers the report not after it’s approved by the AMC, lender, etc. More support for the appraiser, wow what a concept…