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.
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.
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.
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.