TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/1265321
16 | M R EP O RT FEATURE eligible for rep & warrant relief at all, regardless of COVID-19 flexibilities. Desktop appraisals have been around for decades. However, they were typically completed on nonstandard forms and relied entirely on data available to the appraiser from their desktop. In some cases, lenders may supply the appraiser with an exterior photo and a property condition report based only on a drive-by observation of the property, often by a nonappraiser. The flexibilities offered by the GSEs in response to COVID-19 take the desktop appraisal to a new level. They revised the minimum scope of work to allow the 1004 interior appraisal form to be completed at the appraiser's desktop. They also allow the appraiser to accept photos and information from parties with a financial interest in the transac- tion, something they have never permitted before. The Importance of Using the Right Tools S uddenly there are a dozen or more tools available to guide the homeowner through the data and photo collection process. Immediately, it became clear that some controls would be needed around borrower supplied photos and data. Thankfully, these con- trols are available. OnSight, our own virtual inspection app, has numerous authentication controls ensuring that photos are current and taken at the property. But not all tools have these controls. What looks simple at first glance—a homeowner taking photos and sending them to the appraiser—actually requires a sophisticated system. Just as with every other aspect of the loan file, appraisers need to guard against fraud and misrepresentation. Having a borrower send an email with pictures of their property attached gets those pictures to the appraiser, but the appraiser can't be sure whose pictures they are. Lenders need to make sure that their appraisers and appraisal management company they partner with have the appropri- ate security and privacy features embedded in their tools. But how do they tell? Below are some key features that should be present in any application an appraiser uses to collect photos and information from a homeowner. Photo Authentication T oday's appraisal applications can verify photos taken by the borrower as evidence of a property's condition. To do so, however, location services must be turned on when using the application so the device can authenticate the location at which the photos are taken. Along the same lines, the app should not allow access to stored photos in a borrower's photo gallery on the device, nor should they allow borrowers to upload photos from another program. Photos should be date and time stamped and geocoded to the homeowner's location, ensuring current, and ac- curate photos for the appraiser. It should be noted that some appraisal applications are capable of displaying the precise location of photos relative to the property using GPS coordinates. This pro- vides the appraiser with immedi- ate visual validation of the photos that can be included in the report. Most applications also provide an affidavit, though which the homeowner must affirm that they have not provided any fraudulent or misleading information. Homeowner Privacy F or obvious reasons, homeown- ers submitting information on appraisal applications need to be confident that their information and interior photos will not be shared or become the property of anyone other than the appraiser. Traditionally, the gathering of homeowner photos and data is an appraiser function. When an appraiser enters someone's home, they see both the real property and the homeowner's personal property. The appraiser always treats personal effects as just that—personal. Only the informa- tion needed to solve the appraisal problem and produce an appraisal report that is not misleading is communicated to the lender. Just as with appraiser-taken photos, the homeowner needs to be confident that, when necessary, the appraiser will blur any people or personally identifiable details that show up in the photos such as religious icons. To maintain the privacy of the homeowner's prop- erty, there should also be some form of two-factor authentication used to retrieve the homeowner's information, so they don't fall into the wrong hands. Throughout history, many technological innovations came during a time of crisis. Necessity is indeed the mother of invention. Once this COVID-19 pandemic passes, however, virtual inspec- tion technology will continue to improve and add value to many facets of the real estate loan lifecycle. Artificial intelligence, for exam- ple, can be used to conduct initial quality control on homeowner supplied photos to assess consis- tency, identify certain features, and assign quality and condition ratings. "Smart" home data can also be shared electronically with authorized parties, including the appraiser, providing up-to-the- minute age, maintenance, and warranty details for important components like heating systems and appliances. Ultimately, properly authen- ticated virtual inspections can provide a far more in-depth and up-to-date view of a property— residential or commercial—than a few exterior photos from the public street. These innovations and applications will only evolve and improve over time, giving rise to other new tools and techniques that benefit lenders, homeowners, service providers, and the general public. That's a silver lining I think we can all appreciate. . BILL KING is Chief Valuation Officer for Bradford Technologies, a provider of software services to the appraisal profession for over 33 years. King is a certified residential real estate appraiser and licensed real estate broker in Washington State and nationally recognized instructor of real estate and appraisal courses and seminars. King has over 40 years' experience in real estate and valuation; he has served as a forensic expert on valuation and housing issues in local, regional, and national RMBS cases. He has taught dozens of appraisal courses and contributed to the country's most widely used appraisal textbook, The Appraisal Institute's The Appraisal of Real Estate, 14th Edition. He was a key member of the Appraisal Institute for several project teams and has published dozens of industry-relevant articles and papers. He has been a valuation representative to MISMO, consulted with the GSEs on USPAP issues for UCDP, and participated in creation of UAD. Lenders need to make sure that their appraisers and appraisal management company they partner with have the appropriate security and privacy features embedded in their tools.