Decoding Compliance

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feature ORIGINATION Or ig i nat ion When Disaster Strikes: s e r v ic i ng Avoiding Appraisal Pitfalls a na ly t ic s Providing insight for lenders seeking to improve their appraisal processes and mitigate related risks, a la mode's experts revealed the top 10 warning signs that can expose faulty procedures before they wreak havoc on your bottom line. By Jennifer Miller With intense scrutiny exacted upon appraisal quality and compliance, this is not the time to take risks. Even the most well-prepared originators and banks can fall prey to common mistakes, however, because innumerable variables influence collaborations with appraisers and appraisal management companies (AMCs). Thankfully, crafting a conscientious method for avoiding appraisal pitfalls is possible by observing 10 critical warnings signs of noncompliant or ineffective operations. evaluating operations. This simply isn't an option. The Appraisal Independence requirements within Dodd-Frank are very specific concerning the items lenders must enforce. Regardless if exams and enforcement from the Consumer Financial Protection Bureau (CFPB) are imminent, the government-sponsored enterprises (GSEs) and investors are concerned with appraisal independence and are closely observing companies' policies and procedures. And lenders selling into the secondary market will fall behind if adopting a "deal with it later" attitude. Warning Sign: Adopting a "deal with it later" approach. Warning Sign: Loan officers hate the company's appraisal process. Some companies a la mode has spoken with appear to be waiting until appraisal regulations are more defined and additional rules are issued before critically If originators are complaining about the organization's appraisal process, it's likely production will decline, quickly affecting the bottom line. While much of the appraisal control has been intentionally diverted from production because of fears of value pressure, loan officers still have an obvious stake in the quality of appraisal operations. There are solutions to satisfy both production and compliance, so if the company's loan officers are vocal about appraisal problems, it's time to look at options. Warning Sign: Relying on the wrong kind of automation. New products on the market attempt to assist underwriters with the complex task of uncovering appraisal issues, and companies are selling such solutions as a fully automated service. But it's impossible to automate 100 percent of the process, and relying on underwriters to be appraisal experts could be a dangerous mistake. After all, shouldn't informational discrepancies be caught by a company's The M Report | 43 se c on da r y m a r k e t A ppraisal operations are critical to lenders' stability and success, both from a production standpoint and—now more than ever—from a legal liability perspective. Originators are tasked with managing complex regulatory requirements on multiple fronts, from underwriting to securitization, all while adhering to standards that carry perilous penalties if violated. And a costly mistake in today's mortgage marketplace is likely to cripple most lenders.

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