What is an Appraisal Management Company?
An appraisal management company is a company that mortgage lenders use to estimate the value of real estate when they are considering loaning to a home buyer. Appraisal management companies are considered a non-bias third party in the valuation process and they work with lenders to help with the process of ordering, tracking, controlling and delivering appraisal reports. They also provide an additional layer of oversight to the appraisal process that helps meet federal standards.
Essentially, appraisal management companies act as a mediator between a lender and an appraiser, who are legally no longer allowed to work together. There was concern during the housing market crash that some lenders and appraisers conspired together to inflate mortgage rates, so they can no longer collaborate during the process. Appraisal management companies conduct independent appraisal reports to satisfy federal standards and then provide that report to the lender and appraiser.
The appraisal management industry is a fairly young industry and regulations to it are fairly new. Appraisal management companies have become increasingly popular since the 2008 housing market crash and the passage of the Dodd-Frank Act. This law, named for its sponsors in the Senate (Sen. Chris Dodd, D – CT) and House (Rep. Barney Frank D – MA4), regulated Wall Street and the finance industry following the market crash and the failure of several Wall Street banks in 2008. The Dodd-Frank Act lays out minimum requires states need to meet and the Idaho law that requires this bond brings Idaho appraisal management companies fully in line with the standards set forth. Therefore, appraisal management companies in Idaho are now fully qualified and able to do federal projects and issue appraisal for federal property, as well as private property.
Additional requirements for appraisal management companies in the State of Idaho include: all appraisal management companies must register with the Idaho Real Estate Board in addition to getting licensed. They must register by July 1, 2017.
What are the Surety Bond Requirements?
Under Idaho’s new law, the surety bond bond becomes one of the most important requirements for becoming a licensed appraisal management company. No appraisal management company can do business without a license, so this surety bond becomes an essential part of licensing process. Without this bond on file with the State of Idaho, an appraisal management license cannot and will not be granted to any applicant. The Idaho Appraisal Management Company Surety Bond must be filed with the Idaho Real Estate Appraiser Board in order for the company to fully be in accordance with the law. Appraisal management companies in Idaho who got their license before this was a requirement need to post this bond as soon as possible, otherwise their license could be revoked.
The new Idaho Appraisal Management Company Surety Bond has a $25,000 dollar requirement, and this money will used to pay out any losses on the bond. A loss is when a claim is filed on the bond and that claim is found to be legitimate. This bond helps protect the public and the state from harm on behalf of appraisal management companies, and it provides a financial guarantee that those who are harmed are properly compensated.