BLOG VIEW: Vendor assessments are long, arduous tasks for any lender. Identifying the right appraisal management company (AMC) requires a lender to ask key questions during the vetting process – and often the answers only go so far. Lenders need to make sure that the AMC can back up its responses with evidentiary proof.
What follows are some questions lenders should be asking AMCs when conducting a search:
1. Does your company currently have a business continuity/disaster recovery plan in place in the event of a natural disaster?
This is one of the most critical questions to ask an AMC before proceeding. A negative answer should automatically eliminate a candidate for consideration. Be sure to ask how often the AMC runs failover tests to determine if its recovery plan is a priority, and find out if it publishes the results of these tests internally and/or externally. Ask the AMC to describe its formal business recovery program and to identify its dedicated recovery team. If one suffers a catastrophe without dedicated back-up resources in place, it can result in a severe loss of revenue for the organization. It is vital that your AMC has a rigorous recovery plan in place to resume activities quickly so to not impact your business.
2. Does your company have a formal documented information security policy?
Data security is a high priority for any lender, so protecting the integrity of your data should be a top priority for your chosen AMC. The loss of sensitive data can open up financial liabilities and lead to a bad reputation in the industry. The AMC should thoroughly describe the process by which it encrypts sensitive data, both in transit and at rest. It should also guarantee that it operates within an SSAE16 Type II certified environment and that it has an intrusion prevention and detection system.
3. Can your systems be readily integrated with our current loan orignation system (LOS) or servicing platform?
The only way AMC technology can be used to enhance the loan origination collateral valuation workflow – and can automation of processes be achieved – is is through a direct connection with a lender's LOS. Having an AMC fully integrated with the LOS creates a one-stop shop for lenders, thus streamlining the valuation ordering process, increasing productivity, reducing overhead, and reducing errors resulting from manual re-entry. The AMC technology should be based on MISMO standards so that the data can more easily be shared across systems to accelerate the valuation process and ensure full compliance.
4. Does your AMC utilize a proprietary order management system?
When an AMC has invested in a proprietary order management system it helps ensure significantly shorter lead times to implement specific valuation fulfillment requirements. Proprietary systems provide the flexibility to order collateral valuations in multiple ways and the capability for various delivery methods and features, which are essential attributes to a lender handling a high volume of orders.
5. How does your company's technology align with the regulatory requirements of today's market?
Determining whether or not an AMC is in compliance is one of the most important aspects of the vetting process. By establishing that a particular AMC is observing industry and state regulations, a lender can ensure that it is fully in compliance. Be sure to establish that the AMC is PCI compliant and ask for any data on its annual SOC-1 audits. The AMC must also prove it meets updated standards associated with Regulation B and is based on MISMO data standards.
Asking these questions early on in the vetting process will determine whether a particular AMC is a good fit for your lending institution. An AMC with a dedication to security, compliance and a modern, streamlined ordering process is a valuable addition as a partner.
Wayne Smith is vice president of information technology at LRES, a national provider of residential and commercial valuations and asset management for the mortgage, banking, credit union and real estate industries.
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