Partnership Furthers A More Digital Process

FirstClose, a provider of technology solutions for mortgage lenders nationwide, announced that its reporting suite is now available through Ellie Mae’s Encompass digital mortgage solution. The seamless integration allows lenders to order FirstClose’s solutions directly through Encompass to drive quality and efficiency in the loan origination process.

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Services can be ordered directly from Encompass at the touch of a button, eliminating duplicate key strokes when placing orders. When orders are returned, data points are sent back to Encompass, which automatically populates critical fields such as the full legal description and vesting information from the title work, the appraised value from the valuation product selected, and more. Copies of the completed reports are automatically imaged into Encompass. The integration reduces human error, as well as costs and closing times.

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Ellie Mae is a provider of innovative on-demand software solutions and services for the residential mortgage industry. Ellie Mae’s Encompass digital mortgage solution provides one system of record that enables banks, credit unions and mortgage lenders to originate and fund mortgages and improve compliance, loan quality and efficiency.

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“Seamless integration between the LOS and valuation and settlement services helps lenders close loans more quickly and efficiently,” said FirstClose CEO Tedd Smith. “Our secure integration with Encompass enables our clients to simplify the process of ordering our solutions, so they can more easily process mortgage loans and grow their business. We look forward to a long, successful relationship with Ellie Mae.” 

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FirstClose is a provider of best-in-class property & borrower data intelligence and settlement services nationwide. The company specializes in delivering a powerful web app and LOS plugin that is a home equity and refi tool that offers everything from application to servicing (credit score, valuation, title, tax, flood, closing and recording) on one easy-to-navigate platform.

In addition, the company delivers simplified vendor management by consolidating vendors and products on one platform.   FirstClose makes it easy to identify and repair the gaps where lender profits can be maximized.

Class Valuation Acquires Reverse Mortgage Specialist

Class Valuation, a nationwide provider of real estate asset valuation and appraisal management solutions to the residential mortgage industry,  has acquired Van Nuys, California-based Landmark Network, a leader in real estate valuation with a specialization in the reverse mortgage lending industry.

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“As we continue to execute our innovation strategy, we will take great interest in those firms that excel in service and reputation in markets we believe in,” said Class Valuation’s CEO, Michael Detwiler. “With an impressive list of clients, including a meaningful percentage of the industry’s top reverse mortgage lenders, Landmark has done a fantastic job delivering quality, service, and reverse valuation products backed by innovative technology. That’s the kind of specialization and expertise we’re seeking as we continue to expand our footprint.”

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Landmark Network launched with the vision of providing financial services companies with a superior solution for their appraisal management and technology needs. Since inception, they have worked to ensure their clients have an unmatched customer service experience. This vision fits in-line with Class Valuation’s commitment to service and technology that is shaping the future of the valuation space, so more borrowers can realize their American dream. 

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“We were very impressed with the strategic plan that Class Valuation presented and look forward to growing together – both organically and through acquisition,” Erik Richard, former CEO of Landmark – now COO of Class Valuation’s Western Region – said. “I’m pleased that the team at Class understands the intrinsic value of customer relationships and service as well as the reverse mortgage market and values we bring to the company. There is no doubt that this market will continue to grow and that lenders will require our services.”

Class Valuation was assisted by Berkery Noyes in the successful completion of this transaction. No sale price was disclosed.

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Increasing Efficiencies In The Valuation Process

We all know that lenders have different ways of managing their businesses and, of course, different technologies to support their models. The method in which lenders process their appraisals is one area of the business that can also be handled using quite a few different types of technology, with some being more sophisticated and complete than others.

Touching on some of the appraisal-oriented technologies that are commercially available, you have appraisal ordering systems, analytics and scoring software, forms software, accounting software, QC software, vendor management applications, UCDP and EAD delivery technology, AVM ordering, BPO ordering, valuation management platforms and other third party applications. Now, some lenders use multiple vendors to automate the process while others use a comprehensive valuation management platform from a single vendor.

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In this article, I’ll be discussing the benefits of using a single-source vendor to automate the valuation process from start to finish in order to maximize efficiencies. I am a proponent of using fewer venders rather than more in order to centralize and optimize the entire process, allowing organizations to realize the greatest number of efficiencies. This is because involving too many vendors can create gaps in the workflow, cause communication issues, heighten compliance risks, inhibit transparency, force manual intervention, and more perils. Bottom line: too many vendors results in inefficiencies.

