Month: July 2022

Mortgage Investors and Asset Managers Should Do Some Valuations Themselves

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Todd Rasmussen is President and Chief Operating Officer with Equity Valuation Partners, a provider of home value services, valuation tools and property value data for the real estate industry. He has been a residential appraiser since 1990 and started in the appraisal management company space in 2009.

This article was originally published in MBA NewsLink

MBA NEWSLINK: What is a solution for the time and expense for recurring valuations used by bank and credit unions on their loan assets?

TODD RASMUSSEN:  Especially for low-risk, recurring valuations, the optimum solution is for banks and credit unions to do valuations in-house. However, any company that does its own valuations needs a system or a platform that standardizes the process and makes it consistent, and most financial institutions don’t have the technology or resources already on hand. The way you do that is by leveraging technology that automatically draws data from the same sources and produces the same reports every time, regardless of who is performing the valuation.

Compared to having to learn a new format with each report, having standardized reports makes it easier for underwriters and other staff members to review them.

NEWSLINK: Who stands to benefit most by adopting a do-it-yourself appraisal platform?

RASMUSSEN: There are two types of organizations that benefit most from DIY appraisal platforms. The first type are home lenders that are already doing appraisals themselves. The problem for many of these lenders is that the Individuals who are creating the reports aren’t using a consistent process and are gathering data of all different types and from different sources. As a result, they produce reports that vary widely from each other. Having a DIY platform that standardizes every report makes everything so much faster and efficient.

The second type are financial institutions that are currently using outside valuation services but are having trouble getting reports completed because the high demand for appraisers is creating longer turnaround times. It’s not uncommon for these institutions to wait weeks for a single report. With a DIY valuation platform, they can save quite a bit of time and money. 

NEWSLINK: What type of transactions are best for DIY appraisals?

RASMUSSEN: DIY valuations are ideal for banks with existing loans that are coming up for renewal. They’re also a great option for home equity products such as home equity lines of credit, which can be completed using public records and other data without the need to order a traditional full appraisal.

NEWSLINK: Why should lenders consider completing an appraisal themselves?

RASMUSSEN: There are two major reasons. The first is that turnaround times for appraisals soared during the pandemic, when everyone was trying to refinance their loans. Being able to utilize a DIY valuation strategy eliminates these long waits. 

The second and most obvious reason, however, is money. The common delays associated with getting an appraisal ultimately cut into a loan holder’s profit. It’s much less expensive to perform a self-valuation than to pay an appraiser and wait days or weeks to get a report. It’s even more cost-effective than using an automated valuation model.

NEWSLINK: Do you think do-it-yourself valuations will just become second nature in the future?

RASMUSSEN: I do. In fact, by granting appraisal waivers and allowing appraisal alternatives for certain types of loans, Fannie Mae and Freddie Mac have already had started down this path and accelerated this trend as a result of the pandemic and their political strategy. That being said, most lenders that are doing their own valuations are using an ad hoc process that’s not controlled. They also aren’t using good data and don’t have the resources to invest in their own valuation technology like many larger entities do. What they need is a one-stop platform that provides all the data points required to perform low-risk valuations in-house while creating a consistent, compliant process, as well as the option to get a professional appraiser’s assistance when they need it.

NEWSLINK: Are there any other benefits to using a DIY valuation platform?

RASMUSSEN: Yes. By having their staff perform valuations, they can still charge the same fees for a valuation and increase their income or pass the savings onto the consumer. Also, by bringing valuations in-house, they may not need to layoff as many people, which many lenders are doing now that refinance volumes have dried up. They can simply transition their staff to valuations. It’s a win-win.

(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at msorohan@mba.org or Michael Tucker, editorial manager, at mtucker@mba.org.)

The Value Of Appraisal Modernization

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By KIMBERLEY HAAS for The Mortgage Note

As 94% of surveyed lenders agree that appraisal modernization efforts are valuable, two leaders who have witnessed the industry changing say new technology is making things possible that could have only been imagined in the past.

Dean Kelker, Senior Vice President and Chief Risk Officer at SingleSource Property Solutions, and Todd Rasmussen, President of Equity Valuation Partners, recently sat down for interviews with The Mortgage Note, and this is what they had to say.

“The lending process itself has changed quite a bit. It is certainly much faster than it was years ago largely because of the technology that’s been driving it,” Kelker said. “Most recently, largely due to the low interest rates, we have had a large volume of refinance activity in the industry the last few years. The appraisal process has changed, as well as many of the other elements of the lending process.”

Kelker cited digital imaging and electronic reports as helping to move the process along faster for homebuyers. Still, with home prices soaring in some parts of the country, it’s a hard job to be an appraiser, especially in certain places such as the Northeast and Southeast.

“Oftentimes, the price increases begin to happen before the data really catches up,” Kelker said. “In some of the hottest markets, a lot of the contracts basically say the buyer is going to be responsible for any shortage that appears on the appraisal.”

Rasmussen said desktop appraisals are widely accepted because during the height of the COVID-19 pandemic they provided an opportunity to limit face-to-face contact during the home appraisal process.

According to Rocketmortgage.com, a desktop appraisal is a property valuation that is completed at the appraiser’s desk, using tax records and information listed on the multiple listing service, or MLS. The appraisers never go to the property.

“To be called desktop, they can’t go to the property,” Rasmussen said.

Rasmussen said no matter how the appraisal is done, people sometimes feel as the person conducting the work is cold and quiet. There is a reason for that, he explained.

“An appraiser’s job is to figure out the value of the home,” Rasmussen said. “The appraiser is impartial. They are independent of the process.”

On June 20, it was announced that Equity Valuation Partners had launched Inhabet. It is a one-stop platform that empowers lenders to generate their own compliant estimate of value for residential and commercial real estate properties.

EVP Founder, CEO, and Principal Drew Watson said in a statement that with the unveiling of the Inhabet platform, they have made it possible for a lender’s trained staff to complete an estimate of value themselves.

“When appraisal management companies first emerged after the financial crisis, I saw an opportunity to transform appraisals for appraisers, banks, credit unions and portfolio lenders with a product that did not require an appraiser’s inspection,” Watson said.

To better understand lenders’ views on appraisal modernization, including benefits, implementation challenges, and possible applications, Fannie Mae’s Economic & Strategic Research Group surveyed senior mortgage executives in February 2022 using its quarterly Mortgage Lender Sentiment Survey.

Among others, the study revealed the following key findings:

  • 94% of the surveyed lenders agreed that appraisal modernization efforts are valuable to the industry.
  • Similarly, nearly all lenders agreed that current tools, such as Collateral Underwriter, are helpful in managing collateral risk (94%). They noted that the tools provide an extra layer of due diligence and boost lenders’ confidence in appraisals.
  • “Shortening loan origination cycle time” was overwhelmingly cited as the most important potential benefit of appraisal modernization, followed by “enhancing appraiser capacity” and “lowering consumer/borrower costs.” The benefits associated with appraisal quality and risk management were also considered important by many lenders, including enhancing data quality, increasing confidence, reducing errors, and lowering repurchase risk.
  • Lenders cited “the speed of industry-wide adoption” as the biggest implementation challenge, followed by “integration with loan origination systems” and “integration with GSE automated underwriting systems.” 
  • “Inspection-based appraisal waivers” and “nontraditional appraisals (e.g., desktop appraisals or hybrid appraisals)” were cited as the areas most likely to benefit from adoption. Additionally, one-third of lenders think it would be helpful to “incorporate tools such as image recognition or GIS (geographic information systems) into the scoring logic of underwriting or quality-control tools.”