*Giving It To You Straight*
**By Phil Huff**
***It’s hard to do something truly original. I’ve been in the industry for a total of 18 years, and I can’t tell you how many times I’ve heard from companies that are touting “groundbreaking” solutions, when they’re actually just offering different versions of the same old, same old. We hear certain superlatives—innovative, revolutionary, state-of-the-art—used over and over to the point that they become virtually meaningless. If you ask around, you’ll probably hear that it’s because no one wants to buy polished up versions of the original. We like brand new things. The marketing folks will probably say that you can’t simply tell the plain truth. You’ve got to make it sizzle.
****Our industry is a nuts-and-bolts practice. It’s supposed to be based on the plain truth. There isn’t inherently—and probably shouldn’t be—a lot of sizzle in our industry. Especially now. It’s not exactly a secret that for millions of Americans, it’s pretty darn tough to get a mortgage these days. The private mortgage securities market is on life support at best. Credit requirements feel like passing through the eye of a needle for a lot of good, hardworking Americans who just want to own a home. And as for lenders, you guys are faced with so many new regulations and guidelines that scrubbing a loan has turned into a near-religious process.
****I bring this up because a lot of folks have asked me: why, after a five-year hiatus from the mortgage technology field, have I decided to re-enter now? I’ll tell you why. In a nutshell, opportunity.
****The reason eLynx grew to be as successful as it did was because the industry presented an opportunity and we worked day and night to capitalize on it. The short story is that the industry needed a way to transmit documents and data quickly and securely, and we gave it to them. We weren’t the only provider in the industry to do this. We just did it better than the other folks. The mortgage business was different then. We were in one of the industry’s most powerful refi booms and guidelines were loose. Basically, it was the exact opposite of the industry we’re facing today. Except for one thing. Opportunity.
****When I first started speaking with the folks at Platinum Data, the bell that kept ringing in my ears was the call of opportunity. I couldn’t believe what started as a tiny little company 11 years ago in Orange County, California had created a technology that could accurately address the biggest unaddressed problem that’s been brewing under the industry’s surface since the crash of the market—and that the industry as a whole just hadn’t caught on to it.
****It doesn’t take a genius to figure out that our industry is in dire need of fixing a few problems. What I found curious was that the vast majority of the industry’s attention is being placed on borrowers. First we took a look at them. Then we took out our magnifying glasses. Then we put them under microscopes. I’m not knocking the process. Borrowers are a critical part of the mortgage package. It’s vitally important to make sure they are who they say they are and to verify that what they say is true. But borrowers are not the only part of a mortgage transaction. There’s also an equally important component: collateral. There’s just one issue. Relatively few are verifying the validity of property appraisals with the amount of rigor they’re verifying borrower information.
****Can you imagine an industry where a borrower can enter the words “excellent credit” on a loan application and just have the lender—and investor, for that matter—take it at face value? Can you imagine credit “review” technologies that simply scanned loans to make sure that the borrower filled in the blank fields on the application? Without oversimplifying things, that’s what a lot of folks are doing with appraisals. And while the GSEs have specific guidelines for verifying borrower income and credit, they aren’t requiring that same level of scrubbing for appraisals. Not yet, at least. And that’s where the opportunity part comes in.
****I believe this opportunity, at this time in the industry, eclipses any other. Right now, all eyes in the industry are on the valuation segment. When you take the crucial nature of housing values with regard to the overall health of the real estate market, and the risks that lenders and investors take on with a mortgage, and couple that with the capacity for today’s technologies to dig deep enough to provide an inarguable validation of the completeness and accuracy of every single aspect of an appraisal, I think we’re right around the corner from an industry-wide adoption of a far more intricate level of appraisal verifications.
