Regulator Criticizes AMC Oversight

The comments were made by Deputy Comptroller for Credit and Market Risk Darrin Benhart at the Mortgage Bankers Association’s Risk Management and Quality Assurance Forum 2013.

The MBA event is being held from Tuesday until Thursday at the JW Marriott in Phoenix. Benhart spoke Wednesday.

He noted that while the industry has been focusing on modifications, the foreclosure process and servicing issues — little attention has been paid to the appraisal process.

He said governance at institutions of all sizes is weak in the areas of appraisal and evaluation. Weaknesses range from concerns about the qualifications of employees who are responsible for implementing appraisal programs to a lack of audit, quality control, or internal control functions to assure adequate program performance.

One example he cited was oversight of AMCs, which he said was sometimes nonexistent.

“In some cases bankers didn’t understand how appraisers were selected and engaged on behalf of the bank,” Benhart said. “This is a critical function where effective oversight was missing especially when the function was outsourced.”

The development, reporting, and review of evaluations was also considered weak. The OCC official said pre-packaged products, some that claim to be compliant with guidelines, “lacked even the basics — no opinion of ‘market value,’ unsigned and undated reports, even generic assumptions about the actual physical condition of the property, items we specifically addressed in the 2010 guidelines.”

He described a case where an automated valuation model report was stapled to a third-party report without any real evaluation, analysis, or AVM validation.

Deficiencies in the review process for both appraisals and evaluations were found including independence, qualifications and training of reviewers as well as the scope and depth of reviews.