MReport August 2022

TheMReport — News and strategies for the evolving mortgage marketplace.

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38 | M R EP O RT FEATURE floorplan data and a comprehen- sive digital view of the property (more on this later). It should be noted that GSEs do not review and approve all emerging technology used in the Hybrid Appraisal process. They only require appraisals to meet the guidelines of the designated form. If their requirements are met and the data is accurate, the means used to acquire that data is not relevant. Desktop Appraisal Eligibility Requirements T he new Desktops are not eligible on all loans. To qualify, a mortgage must meet the following requirements: • The loan must meet "accepted mortgage" requirements. An accepted mortgage falls within a risk class in which the lender deems the borrower's credit- worthiness acceptable. • Desktop Underwriter (DU) must indicate that the mortgage is eligible for Desktop appraisal. • The purchase must be for a single-family residence, includ- ing a home in a planned unit development. The new rules exclude refinance loans. • The mortgage must have a loan-to-value ratio (LTV) of 90% or less. Mortgages with LTVs higher than 90% require a traditional appraisal, including exterior and interior inspection. Potential Challenges Posed by the New Rules T he new rules mean change, which comes with several ad- vantages and risks. Understanding compliance requirements is key to advancing the industry. While the new rules provide greater flexibility and have the potential to increase efficiency, compliance errors can lead to higher buyback rates. Short-term challenges may include: • Floorplan discrepancies: According to Fannie Mae, when more than one appraiser measures the same property, one out of five times their measurements differ by more than 10%. Such divergences can lead to errors in Traditional Appraisals (hence the new ANSI measurement standards). When performing a Desktop Appraisal, the appraiser may be reviewing conflicting mea- surements and floorplans from builders and assessors and will need to decide what is the most credible source—without setting foot on the property or measur- ing it themselves and without the use of assumptions. This presents an obvious challenge and often will result in the appraiser declining the appraisal assignment and requiring a conversion from the Desktop to a Traditional Appraisal, adding significant time delays to the process. • Insufficient information: To complete a Desktop Appraisal, the appraiser must have suffi- cient information to develop a credible appraisal. In fact, the new guidelines stipulate that an appraiser must decline an assignment when sufficient information is not available. In such a case, the appraiser must rely on the traditional appraisal method. Moving Forward With Exciting Digital Technologies D esktop Appraisals have the potential to make the ap- praisal process significantly more efficient for eligible loans. This may be even more true when appraisers employ new technol- ogies already provided by some industry leaders. These advances make gathering the required information even easier and more reliable, which bodes well for busy appraisers and the mortgage industry as a whole. For example: New 3D scanning technology creates a digital twin of the property. • Scans of the exterior and interior of a home are stitched together to create a 3D image of the property and produce highly accurate floorplan exhibits that meet both the GSE requirements and ANSI Standards without setting foot on the property. • Produces an interactive virtual tour to determine a home's fine details, from the quality of construction, to the condition of the property, including the brand and year of manufacture of those readily observable mechanical systems and appliances. • Comprehensive reporting tools provide geolocation and time-stamping, documenting when and where the scan was performed. • Improved quality assurance with advanced algorithms, machine learning, and artificial intelligence that quickly run the appraiser's report against hundreds of rules, saving time and proactively identifying possible issues. • Drag-and-drop data extraction can be integrated with any appraisal software to bring "Young professionals are more likely to enter a career with a more streamlined apprentice program where they can leverage the latest technologies, rather than an elongated training process still reliant on antiquated technologies and processes."

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