While appraisal management companies (AMCs) have existed for decades, they became ubiquitous here in California following the disastrous fallout from the Millennium Boom.

The AMC requirement was added to the Financial Institutions, Reform, Recovery and Enforcement Act (FIRREA) in 2009 to stop the perceived collusive activity between lenders, agents and appraisers that helped propel home values during the Millennium Boom. Now, government mandated facilitators act as an intermediary between lenders and appraisers who had previously contracted for services directly.

Essentially, lenders hire an AMC, which contracts with individual appraisers. This “middle man” is meant to ensure appraisers are not unduly influenced by lenders to hit a target dollar amount for each property to make sure the transaction closes. In theory, this translates to more accurate appraisals. In reality, it often translates to higher fees for consumers, and less pay for appraisers — but the drawbacks of AMCs is another story.

The designated officer’s role

The designated officer (DO) is an important role ensuring AMC compliance. Much like the DO role for real estate brokerages, the AMC DO is responsible for supervising licensees and submitting required paperwork to ensure compliance. [California Code of Regulations §3500(b)(11)]

In particular, the DO is responsible for filing Form REA 5011 with the BREA when changes occur to the AMC’s:

  • business name;
  • telephone number;
  • mailing address; or
  • DO’s name. [CCR §3527(b)]

Further, the DO may also be the Controlling Person responsible for submitting proof of completion of the 7-hour USPAP Update Course each renewal period. [CCR §3681(d)(2)]

While the DO’s responsibilities are clear, it’s less clear who the DO may be under FIRREA and California law. California’s Bureau of Real Estate Appraisers (BREA) recently clarified this ambiguity in their Fall-Winter 2021 Newsletter.

The DO needs to be a Controlling Person at the AMC and fulfill one or more of the following roles:

  • an officer of the AMC;
  • a director of the AMC;
  • an individual who owns at least 10% ownership interest in the AMC;
  • an individual who can enter into contracts with clients and appraisers for appraisal services; and/or
  • an individual with the power to direct AMC policies. [CCR §3500(b)(9)]

Rather than just a token name for the AMC application, the DO’s responsibilities are crucial to ensuring the AMC stays out of trouble with consumers — and the BREA.

Related article:

Securing your practice against appraiser complaints