Is your time valuable? Is it worth saving?
“If your time to you
– Bob Dylan, “The Times They Are a-Changin'”
Is worth savin’
Then you better start swimmin’
Or you’ll sink like a stone”
Bob Dylan wrote those words in 1964, and the point he was making was certainly more existential than the need for lenders to focus on operating at their highest and best use. That said, it doesn’t prevent us from using it as a poetic jumping-off point for what is happening in the world of residential lending.
For 25 years, the de minimis loan amount over which banks are required to order a residential appraisal has been frozen at $250,000. Over that time, the average home price has more than doubled, rising from $156,100 in Q4 of 1994 to $377,000 as of Q1 2019. While long overdue, the de minimis amount is proposed to increase to $400,000. This will result in an estimated nearly 30% increase in mortgage originations that will be exempt from the appraisal requirement. Add HELOCs, second mortgages, and loan renewals, and the numbers are staggering.
On the mortgage company side of the equation, the GSEs have started talking openly about their long-running pilot program testing a bifurcated appraisal process. For those not familiar, this means one person will complete the property inspection and another, unrelated person will complete the property valuation. Furthermore, the GSE has the option of waiving the property valuation portion entirely and relying on the inspection report and their own internal valuation.
Without getting too deep in the weeds on these changes, the consequences for lenders (and appraisers, for that matter) of all types are monumental.
Banks and credit unions typically – and rightly – focus on their processes for appraisals more heavily than for their evaluations. These lenders are also much more likely to handle evaluations in-house rather than using an outside vendor to manage the process for them. How likely is it that these processes can withstand the added pressure applied by an almost 30% increase in demand? Even if they can, how much staff time will be devoted to this to the exclusion of generating new business and supporting more complex commercial loans?
For mortgage companies, the impact is in the form of having to now manage not one, but two processes and sets of vendors – one for residential inspections and one for residential valuations. Not only that, but it will be vital to be up and running quickly so as not to lose ground to competitors who are able to take advantage of the faster, less expensive process.
Whether you’re on the bank/credit union side or the mortgage company side, not only are Dylan’s questions about the value of your time worth considering, but so is his warning:
“…Then you better start swimmin’
Or you’ll sink like a stone”
The good news is you don’t have to swim alone. EVP has the solutions to get your time back so you can operate at your highest and best use, which is not managing evaluations or vetting new processes and inspectors.
For banks and credit unions, EVP-Eval is the industry’s first solution to utilize not only a homeowner-performed inspection (using our proprietary inspection app), but also to provide you with an appraiser-certified evaluation.
For mortgage companies (and all other lenders as well), EVP has been sourcing appraisals for clients under the bifurcated model for years. Now that the GSEs have caught up with us, it only makes sense for you to take advantage of our experience and get ahead of your competition.
We plan ahead so we can make our clients’ lives easier. Contact us today to see the future of property valuation.