January 2017 - The World's Local Bank

TheMReport — News and strategies for the evolving mortgage marketplace.

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TH E M R EP O RT | 33 FEATURE Anywhere. Anytime. MReport Digital Bringing Today's Lending Headlines into Focus, MReport Digital Puts Mortgage Banking News at Your Fingertips Experts you trust. People you know. News you want. MReport is putting essential mortgage market news at your fingertips with our new digital edition, now available online via your smartphone, tablet, or computer. Enjoy the magazine at your desk, and tap into MReport Digital's easily accessible platform anywhere, anytime. Committed to giving originators, servicers, and all lending professionals access to smarter perspectives, MReport believes it's time to think differently about the mortgage industry. Because the American Dream is evolving . . . are you? Subscribe to MReport and MReport Digital now! Call 800.856.8060 or connect with us online at to take advantage of our special introductory offer! standards. Once an appraisal order is made, the lender absolutely must be kept informed of the process from beginning to end through strict communication protocols that are built into each step. For example, immediately after submitting an order, the listing agent on the subject property should be contacted to schedule the inspection in addition to the home's occupant, if necessary. Every order should also include a review of the purchase contract to ensure it is complete and for the appraiser to verify the property data from public resources. The appointment itself should be scheduled within two business days—and if it's not, a system needs to be in place to learn the reason why and to com - municate this to the lender. Someone needs to ensure the property is vacant for the appraisal and that the lockbox information gets to the appraiser. Finally, every appraisal should un - dergo an accelerated quality control review. A purchase appraisal process that relies on strong communication, and establishes rules about what needs to happen and when, can help ensure lenders that they are getting a high quality valuation delivered to them as expediently as possible. How Can We Ensure Quality? From a regulatory perspective, the mort- gage industry is in very interesting times. We have more rules and requirements than ever before, and no one is quite sure what recent changes in Washington will bring. For now, at least, it's business as usual— which means lenders must do what they can to ensure a compliant valuation process. It bears repeating that the CFPB has increased its attention on third-party valuation provid - ers, even though appraisals are the lender's ultimate responsibility. Despite greater atten- tion from regulators—in addition to the obvi- ous risks—we continue to hear of reports being submitted from appraisers with no E&O insurance as well as reports in which the appraiser had no prior experience in the particular market where a subject property was located. Here again, standards are a useful tool. It's a no-brainer that, for every appraisal, the appraiser's qualifications must be checked to ensure he or she is not only properly licensed, certified and insured, but that the appraiser knows the local market. For every appraisal, lenders also deserve to know whether the decision of value was made without bias or any influence from an out - side party. Every report should come with some type of certification that the report and the data within it have not been misrepre- sented, and that the appraiser's requirements were verified at the beginning of the order and then again just prior to report delivery. Compliance and quality must go further than this, however. Over the past two years, the industry been adjusting to new collateral review tools introduced by Fannie Mae and the Federal Housing Administration. For the most part, the anxiety lenders have about these added processes has quelled somewhat. Yet when an appraisal scores high for risk on Fannie Mae's Collateral Underwriter or on the FHA's AUD, most lenders don't know what to do, and most appraisal management companies and appraisers do not have the resources to get to the bottom of the matter. A high score generally means there is some unexplained issue with the appraiser's determination of value. Often these questions can be explained or corrected by an expert appraiser—unless an easy answer isn't avail - able, in which case delays can happen. Who Do I Trust? When lenders are ultimately responsible for the actions of third parties, deciding who those third parties are is obviously critical. Once again, what are your standards for an appraisal partner? Common sense dictates that a valuations company should be able to tell you whether the assigned appraiser knows the local market before the appraiser visits the property. The company should leverage technology to validate the assigned appraiser's licensing status and market knowledge. It should provide resources for understanding and addressing high collateral review scores. Every single report should be reviewed by a licensed appraiser. And the company should proactively communicate with lenders so that lenders can properly set the borrower's expectations—and if there's a problem with an appraisal, the lender knows immediately. It's impossible to understate the impor - tance of making these decisions correctly. As the housing floodgates begin to open up, every lender under the sun will be hitting the gas pedal hard—if they haven't already. Yet how far they get will depend largely on the decisions they make. In short, Thomas Edison may have needed to make 1,000 mis - takes before he succeeded, but that doesn't mean you have to. WILLIAM FALL, MAI, SRA, ASA is founder and CEO of William Fall Group and its AMC subsidiary, Valuation Partners. A General Certified Appraiser credentialed in five states, Fall has taught real estate valuation courses at the university level and has served as a supervisory appraiser for numerous apprentice/trainees.

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