April 2016 - Tech Revolution

TheMReport — News and strategies for the evolving mortgage marketplace.

Issue link:

Contents of this Issue


Page 29 of 67

28 | TH E M R EP O RT FEATURE of potential trouble areas, and there are many others. Not only is it imperative that the vendor has practical expertise in EAD rules, but they also must have the intention and capability to stay abreast of ongoing changes (see step No. 5—Establish—be - low). 03 Engage in the implementation process. O nce the proficiency of the valuation vendor part- ner has been established, the lender must ensure they have invited that partner to register within the EAD Portal as a lender agent. Concurrently, it is imperative that the lender and vendor commit to a collabora - tive engagement in the integra- tion process and to document a clear understanding of each other's expectations, roles, and responsibilities. Once this is established, the process should include multiple intercompany, multifunctional discovery ses - sions and discussions, resulting in joint decisions regarding the appropriate setup, roles, and administration duties. Once these decisions are made, they must be coordinated between the lender and their technol - ogy partners based upon the aforementioned agreement con- cerning expectations, roles, and responsibilities. This step is the most time con- suming and difficult part of the process, and many lenders/ven- dors, under the time pressure of looming deadlines, are tempted to start here. Skipping the necessary preparatory steps is a sure way to invite a failed integration. Also, as is typical for technology integra - tions, the lender and the vendor will likely get out of this process what they put into it. When the lender doesn't play a key role in the integration setup, they may not end up with an efficient pro - cess that meets their needs from the outset, which could require considerable tinkering once loan applications start accumulating. 04 Examine the appraisal review process. W hile the relevant technol- ogy integrations are occur- ring, the lender should consider modifications to their current FHA appraisal underwriting pro- cess that may be necessitated by the new portal. Similar to UCDP, EAD will render a series of errors and warning messages relating to the appraisal's compliance with FHA requirements. Some of these will be "hard stops" that require intervention in order to advance the file. Some hard stops can be overridden, but others will require correction prior to a successful transmission of the appraisal report to FHA. Lenders will need to have subject matter experts appropriately engaged—ei - ther their own or those of their chosen vendor—to determine the relevancy of hard-stop messages and the level of risk they repre- sent in terms of loan approval. When a hard stop occurs due to an ineligible property char- acteristic—rather than due to a reporting inadequacy by the appraiser—a decision will need to be made regarding the continued viability of the applicant for an FHA-insured loan and potential alternatives should be identified. These could include mitigation of the ineligible characteristic, if possible, or repackaging the loan for conventional purposes. Timely identification of the appropriate response could be the difference between losing the loan alto - gether or salvaging the customer relationship. 05 Establish EAD subject matter experts within the organization. N ew compliance regulations can be difficult to imple- ment for any lender, no matter the size. However, small lenders with limited resources are often deemed "too small to comply" and have to make difficult deci - sions in an effort to maintain the success of their business. Estab- lishing a subject matter expert within these organizations is key to maintaining compliance during times of change and can offer an easy-to-implement solution for small lenders with minimal resources. This person or group of people should be well-versed in all components of the regula - tion, including operations-related processes and legalities. More often than not, this person will also function as the point of contact with vendor partners and can work with them to ensure smooth transitions through every facet of the regulatory change. The SME for the organization will also be seen as an accountability leader who can report on metrics, difficulties, and best practices as the transition occurs. While FHA loan volume should factor heav - ily into determining how many SMEs a lending organization needs, quantity does not outrank quality, as a single committed employee could make all the difference in creating a smooth transition for an organization. This five-step framework is strongly recommended for lenders and valuation vendors as they begin to implement EAD. Of course, depending on the specific nature of each relationship and on the core competencies of each entity, the importance of each step will likely vary. Ultimately, this is a framework that not only increases the odds for a successful implementation, but also en - hances the relationship's ability to maintain success going forward, in anticipation of the inevitable changes to the EAD regulations. Successful Implementations are Possible A s with every new compli- ance regulation, the EAD implementation will come with hiccups, pain points, and eventu- ally, best practices. Open lines of communication and established expectations between lenders and their valuation partners will lead to a more seamless transition, and a relationship that can benefit both parties for many years—and regulatory changes—to come. MIKE FLOYD is chief appraiser and SVP of compliance at StreetLinks Lender Solutions, an Assurant company. A practicing appraiser for nearly 20 years, Floyd currently holds Certified Residential Appraiser credentials in the states of Indiana and Virginia. His expertise helped grow StreetLinks from a local appraisal firm into one of the largest direct appraisal providers in the Midwest, and eventually, one of the largest and fastest growing AMCs in the country. Today, Floyd focuses on product quality, vendor and internal education, client communication, regulatory compliance and new product development for StreetLinks. As is typical for technology integrations, the lender and the vendor will likely get out of this process what they put into it.

Articles in this issue

Archives of this issue

view archives of TheMReport - April 2016 - Tech Revolution