The overall valuation process has so many moving parts and details to stay on top of that it can be a daunting undertaking for lenders to effectively and efficiently manage. And all of these complex and intricate tasks require significant time and resources to handle. On top of that, lenders have to adhere to changing rules and regulations.

While utilization of a valuation management platform is the best method to automate the process, not all of these platforms are of the same level. There is key, must-have functionality that is needed to fully automate the process from soup-to-nuts, which many lack.

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One of the most important aspects of a valuation management platform is that it be completely workflow-driven. Most of them do not have a 100% workflow-driven architecture, so you’ll still have lots of areas that require manual intervention from your employees. In order to be completely workflow-driven, the platform must accompany a “workflow engine.” The engine applies customizable business rules which essentially plays the role of conductor, orchestrating and using auto-triggers and routing functionality to manage time sensitive events and actions at the appropriate time and stage within the process. The engine is at the core of automating the workflow, removing manual touch points, eliminating data errors, reducing costs and managing compliance. Not all valuation management platforms have a workflow engine. Without the engine, complete automation cannot be achieved.

A workflow-driven platform is also key to ensuring that appraisals are of high quality. The ability to custom-configure business rules allows you to set triggers to automatically review appraisals and analyze them in real-time throughout different stages of your workflow for completeness, accuracy, data integrity, consistency and compliance.

Effectively managing your vendors is another important aspect of a workflow-driven valuation management platform. The communication of assignments, reminders, setting tasks and providing real-time status can all be automated. Setting up reminders throughout the workflow is extremely helpful and confirms that appraisers are notified in a timely fashion as to what to do and when. This saves lots of time and ensures that nothing is missed.

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Another important part of managing vendors (whether individual appraisers or AMCs) is scoring. Things like appraiser licensing, appraisal quality, turn times, communication levels, and much more can all be automatically analyzed and scored using a valuation management platform that includes vendor management tools. Without the right technology, however, this can be time consuming, laborious and costly to do.

And then there is the accounting aspect. You should be able to automatically process credit cards and other forms of payment. Tracking AMCs appraiser payments and allowing for automatic export into the lending accounting system is paramount. Also, loan officers and borrowers should be to self-service while interfacing at the point-of-sale with the ability pay for appraisals, which is also critical to establishing an efficient process from the very start of the mortgage transaction. Lenders work with multiple appraisal vendors and getting them paid on time is important to maintaining good relationships.

Compliance is yet another area lenders need to be ultra-concerned about. There will always be changing rules and regulations that you must stay on top of or run the risk of fines and even the potential for buy-backs. A valuation management platform automates compliance so you don’t have to worry about keeping up with existing and new rules. It takes risk out of the equation, reduces instances of fraud and lowers operating costs associated with the appraisal process. The Equal Credit Opportunity Act (ECOA) Valuations Rule is but one example of a regulation that can be adhered to via automation. Per the rule, the borrower must be notified that they have the right to the appraisal report within three days of loan application, and then delivering it to them within three days of closing.

Reporting is another huge area to establish much needed transparency, vendor oversight and to understand where there are efficiencies and where there is room for improvement. Customizable reports that business people can easily create and run in real-time. This enables you to manage the specifics of your unique process in the now, not just evaluate the past. I cannot stress enough how important it is that reporting transpires in real-time. Being able to report in real-time gives you up-to-the-minute information that empowers you with insight to make the best decisions for your specific way of doing business. If reporting is light and isn’t in real-time, you cannot make adjustments as needed and on-the-fly. Lastly, in-depth reporting can demonstrate compliance in the event of an audit.

When it comes to integrations, a valuation management platform needs the ability to seamlessly integrate with the UCDP, EAD, CU, data analytics solutions, collateral review systems, LOSs and other relevant third party applications. Lenders shouldn’t have to leave their core system of record — the LOS. From within their LOS, users should be able to easily order and manage appraisals, check order status in real-time and receive the completed appraisal file back into the LOS. What’s more, the platform should have the ability to integrate with different AMC technology platforms, effectively allowing lenders that use multiples AMCs to easily distribute orders among them. Having direct access to multiple AMCs via one platform simplifies business continuity, controls costs, reduces turn times, and promotes compliance. The ability to do “champion/challenger” competition to improve turn-times based on any geographical area is essential.

