The Cost of Non-Compliance: Compliance Training for AMCs
Former Deputy U.S. Attorney General Paul McNulty famously said, “If you think compliance is expensive, try non-compliance.”
In a recent introductions meeting with an appraisal management company, we discussed my performing an overall “health” exam of the company’s daily and back-office operations. Such an assessment acts as a mock audit and endeavors to discover strengths, weaknesses, and priorities that need immediate action. Issues can be from simple one-off human errors that are easily corrected, to organizational weaknesses, such as lack of required procedures, non-compliance with state requirements, and lack of training and documentation.
One failure identified recently at an appraisal management company was the lack of training. Serving multiple purposes, training:
- demonstrates to clients that the appraisal management company is serious about its operations, for the client’s own third-party oversight
- helps to ensure that procedures are carried out as written
- may identify any disconnects between written procedures and real-world experiences
- emphasizes to staff that their role is important and critical to the company
- satisfies many states’ requirement that certain appraisal management company employees be in-the-know about specific topics.
When discussing the nuances of state requirements, a common question related to training is “Does a USPAP class satisfy states’ requirements that an appraisal management company train the company’s appraisal coordinators?” In short, no.
While a few states require certain staff to take a USPAP class, more states require deeper training targeted at valuation independence specifically. Keep in mind that the USPAP Update course is designed with appraisers in mind and generally it approaches issues from the appraiser’s perspective. Training on valuation independence and instructional USPAP basics, on the other hand, encompasses a broader field of topics and is best presented from a perspective of an appraisal management company employee.
For example, if an appraisal management company asks an appraiser to change her value conclusion, certainly the appraiser will be concerned about ethical standards and her certification (USPAP items), but the appraisal management company’s obligations more closely relate to the Truth In Lending Act, A.I.R., and states’ regulations, not to USPAP per se.
This is not to say that requiring certain appraisal management company staff take a USPAP course is without value. Certainly, it helps the appraisal management company employee to understand the perspective of the professional appraiser on the other end of the appraisal assignment. But a USPAP class does not meet most states’ requirements for staff training.
In a recent survey conducted by Walitt Solutions, of those responding, over 62% of state regulators indicated training for appraisal management company staff is necessary. Responses to the survey identified more than 15 subject-matter categories that regulators believe should be included in a valuation independence course. Among those numerous topics, the top four responses were:
- Federal and state regulation overview
- Violations of appraiser independence
- Responses to violations
- Quality control
- The survey responses also indicated that the regulators believed a 7-hour USPAP course should be presented to AMC staff outside of the valuation independence training.
As I remind clients, training your staff is a small investment to comply with state requirements, as Mr. McNulty’s words routinely remind us. More importantly, though, training ensures that processes are carried out correctly and any potential violations or deficiencies are identified for escalation and corrective action.
The cost of non-compliance is not solely a monetary cost. It also carries reputational risk, which can affect an appraisal management company’s relationship with current and prospective customers.
Walitt Solutions provides custom Compliance Training for delivery to appraisal management staff on an annual basis as well as top-of-mind staff interviews.
To arrange for classroom or live webinar training on Valuation Independence, USPAP Basics, and Fair Housing to meet state and client training requirements, or to arrange a classroom USPAP Update course, contact us (below).
Originally posted on LinkedIn by Joshua Walitt. Minor updates have been made.
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