Getting Better Before Getting Caught

In the world of appraisal operations, there’s a new compliance topic every lender and AMC is talking about now. Quality assurance has always been of critical interest, but since the OCC, CFPB, and Fannie Mae have recently issued bulletins regarding their requirements for appraisal quality assurance strategies, the topic has moved squarely into the realm of compliance and is getting more and more scrutiny.

Every institution has its own internal goals and processes for appraisal quality assurance, and we’ve been asked by many lenders and AMCs for industry best practice guidelines. Anyone can download our free white paper at www.MercuryVMP.com/QC to get valuable recommendations and lists of warning signs.

But even after reading the white paper and implementing new QC processes inside your organization, you’ll be left with a few critical questions, such as: How can you make sure your process really works? How can you verify that your process actually results in the level of appraisal quality the regulators and investors demand? How can you ensure you uncover your own vulnerabilities so you can correct them before they cost you?

We’ve helped many lenders and AMCs answer these questions and it’s a great idea to test your own processes to verify you’re getting the desired results. Unfortunately, we all know there can be a wide, wide margin between intention and reality so testing is absolutely critical.

When you have quality assurance processes in place, here are a few easy ways you can test your results.

First, Run pre-funding spot checks on randomly selected appraisals. Pass a sample population of your appraisals through an automated quality control diagnostic tool. You don’t have to do a time-consuming search for QC products or commit to use the tool on all appraisals if you don’t need to. Just choose a tool you can use on an as-needed basis, without contracts or required minimums, so you can spot check that your quality assurance strategy is producing the results you need for compliance.

Second, Run post-funding spot checks on appraisal quality. You can use the same tools mentioned above to check your older appraisals to verify your processes are working.

Spot-checking appraisals is incredibly valuable in determining the success of your quality control processes. Your findings will help you further tailor your pre-funding appraisal quality control measures, and help you uncover risks and vulnerabilities in your strategy before your shortcomings can have drastic consequences.

Any lender or AMC who has implemented a third party QC tool into their daily workflow will tell you it’s not always easy to identify the best option, or negotiate terms favorable to the institution so you’re not overpaying or being forced to use and pay for the tool on more reports than necessary. That being said, the key to success here is to find a QC tool that’s easy to access without contracts or minimums, so it’s available to use on a few appraisals, or just as needed.

Even if you already use third-party QC tools as a part of your internal quality control process, spot-checking your results by periodically testing against an additional QC check is prudent and will further minimize your risk.

About The Author

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Jennifer Miller
Jennifer Miller is president of Mercury Network, a web-based software platform used by more than 600 lenders and AMCs to manage compliant collateral valuation workflow. Jennifer can be reached at Jennifer@MercuryVMP.com.