There are many different choices lenders have to manage their valuation process. I recommend not relying on and cobbling together a multitude of different technology vendors that handle bits and pieces of the overall process. Instead, implement an enterprise-level valuation management platform that centralizes and automates the entire process. But make sure the system is a truly configurable, workflow-driven enterprise-level system. It’s crucial. Before selecting a vendor, evaluate the merits of everything covered in this article and you’ll be automated, efficient and more profitable.

About The Author

Commercial Evaluations Could Be The Answer

The appraisal industry is rapidly changing, and these changes usher in challenges as well as solutions. A declining appraiser pool can sometimes lead to appraisal delays and contribute to industry frustration. A more lengthy appraisal process can also create a disconnect between the borrower and the lender. This concern is significant in the commercial lending space as well as the residential.

To counter this dynamic, viable substitutes to traditional appraisals continue to emerge within the marketplace for qualifying situations. These substitutes are most often referred to as Evaluations. Evaluations are typically administered by real estate brokers and agents and follow practices set forth by the FDIC’s Interagency Guideline (IAG). They are most suitable for small loan balances as well as due diligence, portfolio monitoring, loan modifications, default services and extensions of credit. Lenders may also use evaluations for origination purposes when valuing a commercial property under a $250,000 loan threshold.

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So, what are the key differences?

The evaluation process is governed by the Interagency Guidelines and offers an abbreviated set of standards to accommodate qualifying transactions, while the traditional appraisal process is governed by USPAP which outlines a comprehensive set of standards by which to operate. Prices for evaluations are often less than the price of appraisals. Commercial evaluations generally cost under $1,000, while commercial appraisals can cost anywhere from $2,000 to $4,000 for similar properties. The time required to complete an evaluation is also reduced. Evaluations are generally completed in ten business days or less, while commercial appraisals generally require three to four weeks.

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The commercial evaluation form contains several approaches to value which includes land values, a comparable analysis (three comparable listings; three comparable rentals; three comparable sales); line item adjustments; local market trends, including vacancy rates and the subject’s neighborhood; income approach; subject property transaction history; capitalization rate; operating expenses; current subject photos; and commentary. Field agents perform interior site inspections as requested. The reports address current zoning, site utility, construction quality, assessment information and highest and best use.

Because the standards are not as extensive for evaluations, it is critical for lenders to understand the processes their vendors use including the use of technology, data resources and manual review.

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Lenders that understand the differences in the products offered by the market and the appropriate application of each can, in many cases, lower costs and expedite the production of credible values.

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New Valuation Acquisition

Require Holdings, LLC, has completed its acquisition of Service 1st Valuation and Settlement Services, Inc.

Service 1st is a leading provider of valuation risk management services, including: desk reviews, valuation risk analysis, field reviews and market data.

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The Company will be a wholly-owned subsidiary of Require Holdings, joining their portfolio of companies, which include: reQuire Real Estate Solutions, Covius Technology Solutions and Covius Real Estate Services.

Service1st will remain under the leadership of current President and CEO, Mark Oliver, who will report to Require Holdings CEO, Al Will.

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“I am absolutely thrilled about this deal,” Oliver said.

He added, “It is very rare that one company in our space can be acquired by another, where all of our services are complementary, and few redundancies. This is definitely a case where the sum of the whole is far greater than the sum of the parts.”

The Require Holdings CEO echoed Oliver’s excitement.

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“Service 1st has proven itself to be a leader in objective valuation risk management solutions, and also an invaluable resource to clients by providing extraordinary service in a complex regulatory environment,” Will said.

“Their commitment to customer satisfaction isn’t just a part of their name, but it is reflected in all that they do. We share their commitment and are pleased to have found a like-minded partner to further our growth in technology enabled real estate transaction services,” he continued.

The acquisition comes a year after Require Holdings’ acquisition of Covius.

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Trade Group Picks Valuation Partner

Summit Valuations, LLC, a full service valuation company, announced today the firm is now a member of the American Association of Private Lenders, an organization that serves real estate investors with online education, networking, industry information and inspiration. Members of the American Association of Private Lenders are the new trend-setters in the private lending industry. Through the organization, they gain access to a network of skilled professionals, allowing them to not only put together more deals, but better deals. In addition to private lenders, AAPL members also include brokers, attorneys, accountants, mortgage fund managers, loan servicers, debt buyers, and consultants.

