Is it an industry practice for compliance to handle ordering appraisals for the lenders in this day and age?

This is a one-man-show, staffed by a newbie to compliance in the modern banking world. Time is most precious and efficiencies are always being sought. Appraisal orders on a busy week can intrude and burn time to prepare.

How does your bank handle real estate lenders' appraisal requests?

Goodnight, you must be a small shop. I don't see how the compliance officer could function as the appraisal department. Does this mean you have to manage the stable of approved appraisers, order and have the appraisals reviewed, and then manage any issues from the appraisals?

Who has time for that?

I know a number of banks where the tellers order the appraisals. They have the approved appraiser list and a log book (paper or computerized) to track where the last order was placed. Haven't heard of any time issues with this method.

I can't imagine that the tellers are reviewing, assessing appraisers, managing the list, etc. I would think they are just ordering from the list. In any case that process, and having compliance involved, must be small banks.

For banks that have credit/credit admin areas, I usually see it handled there. As banks get larger, they usually have an appraisal department as this becomes a full time function.

Originally Posted By: Pale Rider

Goodnight, you must be a small shop. I don't see how the compliance officer could function as the appraisal department. Does this mean you have to manage the stable of approved appraisers, order and have the appraisals reviewed, and then manage any issues from the appraisals?

Who has time for that?

Yep.

When real estate lenders are busy and compliance is otherwise engaged with audits and preparation for meetings etc. there just isn't adequate time available for it all and I'm casting about, looking for a brilliant idea for managing the appraisal requests.

I'm not going to be able to lose the appraisal review process to anyone else.

Sorry to bring this back up but is it a no-no for the mortgage loan officers' loan processors to be able to contact appraisers directly for any follow-up questions or needs once the compliance department initially orders the appraisal?

Or, do they have to continue to use the compliance officer as the go-between for each and every question they might ask of an appraiser during the appraisal process?

This is the one-person compliance department and not loan production. It seems nuts to bedevil both loan processors and compliance with something that could be so simple.

Once the assignment is made, everything the appraiser needs to know is contained within the engagement letter. The appraiser delivers the appraisal to the independent review group/person who review and approves or rejects the appraisal and if approved, passed it on to the processor.


What could a processor possibly need to contact an appraiser for???

Apparently there are endless reasons.

-Checking on status; wanting to hurry things along (mostly).

-Revise a lot number because the builder decided to use a different lot to construct the house he'd planned to build. This was an interim construction loan request on a spec home in a new housing addition.

-Add needed contact names for property access.

-Forward a just-received real estate sales contract along.

These are only a few examples of the recent needs that come to mind.


And the appraisers occasionally want to call with questions of all types regarding the appraisal order which would be more properly answered by the loan officer or loan administrator/processor.

The most recent appraiser question was from a nitwit appraiser, especially requested by a loan officer, who found some significant improvements connected with the 238 acres when he inspected the property and called to say that he really was "only capable of doing raw land ... actually didn't much handle appraisals with property improvements ... maybe we would want to call someone else ... and what was he suppose to do?!"

Of course this was forwarded to the loan officer who told me to tell the appraiser that the improvements were actually on an adjacent property. This was a bigger bank and forth time waster than it appears on the surface, what with emails sent back and forth, phone calls made, cell phone calls dropped, and messages left.

The compliance officer can't be in the middle of all this.

I want to help but this is a misuse of a compliance officer's time and involving me and then waiting me out is an unnecessary time burden on loan officers/administrators.

I'm also reviewing in detail each and every 75-300 page real estate loan package produced by loan officers, for accuracy, completeness, and compliance; be it in-house commercial and residential or secondary market before the loan can close. I'm also the bank's auditor. Oh and the various hats as designated officer: BSA, Security, CRA, etc. with the regular committee meetings and staff training that involves. It's a small bank but it isn't that small.

A fundamental question: Is this a normal for compliance? If so then we're simply not going to get around to it all. Just not going to happen.

No, it is not.

Sounds like you have significant structural issues within your organization and solving the appraisal dilemma would be just scratching the surface. Sounds like you need a total re-organization of structure and duties assigned.

To return to the question of the bank's loan processors maintaining contact with appraisers after the initial appraisal order is made from this compliance office: is it appropriate for loan processors to have any contact with appraisers?

No

It truly is not. I know of situations where special appraisal exams were scheduled because an appraiser complained to the bank's regulator when someone in the loan processing/approval chain contacted him to discuss aspects of the appraisal.

From the appraisal guidance:

The collateral valuation program is an integral component of the credit underwriting process and, therefore, should be isolated from influence by the institution’s loan production staff.

How are they isolated if you allow them to contact the appraiser at will??

This is a problem too. An LO can in no way influence the choice of the appraiser.

And why is a nitwit appraiser on your approved appraiser list. I would say your appraiser and vendor management program also needs some work.

Being at a smaller bank, I watch and learn. But isn't it, depending upon facts and circumstances, sometimes OK to have processors in touch with appraisers? Per Guidelines:

"For a small or rural institution or branch, it may not always be possible or practical to separate the collateral valuation program from the loan production process. If absolute lines of independence cannot be achieved, an institution should be able to demonstrate clearly that it has prudent safeguards to isolate its collateral valuation program from influence or interference from the loan production process."

We're definitely small and rural.

And, yes the appraiser program needs work and needs attitude adjustment.

sometimes OK to have processors in touch with appraisers?

At smaller banks, they indicate that you may need to use people within your loan production staff to carry out all of the duties, but this does not short circuit the independence requirements. If you have loan officer A and processor B handling the loan, then only employees C thru G can have anything to do with the appraisal process for the loan. Loan officer A and processor B should still remain totally isolated from the appraisal process for the loan on which they are working.

That is the key. You have to work hard to build walls on a transaction by transaction basis.

Smaller banks using tellers was what I was referencing in my post above.

We are a small community bank. The loan officer prepares a loan ticket that contains the property address, current owner & contact information. Our loan administration department handles the appraisal process...choosing the appraiser, ordering the appraisal, get the appraisal reviewed, then getting a copy to the applicant and loan officer. This department does not process loans exclusively for any single loan officer and we have a small pre-approved appraiser list.

Thanks for your response Kathy and welcome to the Forum!

So your loan administration department maintains a degree of autonomy from the lenders which is considered sufficient to allow the handling of the appraisal process.

Am I to understand that compliance doesn't evaluate the appraisals at your bank?

I'm not trying to duck out of what is properly considered compliance issues or get out of work. Eight hours is eight hours (well more occasionally) and I'll take it all on. I'm just trying to make work flow better by seeing how others are accomplishing compliance and if they are also being used for loan administration functions.