Appraisal Management Company - AMC


DEFINITION of 'Appraisal Management Company - AMC'

A U.S. independent entity through which mortgage lenders order residential real estate valuation services for properties on which they are considering extending loans to homebuyers. AMCs fulfill an administrative function in the appraisal process, including selecting an appraiser and delivering the appraisal report to the lender. Individual appraisers who work for AMCs provide the actual property valuation services.

BREAKING DOWN 'Appraisal Management Company - AMC'

Appraisal management companies have been around for decades, but they became more important after the subprime mortgage crisis of 2007 and 2008, when new federal regulations limited the amount of direct contact that lenders could have with appraisers. The U.S. federal government created appraiser independence requirements to prevent lenders from influencing appraisers to inflate property values. Thus lenders would be prevented from issuing mortgages based on inflated appraisal values, a problem believed to have contributed to the housing crisis.

Neither mortgage brokers, loan officers nor homeowners may select the appraiser for the property on which they want to lend/borrow funds. Since the former parties have a financial interest in the transaction, there is a risk they might attempt to influence the appraiser to assign a higher value to the property than market conditions support so the transaction will go through. When the system works correctly, the AMC chooses an appraiser with local knowledge of the market for the property being appraised.

For federally-related transactions, which most mortgage loans are, AMCs must select state-licensed or state-certified appraisers. In addition, federal regulations require AMCs to register with their respective state appraisal boards and require AMCs to follow the Uniform Standards of Professional Appraisal Practice (USPAP). AMCs are regulated under the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Truth in Lending Act.

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