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“Private lenders of all sizes know that real estate can be a lucrative investment, but these lenders need a source of good industry information to guide their efforts,” said Summit Valuations President Ron Ahlensdorf, Jr. “This organization is dedicated to providing support to entrepreneurs who see the potential in the real estate market and desire to provide liquidity. Since we provide professional real estate valuation services to originators, loan servicers and investors throughout the market, this is a good fit for us.”

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“We are always seeking out industry experts who can shed light on the events impacting the real estate market for the benefit of our members,” said Chrissey Breault, Director of Marketing & Member Services for the American Association of Private Lenders. “Ron, Mark and the rest of the team at Summit Valuations certainly qualify and I’m sure they will provide a wealth of information to benefit our organization and its members.”
Summit takes quality seriously and provides the story behind each property’s value. The company’s approach delivers a human touch by backing its people with systems, not the other way around. By instituting a human touch, Summit ensures all reports are reviewed by a human – avoiding limitations inherent in system-driven reviews. Banks, credit unions, mortgage servicers and investors trust Summit to provide top-quality valuations so they can take an analytical approach to decision-making.

Lending Valuation Firm Launches New Website

LRES, a national provider of residential and commercial valuations and asset management for the mortgage, banking, credit union and real estate industries, announced the launch of its new website, which acts as a source of valuable industry information and provides greater detail of the company’s products and services in an easy-to-navigate format.

LRES designed the website to not only provide easier access to its services and product offerings in a more functional and visually appealing format, but to offer valuable information to clients and vendor partners on best practices and practical solutions impacting the valuation and asset management market.

Highlights of the new website include more downloadable how-to information, tips on timely industry challenges, resources to easily showcase the company’s service offerings and a fresh design that adapts to a broad range of devices.

“The new website better reflects our company brand and serves as a resource for visitors looking for practical solutions for their valuation and asset management needs,” said Roger Beane, LRES founder and CEO. “As LRES continues to expand its corporate footprint, we needed to update the website to adequately represent the professionalism and culture of our firm.”

Partnership Provides Deeper Valuations

Global DMS, a provider of Web-based compliant valuation management software, and Collateral Analytics, a provider of real estate analytics and valuation products, have formed a strategic alliance that integrated various components of their software valuation solutions. From within Global DMS’ single-source eTrac Enterprise platform, which compliantly handles the entire appraisal management process, users can now access Collateral Analytics’ products and services that include its automated valuation model (AVM) services, data analytics products and risk management solutions.

“There are many factors that must be taken into account in order to determine accurate property valuations and reporting in today’s market,” states Vladimir Bien-Aime, president and CEO of Global DMS.  “This new partnership extends to our customer base Collateral Analytics’ sophisticated data analysis capabilities that produces precise reports on valuations, market analytics and risk scores.”

Collateral Analytics’ AVM service provides highly accurate property value estimates with supporting data for forecasting and decisioning; its data analytics products also report on historical and current home price trends as well as forecast future trends and market condition.  In addition, the company’s risk assessment tool, CA Risk Profiler, determines the probability of valuation risk for BPOs and appraisals based on the use of numerous data points.

“Global DMS has done a tremendous job in building a platform to bring automation and compliance to the entire valuation management process for organizations operating in the appraisal business,” said Michael Sklarz, president and CEO, Collateral Analytics.   “Our solutions complement one another well and make for a robust offering that can be seamlessly accessed by Global DMS customers. We are very pleased to have established such a strong partnership with Global DMS.”

Global DMS’ eTrac Enterprise platform empowers organizations to order, assign, track, review and deliver completed appraisals in full compliance to the Uniform Collateral Data Portal (UCDP) for sale to investors and GSEs.  Both Global DMS and Collateral Analytics’ solutions can apply customizable business rules for clients to manage their specific internal processes and procedures.

The combined solutions significantly reduce costs, drive appraisal review efficiency gains, and deliver greater accuracy, reliability and time savings.

AVM Secrets And Lies

You can Download this article as a PDF HERE

TME-PHuffThough many people don’t realize it, billions of automated valuation models (AVMs) are used each year to value properties. In fact, AVMs are the most frequently used tool for valuing residential properties. In comparison, roughly 2.5 million traditional appraisals are completed each year. Yet despite their popularity, AVMs still get a bum rap in some quarters. It’s an undeserved reputation, in my opinion. And I’ll tell you why.

