Due Diligence and Ongoing Monitoring

We currently do not include inspectors and appraisers in our vendor management software. These get approved in a committee and there is a list of appraisers kept by the credit department but the inspectors are not maintained anywhere. The question recently came up about making a change to include them.

How do you handle this at your company? If you do add them, what documents do you require? I appreciate any input! 

Inspectors are tracked for current COI and engagement letters. 

In our TPRM software, there is one provider tab for Inspectors in each state within the footprint. Ex- Inspectors-FL. 

 Each provider tab can have multiple service providers, and each inspector is added as a separate service.  The COI is tracked for reminder prior to expiration. The CLA handling the inspector relationship contacts the inspector to obtain updated COI and provide to TPRM.  

The approach you take depends on your organization's risk appetite and available resources. As a financial institution with a large portfolio of appraisers, we categorized them as Non-Tier Vendors (we have a five-tier system). Instead of processing them through our vendor management process, we allowed the business units to handle onboarding, due diligence, and oversight. Annually, the vendor risk manager conducted a light-touch review to ensure that the business practices aligned with our primary vendor management policies and procedures. This review included sample testing and obtaining documentation to validate that controls were effective.

For example, we ensured that the Agreement or Engagement letters for appraisers included adequate language, verified that appraisers were licensed, and confirmed they maintained current insurance documents and performance scorecards. These requirements can vary based on your program's needs (e.g., obtaining prior sample work for new appraisers). Additionally, we validated appraisers through the California Bureau of Real Estate Appraisers (brea.ca.gov).  

With over 300 appraisers in our portfolio, this approach enabled us to manage our vendor portfolio effectively while ensuring that business oversight aligned with the organization's policies and procedures.

From our TRPM Policy:

Third Party Inventory Exceptions

The following groups of vendors are not included in the TPRM Inventory.  

...

•    Real Estate Appraisers & Construction Inspection (Draw authorizer) firms and Field Examiners and Field Appraisers, are excluded from the Third Party Inventory because: 
1.    They are subject to a Commercial, Consumer, Trust, or Mortgage Program's Due Diligence and Assessment standards;
2.    They are subject to Secured Credit's inventory, qualification, and review process and standards;
3.    Real Estate Appraisers are vetted by FHA/USDA/VA (GSEs) and regulations require their use; or
4.    For appraisals outside our market, where we have no panel appraiser, we rely on the software provider to assess and provide lists of licensed appraisers
5.    For Inspectors outside our market, where we have no regular inspectors, we rely on Line 1 due diligence (reviewing samples of their work product, reviewing client lists, reference checks, relevant licensure, etc.) to select individual inspectors.
•    FMB panel appraisers are inventoried within the Commercial, Consumer, Trust, or Mortgage Program. Non-panel appraisers are inventoried and assessed either by the relevant GSE or the software provider.