TheMReport — News and strategies for the evolving mortgage marketplace.
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FEATURE SERVICING A s a confirmed "news junkie," I frequently fail to address the real issues in our industry. Barbara Corcoran, a real estate mogul and contributor on The Shark, provided a recent example of this type of frothy news coverage while speaking to ABC's Morning Watch regarding "low appraisals. encounter headlines and articles on appraisals and valuations, and most of them have one thing in common: They " spoken but insubstantial commen- tary on the importance of getting the right appraisal, it occurred to me that I have rarely—if ever—seen an actual valuation expert have the opportunity to present his or her perspective via a major media outlet. Appraisal problems run deep, Listening to Corcoran's well- and from my perspective, I believe that we won't see a full recovery for the U.S. housing market until we reengineer the industry's pro- cesses. Unless and until consumers and the marketplace have confi- dence in the underlying collateral valuation, borrowers won't buy homes, builders won't build, lend- ers won't lend, and the secondary market won't invest, without first trusting appraisers and the valua- tions they produce. The perfect storm is brewing valuation professionals represent the bank or lender, and so it is crucial that an appraiser is well prepared to engage the consumer, as they are rapidly becoming one of a very few human contacts encountered by the borrower during the loan process. I believe that statutes for appraisers' interactions with consumers should be spelled out explicitly in today's lending policies, thus directing the industry's focus toward invaluable, influential changes that ensure all borrowers have access to a quali- fied, ethical appraiser who treats them with professionalism. Additionally, it's critical that lend- consumption by consumers—origi- nators and appraisers are on course for a time-consuming set of issues. Most borrowers believe that in the valuation sector, and you've already seen real estate agents, loan officers, and others blaming "bad appraisals" for hindering hous- ing's progress. However, the most profound result of this type of environment remains to be seen, because borrowers caught in the industry's overcorrection are likely to feel nothing but confusion—or worse, wrath—when reviewing their latest appraisal report. The Dodd-Frank Act mandates ers enact policies to perform and manage proper due diligence for appraisers and third-party appraisal management companies (AMCs). Meanwhile, appraisers should be proactive in functioning as a key information portal for consumers, guiding them to the proper source for questions about their appraisal and answering questions regarding the online information that's now integral to the appraisal process. Appraisal Independence that consumers receive a copy of their appraisal three days prior to settlement, and though inject- ing greater transparency into the appraisal process is positive, the new documentation standards will create operational challenges for lenders. Through inundating borrowers with this information— much of which wasn't designed for lutely essential to generating quality appraisals! So what constitutes good communication between a bor- rower and valuation professional? My short list includes the exchange of details on the property's recent upgrades or renovations, as well as any transactions that may have occurred that would not appear in the Multiple Listing Service. Also, proactive lenders should maintain a hotline for appraisers to facilitate reports regarding improper attempts to influence their valuation. Challenges resulting from the In fact, communication is abso- D.I.Y. Interactive BUILDING AN AUTOMATED ONLINE STRATEGY ISN'T EASY, BUT A FEW SIMPLE HOW-TOS CAN HELP MORTGAGE INDUSTRY PROFESSIONALS GET STARTED. Requirements, which were codified with the July enactment of Dodd- Frank, mandate that the consumer, or any other stakeholder, forgo attempts to influence the valuation. However, having been miscon- strued by some professionals, the requirements have at times led appraisers to refuse communication with anyone associated with the property, establishing an incredibly counterproductive procedure. still loom in the real estate and mortgage industries, it's a con- clusive certainty that consumers will struggle in their attempts to make sense of appraisal reports. While broad initiatives like the government-sponsored enter- prises' Uniform Appraisal Dataset (UAD) are worthwhile projects for standardizing data and analyzing risk in the housing finance sector, even industry experts experienced a learning curve when adapting to UAD-formatted appraisal reports. The bottom line for lenders: Uniform Standards of Professional Appraisal Practice (USPAP) have further complicated matters in the industry, because the rule dictates that appraisers may not commu- nicate the results of their valuation with anyone other than their client. This puts the appraisal professional in an awkward spot, as borrowers will, of course, want to communi- cate with the author of the appraisal report upon receiving a copy. For lenders, this means the time to prepare is now, by establishing streamlined processes for effective communication with consumers regarding appraisal issues. And while they're at it, lenders should also implement an action plan for "Reconsideration of Value" that rightfully respects the engaged ap- praiser and his or her independence. Though many questions Turning the national spotlight on the appraisal process is, ultimately, a positive influence in the valuation and mortgage industries. But transparency is a concept that will require adaptation on the part of all property stakeholders, and it's likely that getting accustomed to new rules and regulations will take patience and persistence. Having an advanced, compliant appraisal strategy in place well before implementation deadlines arrive is crucial to moving beyond today and into the future of the industry. 1. Inform to Engage: Enhance your website, ensuring that it features thorough, consumer-friendly descriptions of the appraisal process. 2. Profile Pics: Establish productive communication with borrowers, helping them prepare for valuations by sending along a photo of the appraiser in advance of the appointment. 3. Poll the Audience: Want to know how your valuation professionals and AMCs are doing in the field? Send borrowers a brief survey about the appraiser's conduct during the inspection. 4. I'll Call You: As mandated by federal rules, lenders must email appraisals to the borrower three days prior to settlement; confirm your process for delivery and follow up now. Companies and professionals choos- ing to get ahead of these issues will emerge as victors. And lenders lack- ing efficient processes, strong com- munication platforms, and highly developed, consumer-facing online interfaces will surely suffer. 5. Consider the Source: Constructing an automated, online procedure for handling "Reconsideration of Value" claims is a critical, time-saving measure for all parties involved in the mortgage loan process. THE M REPORT | 53 ORIGINATION SERVICING ANALYTICS SECONDARY MARKET