Platinum Data is the largest independent reseller of AVMs in the industry. To give you an idea just how substantial the volume of AVMs is industry-wide, consider that one of our vendors reports volume of over one billion AVMs each month. That’s over 12 billion AVMs each year for that vendor alone.  Add that to all of the AVMs from other vendors and you’ll see: this is probably the largest, least talked-about market in the industry.

Just who is using AVMs? I estimate that at the very least, hundreds of millions of the billions of AVMs run each year are performed on behalf of lenders and servicers. The remaining are used by other financial service providers, such as auto lenders and other creditors. In the mortgage industry, AVMs are used to estimate the value of a residential property for everything from home equity lending to pre-qualifications for first trust deeds; from appraisal due diligence to valuing servicing portfolios.

The truth is, AVMs are used so frequently because they work. They’re good at what they do, which is to provide a reasonable estimation of a property’s value, quickly and at a very low price. Yet despite the fact that AVMs are used millions of times every business day, very few in the mortgage industry are discussing them. They’re often treated like the industry’s dirty little secret. But why?

For one thing, there are a number of misconceptions about AVMs. A lot of conclusions about AVMs were drawn at a time when they were being misused as replacements for appraisals in securing a first trust deed. Information on AVMs was presented out of context by organizations that incorrectly believed AVMs might threaten their business. This in turn perpetuated some myths about AVMs. I’m not interested in pointing the finger or figuring out why certain organizations wanted to undermine AVMs. My objective is to shed light on the most relied-upon product in its category, and to uncover how AVMs are being used–or in some cases, misused–so we as an industry can improve, continue recovering, and originate and service healthy loans.

Re-Evaluating AVMs

It’s time to re-evaluate the industry’s position on AVMs. If we don’t acknowledge AVMs as a critical and often-used component of certain mortgage processes and transactions, we are missing an opportunity to optimize them. The more we know about AVMs, the more we can bring them into the conversation, learn about them, improve them and leverage them to further the industry—not to mention improve our bottom lines.

At a time of shrinking volumes and constricting margins, it’s high time for us to separate AVM fact from fiction. Here, I’ll evaluate the five most prevalent AVM myths and get to the truth of the matter.

Myth #1: AVMs Are Unreliable

Several experts, including renowned valuation expert Bill King, Platinum’s senior vice president of valuation solutions, have estimated that AVMs as a whole are likely to have a standard error of about eight percent. That means an AVM will return a value that is within 16 percent of the actual value of a given property, 95 percent of the time. Before we jump to a conclusion on whether or not we can deem eight percent reliable or unreliable, let’s put that percentage into proper perspective. Studies have found traditional appraisals can have a standard error of roughly 13 percent, which means appraisals, on average, are within 26 percent of the actual value of the property, 95 percent of the time. Again, this isn’t to point fingers at one form of valuation or to judge one product as superior over another. Appraisals are considered to be the gold standard in the industry. It’s simply to put that eight percent in context. There are other factors to consider. Let’s take a closer look at how standard error is determined.

A standard error rating is an average. Each AVM and each appraiser will achieve a better rating, like two to three percent, on certain properties, and a worse rating, like 15 to 18 percent (or higher), on others. That’s because each AVM performs better within certain geographies and on certain properties. There’s no such thing as a one-size-fits-all AVM, just as there is no such thing as a one-size-fits-all appraiser. AVMs have a two to three percent sweet spot, just as appraisers do. Regulations mandate that we utilize appraisers with geographic competency. We’re required to use the most suitable appraiser for the property. The question is: why aren’t we required to use the most suitable AVM for a given property, as well?

Myth #2: AVMs Shouldn’t Be Used Because They Cannot Inspect a Property

An AVM cannot conduct a physical inspection of a property. Most in the industry understand this limitation, and regulators have taken it into account when developing AVM usage guidelines. But this doesn’t necessarily mean that the mortgage industry shouldn’t use AVMs. It simply means that AVMs shouldn’t be used exclusively to evaluate collateral in transactions such as first trust deed mortgages, but instead for servicing portfolios, home equity lending, appraisal underwriting and quality control, and prequalifying first trust deeds. It’s a matter of common sense. You’ll want an inspection on higher risk transactions. The risk associated with a brand new, high loan-to-value first trust deed is greater than the risk, for example, on one of 10,000 loans in a servicing portfolio of first mortgages, particularly when those mortgages are secured by collateral that was recently valued with a traditional appraisal.

