January 2017 - The World's Local Bank

TheMReport — News and strategies for the evolving mortgage marketplace.

Issue link:

Contents of this Issue


Page 35 of 67

34 | TH E M R EP O RT FEATURE * * * The Effect of Hybrid Technology By Jeff Jonas T he aging (and shrinking) appraiser population is a well-known challenge facing today's valuation industry. What's stopping new appraisal talent from entering the profession? Is it the median salary, the pressure to perform, or is it an unintended consequence of Dodd-Frank, which has created disincentives for existing appraisers to take on appraisal trainees? Whatever the reason, this paucity of available appraisers has put the valuation industry in a position of having to tolerate higher fees for field appraisals while encountering impractical turn-times. Appraisers have made monu - mental strides in creating alterna- tive or hybrid appraisal products. These products compensate for the lack of field appraisers by con- verting a percentage of appraisals that would typically be handled through drive-by appraisal or field review to products that can be generated with commensurate valuation results and confidence at a higher volume. This causes turnaround times to be drasti - cally reduced and fees will be maintained at a moderate level. It is imperative that innovation in the appraisal space continues so professionals can satisfy the ever-increasing demand for quality valuation work. Introduction of Third Party Appraisal Products In lieu of a traditional field appraisal, for which field apprais- ers are requesting fees of $300 or more, an appraiser who is licensed or certified in the state where the asset under review is located can use proprietary tools to evaluate the quality and accuracy of third party tradi - tional appraisal products such as 1004s or 2055s. This review can be completed in days whereas a traditional field review may have a turn time of up to two weeks. Collaboration of Services There are also solutions that combine the services of a li- censed real estate agent or broker in the market where the asset is located with those of licensed or certified appraisers. The broker/ agent conducts an inspection of the property and provides that information to the appraiser who determines a value. These can be completed with a standard turn-time of three to five days. A comparable drive-by appraisal or 2055 in some markets is taking as long as three weeks. Use of ARBOs Using appraiser reconciled broker price opinions (ARBPOs), which combine full traditional broker price opinions (BPOs) completed by a broker with a reconciliation of the BPO value by appraisers licensed or certi - fied in the same state as the asset using proprietary technology, will increase turnaround times. Turn- times on ARBPOs are generally five-seven days in comparison to the aforementioned turn-times for 2055s of up to three weeks or 1004s, which can take even longer. Finding a Voice Even with the development of these new products, significant challenges still remain in the valuation industry. In November, the Financial Services Committee held a hearing regarding modern- izing appraisals, where repre- sentatives from the appraisal industry addressed the needs of their constituents. However, there is a growing need for an industry voice to advocate on behalf of the hybrid products that can be completed in higher volume with fewer appraisers. For instance, the $250,000 de minimis appraisal threshold, which exempts real estate loans made by federally insured financial institutions from statutory appraisal requirements, has been in place since 1994 and severely limits the volume of loan transactions that can use hybrid valuation products in their under - writing process. Increasing this outdated threshold to $400,000 or $500,000 would immediately create more demand for hybrid products and decrease the economic pressure on traditional field appraisals that has created issues with timeliness. JEFF JONAS is the Manager and Broker of Red Bell Real Estate (Red Bell). He has been a real estate developer and broker since 1981 and has been active in the management of REO properties for the last 20 years. * * * Welcoming the Next Generation By Mike Floyd A s the presence of industry professionals diminishes and the demand for appraisals grows, one of our greatest op - portunities lies in giving current trainees more independence and responsibility, while making the profession more accessible–and attractive–to new appraisers. After the Great Recession, the idea that trainee appraisers should not be permitted to complete the appraisal inspection process with - out the presence of a supervising appraiser spread throughout the industry. This perception led to many active appraisers making the decision to refrain from em - ploying trainees because it wasn't a smart business move. Why su- pervise a trainee when you could complete orders on your own for full profit in less time and avoid subsequently splitting the fee and taking on significant liability for the resulting report? However, recent discussion around trainee guidelines from a GSE and state licensing outlook shows that in most states, trainee appraisers can complete inspec - tions on their own once they've reached an appropriate level of competency. This makes the partnership much more beneficial for both the supervisor and the trainee, as they can simultane- ously complete assignments. Working Together, Saving Time In our heavily regulated industry, supervisory appraisers are more likely to allow a trainee to complete the physical inspec- tion of the subject property and comparable sales while the su- pervising appraiser compiles and analyzes market data and finalizes the value conclusions. It takes less time to train someone to measure and photograph a property while communicating with transaction borrowers and real estate agents than it is to train them to analyze comparable sales and marketing conditions. This approach can be beneficial for both parties, as the trainee still receives credit toward qualifica- tion hours, and the supervisor can increase capacity and volume lev- els while maintaining turn times and ensuring quality and compli- ance. This process also allows for a greater percentage of appraisal assignments to be completed by the most knowledgeable and conscientious appraisers because it reduces the amount of time that highly trained market analysts spend behind the wheel of a car or performing data entry. If this model is embraced by the lending community, it could reduce turn times and actu- ally improving quality in critical markets–all while helping young appraisers get the experience they need to meet certification requirements in a more palatable timeframe. Educating Future Recruits Another factor that could help increase the ranks of future ap- praisers is including education

Articles in this issue

Archives of this issue

view archives of TheMReport - January 2017 - The World's Local Bank