MReport January 2018

TheMReport — News and strategies for the evolving mortgage marketplace.

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18 | TH E M R EP O RT FEATURE there is a shortage of area appraisers and/or delays and empower ap- praisers to operate and perform ap- praisals out of the geographic area in which they are licensed only for a specified time period. Changing the Appraiser Qualification Criteria: The Appraiser Qualifications Board (AQB) of The Appraisal Foundation has been evaluating making changes to the real property appraiser standards candidates must have to become a quali - fied appraiser. This includes The College Degree Requirement for Licensed Residential and Certified Residential, Practical Applications of Real Estate Appraisal, and Experience Requirements. Many believe that making adjustments to the qualification criteria will help new appraisers get caught up to speed quicker and be able to successfully enter the appraisal field, although this is still being assessed by the AQB and other industry voices. Technology Solutions T echnology is filling the gap and helping GSEs, lenders, and other vendors by providing appraisal solutions to make in- formed valuations. Some popular technology solutions include: GSE Valuation Technology Solutions F annie Mae and Freddie Mac have developed technology of- ferings that yield benefits relating to mitigating the need for a full appraisal in some circumstances: • Fannie Mae's Day 1 Certainty Program is an attractive option that safeguards lenders from potential buybacks or kickbacks if its Collateral Underwriter ® (CU™) system produces a score of 2.5 or lower, thus provid- ing freedom from reps and warrants. But moreover, no appraisal is needed for low loan to value ratios on certain loans. • Freddie Mac's Automated Collateral Evaluation (ACE) Program waives the need for an appraisal, depending on the results that ACE produces. The program is based on the use of big data and analytics for appraisal au- tomation. On September 1, 2017, the program was expanded to include purchase transac- tions for certain Loan Product Advisor ® mortgages. Proprietary Valuation Technology Solutions V endors offer a number of technology solutions to help with valuations. Based on need, some solutions work better than others and at different points in the valuation process. These solutions can be extremely helpful in avoiding a full appraisal, until such time that it is absolutely necessary. Technology can also help lenders with valuations in this new era of appraiser short - age. There are alternatives to full appraisals, but how do they work and how effective are they? Some technology solutions offered by vendors include: • Automated Valuation Models (AVMs) are leveraged by lend - ers as a tool to determine what a property "might" be worth for them to lend against the valua- tion. AVMs are increasingly being utilized to prequalify the bor- rower as a means to ascertain if the value of the home is reason- able before proceeding with the underwriting process and paying for an actual appraisal. This can dramatically reduce the number of manual reviews, resulting in huge time and cost savings. • Collateral Review Solutions are used by lenders to help arrive at the potential valuation risk of a Broker Price Opinion (BPO) or appraisal report. Using thou- sands of data points, they auto- matically analyze an appraisal in real-time for completeness, compliance, consistency with GSE guidelines, best practices, and more. • Desktop Appraisal Applications are a method of valuing a property with readily available informa- tion. The allure of desktop appraisals are reduced costs. A desktop appraisal does not consist of an actual physical inspection of the property but is done using publicly available information whereby the appraiser does not have to leave their desk, hence the use of the word "desktop." • BPO Ordering and Management uses a real estate agent to per- form a cursory drive-by opinion of properties to assist in deter- mining the potential price of a home. Frequently used in default servicing, the "process" by which a BPO is ordered and managed can be automated using technol- ogy. However, by no means can this replace an appraisal. Hybrid Home Valuations: An Evolving Industry Standard? H ybrid home valuations combine features to offer robust prod- ucts that do a solid job of appraising a property without incurring the cost of a complete appraisal. These alternative valuation products come in many different flavors, and one common type is an AVM coupled with an inspection. A hybrid approach enables technology providers to col - laborate with both lenders and AMCs to develop comprehensive web-based forms that are concise, digital, accessible, and auditable. These integrated forms can ef - ficiently merge data from multiple sources like MLS, AVM, and property condition inspector data, providing an easy auto form-fill system for reconciling and digital sign-off by the appraiser. These types of products can be typically completed in two to five days. Hybrid-based products will grow in popularity as they save time, have low risk and costs, and are very accurate when used in major metros with homogeneous housing profiles. All this goes back to the impor - tance of the collateral. As a lender, what deal am I getting into? What is this asset really valued at? How accurate is it? Given marketplace conditions and the shrinking pool of expe - rienced appraisers, will machine replace man? No. But the entire valuation ecosystem is changing, and lenders are continually in search of a remedy to keep costs low, maintain acceptable turn times, be compliant, and ensure the accuracy of appraisals. Now more than ever, the third of the three Cs is crucial to effectively manage. The overall appraisal field will certainly get more interest - ing over the next couple of years. For now, lenders should leverage the appraisal technology solutions that make the most sense for their business, always keeping compli - ance at the top of the list. VLADIMIR BIEN-AIME is President & CEO at Global DMS, a real estate valuation management solu - tions company that develops and delivers web-based valuation management software for the real estate industry. For more info visit "Based on need, some solutions work better than others and at different points in the valuation process. These solutions can be extremely helpful in avoiding a full appraisal, until such time that it is absolutely necessary."

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