An AVM’s inability to inspect a property doesn’t impair its ability to perform any of its core functions within the mortgage sector. We simply need to remember where it makes good sense to use an AVM and where it doesn’t.

Myth #3: AVMs Don’t Do a Good Job of Taking Neighborhoods into Account

A lot of people have criticized AVMs, saying they can’t fully characterize, differentiate and account for neighborhoods. While this may have been true in the past, times have changed. The AVM of today isn’t exactly your father’s AVM.

AVM technology has progressed quite a bit since the days when AVMs were severely misused in our industry, when they were used to value collateral for first trust deeds with loan-to-value ratios that exceeded 100 percent. Thanks to the work of the industry’s top minds in valuation analytics, AVM providers are now able to construct more and more meaningful geographical boundaries within their databases. In fact, they’re actually starting to come out with neighborhood-specific and community-specific models. They’re not simply drawing boundaries as a circle or a box. They’re establishing what are called “neighborhood polygons,” which essentially means they’re able to create neighborhoods that have jagged lines and specific boundaries.

While an AVM isn’t a person who’s lived in a neighborhood for the past two decades, it is a technology that can be programmed to learn rules and execute those rules flawlessly, 100 percent of the time. And that technology is improving every day.

Myth #4: AVMs Rely on County Data, and County Data Isn’t Reliable

AVMs do rely on county data. However, in aggregate, county data is generally reliable. A lot of folks who say that county data is unreliable argue for the use of Multiple Listing Service (MLS) data. My issue with using MLS data is that listing agents are working for their clients, not for lenders. That’s not to say that Realtors are dishonest, by any stretch. Realtors are qualified professionals who play an essential role in the housing industry, as well as in the American economy. While Realtors as a whole have zero interest or intention of deceiving lenders, their interests are focused on keeping their clients satisfied. That sometimes means listing homes for as high a marketable price as possible, not necessarily at a price that reflects the true market value of the property.

If Realtors made a habit of marketing properties using the bare bones, hand-to-heart truth, they’d probably be doing their clients an injustice. While they may not hide the ugly truth, they probably aren’t baiting the hook with it, in the same way that Coca-Cola’s ad agency won’t recommend an ad campaign that leads with the number of calories or lack of nutritional content in a can of Coke. It’s going to put Coke’s best foot forward, just as a Realtor will do with the client’s property. You’ll find out about the 140 calories soon enough. The ad agency wants you to know how Coke tastes or how it will make you feel, before you start visualizing those extra pounds. It’s not dishonest. It’s just common sense marketing, and that goes the same for marketing homes.

While there’s no such thing as 100 percent reliable data from the county recorder or any other source, I certainly don’t believe that marketing copy provides a more accurate or complete depiction than historical record. The fact is, county data is pretty darn reliable, and getting more so every year.

Myth #5: AVMs Rely on Outdated Comps

Over the years, I’ve heard it argued that AVMs aren’t credible because they use outdated comparables. It’s an old argument, and one without much merit.

Of course it’s possible that AVMs may sometimes need to rely on dated comps, but then again, so do appraisers. If an AVM doesn’t have access to current comps, neither will any other form of property valuation, and that includes a full appraisal by an appraiser. Everyone is fishing from the same pool. In any given neighborhood at any given time, comps may be abundant and current, or sparse and dated. Just like most appraisers, quality AVMs will not choose outdated comps if relevant, current comps are available. The alternative is to use comparable sales that are outside of an acceptable area, which is, of course, the same challenge faced by appraisers.

It’s certainly not ideal to use dated comps. But in my opinion, it’s even less desirable to use comparable sales outside of the subject neighborhood. However, when these scenarios occur, they are industry-wide challenges that are not unique to AVMs.

