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Issue link: http://digital.themreport.com/i/120611
cover story Fair Value Blending old-school oversight with brand new solutions, today's valuations providers are gaining a strategic advantage through adaptable compliance initiatives. P roving that compliance and risk management challenges are pervasive throughout the mortgage marketplace, companies in the appraisal industry are making smart, strategic strides to set new precedents for adaptation. By mixing time-tested methods with futurefocused tools, valuations providers are keeping pace with today's rapid regulatory changes through a combination of technology and traditional, hands-on solutions. Commitment to Quality Control Strategic Innovation: A full-time compliance staff focused on preparation for current and impending rules and regulations, as well as quality control protocols that mandate manual reviews following automated processes. Successful Application: In business since 1959, Allstate Appraisal became a national firm in 1999 and is one of the oldest appraisal management companies (AMCs) in the nation, thanks largely to its compliance and oversight diligence that helps provide lenders with confidence that the produced valuations meet the highest quality and compliance standards. The company has remained steady not only during the downturn of the mortgage business at the end of the last decade, but also through the various other gyrations of the real estate and mortgage market of the past few decades. In the last year, the company's business—which includes work not only for mortgage originators, but also for the mortgage insurance industry, the government, law firms, and servicers— grew by more than 50 percent, according to EVP Steven S. Albert. "The quality and reliability of the services that we offer to our clients are maximized by the quality control protocol that we employ in our day-to-day operations," Albert says. "Compliance is non-negotiable. One of the first things that a lender does when looking to onboard an appraisal management company is look at its compliance procedures and its quality control." That includes looking at the appraisal management company's adherence to policies and procedures for the operations of the company's technology and of the staff. Allstate feels that an AMC's quality control protocol is the centerpiece of its usefulness to a client. Half of the company's 100 employees are certified residential or certified general appraisers, Albert says. "That's very unusual for appraisal management companies, even those owned and operated by appraisers. Many AMCs employ a licensed or certified appraiser or two, but only for elevated quality control issues. For many AMCs, most of the quality control is conducted by non-licensed professionals, or trainees. In addition, quite a few AMCs outsource their review work to automated offshore companies who use non-appraisers to review the appraisals, in order to minimize their costs." In addition to the certified appraisers, the company also has a full-time compliance staff to stay on top of the varying rules and regulations as they apply to the AMC industry, Albert adds. "We have a large quality control system in place here that relies on 100 percent manual review after automated rules are run on each order. We literally pay attention to every single line on the appraisals we submit to our clients," he says. "To date, it has been our experience this remains the most effective policy for us, and our clients." Some lending institutions and other users of appraisal services continue to seek the lowest fees when selecting AMCs to work with, but invariably, lower fees translate to shortcuts in quality control policies, compliance, or both. As has been demonstrated, everyone loses when this occurs, eventually. But lending institutions whose focus remains on quality still exist, and "these are the types of clients we focus on in our business development efforts," Albert says. Superior Standardization Strategic Innovation: Proprietary technology that remains flexible for customization of information and documentation, while still ensuring standardized data collection from the initiation of valuation processes. Successful Application: Using "technology borne out of the broker price opinion business," Colorado-based First Valuation is routinely delivering BPOs to its customers a day or two ahead of most of its competitors, according to Sue Potteiger, the company's president. While the difference of a day or two may not seem like much to many, the time difference is very important to First Valuation's clients, which include auction houses, portfolio owners, and investors, according to Potteiger. "The most important thing in our industry is the commitment to time," she says. For most clients, the timely delivery even outweighs the cost of the service, according to Potteiger. Timely delivery is important because government agencies will announce property auctions late one week, then conduct the auction late the following week. So bidders, auctioneers, and other interested parties will want the BPOs in order to make the most informed decisions at auction. First Valuation's speed comes from its proprietary BPO technology that enables standardized collection of data at the input point, Potteiger explains. "There are typically a lot of inaccuracies and inconsistencies because with [a typical BPO], one person will put the information in one place and someone else will put it somewhere else," she says. "We provide some consistency in the data input and field requirements." The First Valuation technology prevents users from entering letters where numbers are required and vice versa, and it highlights other items the application considers questionable so that the review team can quickly see and, if necessary, correct any entries. Each customer that orders a BPO wants something a little bit different, which has made the standardization of forms a challenge. First Valuation has solved this issue by enabling users to input standardized items where possible, yet have the ability to input customized information in areas when desired. "We don't know how much of a problem this [inconsistent data entry] is for others," Potteiger says. "But for us, the technology is efficient and thorough. With this, we don't make a time commitment [for a BPO] that we can't keep." Currently only First Valuation and a couple of firms that have white label versions of the application use the BPO form technology. But First Valuation is working on the legal and business development need to license the technology to other users. The M Report | 25