****Sometimes the truth can hurt. But getting to the plain—and sometimes ugly—truth is the only way we’ll get this industry back on track. If I were an investor, I wouldn’t want to invest a couple hundred thousand dollars in a loan that’s collateralized by a property with a value that I’m just pretty darn sure is legitimate. I want to be absolutely, positively sure that when I’m investing in a securitized loan, that my security is what I think it is. If I find out down the road that I’ve been sold a loan with an inaccurate collateral assessment, guess what? I’m making you buy it back. And yes, it does happen. Faulty appraisals are a major cause for loan repurchases, which aren’t just painful for lenders. Think about the homebuyers and sellers who are forced to place their dreams on hold because someone failed to do the job correctly. The truth is no one in the mortgage process has the time or money to waste on a bad appraisal.
****If we look at the industry’s recent track record, we can see a pattern. An industry-wide problem arises, for example, the prevalence of fraudulent information about a borrower’s income. Investors start adopting solutions, like requiring proof of income or scaling back on loose guidelines. Then the government gets involved. Over and over, especially throughout the past few years, we’ve seen an increase in federal legislation and other mandates. In the appraisal industry, lenders already have to abide by new Interagency Guidelines, USPAP guidelines, FHA requirements and the GSEs’ rules for the Uniform Appraisal Dataset and Universal Collateral Data Portal. We’re even seeing new standards being set by the Consumer Financial Protection Bureau. In other words, as far as an industry-wide appraisal clampdown goes, it’s already happening.
****Now, I want to make it clear that I wouldn’t have returned to the industry to join a company that was out to rape and pillage during one of the industry’s weaker moments. Platinum Data didn’t jump into the market at the first sign of weakness. The company has been around for more than a decade. It was started by a very smart man named Rocky Donathan, with whom I have the fortune of working, side-by-side, every day. Rocky and his team have done an amazing job in the past few years with the company. Steadfast, staunch and strong, Rocky guided this company into triple digit growth for the past two years—and that’s without any marketing and advertising. He and I share a lot of the same values. We believe in providing the industry with the best solution on the market, and doing so at a fair price. As corny as it sounds, at the end of the day, we just want to help make things better—for lenders, investors, borrowers and the industry as a whole.
****It’s Rocky’s vast knowledge of the industry that infuses our technologies with the precise solutions our industry needs. Platinum’s RealView appraisal review platform is like an appraisal review software, not on steroids, but on nuclear fuel. While other systems review for blank fields and basic field validations, RealView looks at thousands of industry standard appraisal review guidelines, and covers 1,300 data points. It checks the status of the appraiser’s license. It reviews public records. It even incorporates MLS data. It provides quantitative and qualitative scoring. And there’s more. Without getting into too much tech talk, it also incorporates a business rules engine that allows custom rules to be implemented in literally hours, while other systems are still taking weeks or even months to roll out new versions of code. That means, for example, if a lender wants to be alerted on specifics, like any appraisal within a certain zip code where comparables fall outside of a certain radius, RealView can be customized to do that in a couple of hours. All told, no one even comes close to doing what RealView can do. I wouldn’t be here were the platform any less.
****It feels good to be back in the industry. In the few short months since I joined the company, I’ve gotten a warm welcome, a fast ramp up and an even faster education. I’m working alongside some of the brightest minds in the business and I’ve gotten to know a host of enthusiastic customers, companies that credit our technologies for their exponential growth, say we’re the only company that enables them to provide “underwriter-ready” appraisals, and even label our platform as “revolutionary.” For a returning veteran who’s used to being sold the sizzle, it’s nice to serve up the steak and have your customers put the sizzle on it for you. I feel great about being here at Platinum Data, a place where—without fluff, without frills, without sizzle—at the end of the day, we’re just people helping people.
****ABOUT THE AUTHOR: Phil Huff, former CEO and co-founder of eLynx, is the CEO of Platinum Data Solutions. Platinum Data provides technologies that help mortgage lenders, servicers, investors and appraisal management companies value collateral, and identify and manage collateral risk. Its online platform and analytical tools are being used by hundreds of companies to perform due diligence, prevent buybacks and protect billions of dollars in assets across the U.S. The company’s RealView system revolutionized the way the industry reviews appraisals, while its AVM offerings provide a truly unbiased perspective on collateral valuation. Platinum Data Solutions is based in Aliso Viejo, California and was founded in 2002.