AVMs are practical, useful tools when used in the correct situations

The bottom line is that when used correctly, AVMs are viable tools for providing a fast, accurate, and very economical estimation of collateral value. Given the fact that the mortgage industry is using hundreds of millions of AVMs each year, we need to come together and open the lines of communication. Lenders and servicers need to share information on how they are using AVMs. And technology experts need to move forward, innovate, and introduce new tools that will bring positive change into this segment. AVMs aren’t going anywhere. They will continue to impact the industry, whether we acknowledge them or not. If we want to control the impact AVMs have on our industry and on our individual bottom lines, we need to start by acknowledging their use, their prevalence and their role in our operations.

In next month’s installment, I’ll share the information I’ve gathered on how lenders and servicers are using AVMs in the current market, provide concrete specifics on how big an impact AVMs are having on the bottom lines of lenders and servicers, and list specific steps that lenders and servicers can take to save tens and hundreds of thousands of dollars—perhaps even millions of dollars—simply by choosing and using the right AVM for the scenario.

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It Doesn’t Have To Be Complicated!

The recent mortgage and housing crisis was in large measure a result of functional breakdowns of the two most important components of our housing finance system: qualification and valuation. For this reason, reforms have focused on these two components and have resulted in significant regulatory changes. Regulation of the appraisal process has been completely overhauled. Appraisal management software can be a major help or hindrance to lenders facing this new regulatory environment.

Among the key areas of focus within already enacted regulations, and within proposed changes still to be finalized, is creation of a comprehensive data record for each appraisal transaction. Every aspect of the transaction, from ordering, to appraiser selection, to appraisal performance, to communication among parties involved is subject to audit and review.

The question for each lender then becomes: Is your appraisal management process up to meeting the higher standards and providing protection from these new risks?

Software as a Service (SaaS) is a method of software distribution in which applications are hosted by a vendor or service provider and made available to customers over a private network or the Internet. Today many applications used by businesses and other organizations, except custom applications that provide unique competitive advantages, are being delivered as web-hosted services via a browser. Within the mortgage industry, SaaS is a very hot topic. SaaS has emerged as a replacement to older systems throughout the mortgage production-chain from Customer Relationship Management (CRM), to Loan Origination Systems (LOS), to appraisal management, to document preparation, to compliance and beyond. Why?

SaaS Advantage 1—Save Money and Shorten Implementation

SaaS applications are offered on a pay-as-you-go, subscription basis. This enables you to avoid the expenses associated with implementing traditional software. There is no need to buy hardware, software, facilities to house them, or to hire people to manage it all. Industry consultants estimate that the cost of implementing traditional enterprise software is four to five times the initial licensing cost.

Many implementation tasks associated with older systems are eliminated because the SaaS is already up and running at the vendor’s data center. This results in a shortened deployment time and a quicker achievement of positive ROI.

Key Takeaway: SaaS Appraisal management software provides cost savings and quicker productivity gains than the older systems or manual processes.

SaaS Advantage 2-Superior Data Management

The architecture of SaaS systems enables levels of customization, feature enhancement, patch deployment and external data interfacing that is vastly superior to older systems or locally installed software. Such capabilities greatly enhance the flexibility, and responsiveness of the system, while also offering superior data integrity, reporting abilities (providing operational visibility), record management and an overall risk reduction.

Key Takeaway: SaaS appraisal management software can easily be customized for a lender’s specific operational needs. Moreover, comprehensive reporting capabilities allow use of pre-set or completely custom designs in real-time without the need for re-programming, thereby dramatically improving responsiveness.

SaaS Advantage 3-Focus Technology Efforts on Competitive Advantages

The business processes within the mortgage industry must produce products that are largely identical to one another, regardless of which industry participants are involved. Consequently, it makes sense to utilize highly specialized, reliable and secure SaaS systems to ensure uniformity and compliance within origination (CRM, LOS, appraisal management, document preparation and compliance), closing, loan sales, securitization and servicing processes. Through the cost-effective use of SaaS software, a mortgage lender can reallocate from its technology budget to focus on those activities that provide unique competitive advantages.

Key Takeaway: SaaS appraisal management software can improve efficiency, effectiveness and compliance, while helping to return management attention to other activities that may yield better competitive advantage.

The adoption of SaaS appraisal management software is increasing at a rapid pace.  Lenders of all types are making the change to ensure that their appraisal processes are managed both to eliminate risk and to provide positive operational benefits. These benefits include cost savings, ease of implementation, productivity gains, appraisal operations visibility, customization and reduced oversight.

Is your appraisal management process up to the task?

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