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

Executive Spotlight: Vladimir Bien-Aime of Global DMS

Vladimir Bien-AimeToday, the Executive Spotlight illuminates the subject of valuations, and our expert on the subject is Vladimir Bien-Aime, president and CEO of Lansdale, Pa.-based Global DMS.

Q: Credit used to be the most important barometer by which underwriting used to assess risk. However, the focus on valuations is now considered as important, if not more. Why is this?

Vladimir Bien-Aime: Before the meltdown, lenders wanted to get deals done quickly and sold on the secondary market quickly. The three ‘Cs’ (credit, capacity and collateral) were all taken into account upon making the decision to lend a borrower money.

However, things like stated income were widely accepted and the submission of appraisals was not always verified for accuracy, and sometimes appraisers inflated home values. If the collateral valuation is inaccurate, then the deal could easily make absolutely no sense to do. In addition, if a there is an issue with the appraisal, then there could be investor buybacks.

But today, many things have been addressed that were previously broken in the collateral evaluation process. One of the first things done was to implement the Home Valuation Code of Conduct (HVCC) in 2009, which prohibited lenders and third parties from influencing appraisals. While HVCC is officially no longer in existence, portions of it still reside in the Dodd-Frank Act, which are working well.

Performing accurate appraisals is extremely important in the event a borrower is unable to meet the payment obligations of a loan. The underlying property serves as the collateral for the obligation and is a huge component of assuming risk. If a borrower has good credit but the collateral isn’t there to support the structure of the deal, then good credit is irrelevant.

Q: Appraisal and AVM technology have come a long way since the mortgage meltdown. What are some of the most significant advancements and where are some software providers falling short?

Vladimir Bien-Aime: Appraisal technology has advanced to effectively make use of comprehensive analytics, trending and other key factors that weren’t generally considered in the underwriting of loans. The confirmation and accuracy of property valuations can now utilize previously unused data elements that provide enhanced market intelligence. Some examples are making use of rich data sources such as multiple listing service (MLS), statistical analysis, neighborhood-level house price indexes (HPIs), inventory and sales trends metrics, and foreclosure data.

The data collected can then be translated into meaningful, actionable information that takes the accuracy and completeness of property valuations to the next level. Where some software vendors are coming up short is not taking a best-of-breed approach to produce a deeper solution that meets the needs of their lenders. These partnerships produce a holistic solution that drives efficiencies, promotes compliance and saves money.

Q: The mortgage industry now operates in a business environment that demands loans be handled with extreme precision and in 100% compliance – on so many different levels. What are lenders and investors biggest concerns with appraisals in today’s market?

Vladimir Bien-Aime: There are so many constantly changing rules and regulations lenders must keep up with that it’s become a daunting undertaking that is seemingly infinite. Lenders want to be in full compliance to avoid fines and ensure they deliver appraisals of high quality to investors without any missing information so as to prevent loan buy backs or appraisal kick backs.

Whether you’re a lender using an AMC or have an in-house appraisal panel model, you don’t want to miss a beat with compliance, having any UCDP hard stops, flagged appraisers, or fraudulent information could be disastrous. Investors and the GSEs simply want quality appraisals done in full compliance with industry guidelines that are verified and documented throughout the process. The right technology handles the heavy lifting and does the thinking for all parties involved.

Q: Global DMS automates the valuation management process. What are some of the things you are currently doing with your technology that is making a difference, and what is on the horizon?

Vladimir Bien-Aime: Our Enterprise eTrac platform automates the entire valuation management process from start to finish. This includes ordering, assigning, tracking, reviewing and delivering appraisals in full compliance to the GSE’s UCDP. Lenders and AMCs have come to rely on our technology to help them compliantly and cost effectively assess and process all of their appraisals.

We’re currently integrating with select best-of-breed vendors that add more value to our solution. Our customers are already benefiting from this. We are also expanding our mobile device offering and have plans to enhance our existing platform with advanced user definable workflow capabilities.

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