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A new standard for appraisal review.

Appraisals historically have been one of the more opaque--and at times, contentious--aspects of home financing. Yet establishing collateral values is an essential part of lending. [paragraph] So it's a step forward when mortgage technology not only digitizes data-heavy appraisals, but also makes it easier for lenders to thoroughly underwrite the conclusions reached by appraisers.

"Nobody's taken this to the level we have," says Phil Huff, president and chief executive officer of Platinum Data Solutions, Aliso Viejo, California. "This is appraisal review and quality control on steroids."

Huff is referring to Platinum Data's RealView[R] QB system, which allows lenders to communicate and share information with appraisal management companies (AMCs) and individual appraisers in order to deal with valuation issues early in the loan process.

Lenders can assess appraisal quality by comparing new reports with property data available in public records, recent sales and Platinum's own appraisal database. Platinum Data reports that RealView was used to evaluate more than 1 million appraisals last year.

Platinum estimates that two-thirds of the nation's home appraisers use its technology. RealView is integrated with nine of the top-10 appraisal management software systems, Huff adds.

Lenders and appraisers can access RealView directly, through its online portal, or on existing appraisal platforms. Being available on different systems makes RealView easier to use.

Industry players complain that every specialized automation platform typically deploys its own online portal. Needing to log on to a number of portals just to view or update application information then becomes unwieldy.

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Collaboration between all parties in the mortgage process will improve as data becomes more freely accessible. However, security concerns make that a challenging goal.

Custom tweaks

Lenders can define how appraisals are checked for quality control in RealView QB. Customizing appraisal review rules helps assure mortgage companies that their loans will hold up under investor and regulatory scrutiny.

After an appraisal is evaluated, a lender can electronically request clarification or additional information from the appraiser or AMC. Each step is archived on the system to establish an audit trail.

RealView QB can be configured to underwrite appraisals differently according to loan type or location, notes Huff. Or an AMC may adjust the software to adapt to the preferences of different mortgage lenders.

Although the system can be tweaked with a few mouse clicks, Huff adds that lenders receive a lot of functionality without using that option. RealView QB automatically reviews appraisals against more than 2,500 business rules as well as professional appraisal standards.

Appraisals also are evaluated in terms of how local market prices are moving, and fraud checks are in place. A rigorous analysis accomplishes more than a "check-box" approach to appraisal quality, says Huff.

Performing this work on each appraisal early in the mortgage process is more beneficial than making post-funding reviews. Lenders then can get in touch with appraisers for reasons ranging from a missing data field to a question about how comparable properties were selected.

Maintaining effective oversight on vendors is essential in today's marketplace. All financial regulators are holding lenders accountable for compliant behavior from their business partners.

Pick a number

One result of the industry's development of digitized appraisal databases is that it's easy to compare valuations given on the same home over time. Platinum Data reported last October that almost two out of five appraisals submitted in the third quarter of 2015 "contained property quality or condition ratings that conflicted with previous ratings on the same property."

More than 300,000 new appraisals were evaluated by RealView over that period. Appraisal discrepancies cause delays, because each one must be individually resolved to ensure an accurate valuation.

Enabling lenders to identify appraisal discrepancies long before a mortgage is scheduled to close is a primary function of RealView QB. Fannie Mae's Collateral Underwriter[TM] (CU) also points out inconsistencies with appraisal information contained in the government-sponsored enterprise's (GSE's) database.

"Lenders and AMCs--not to mention appraisers--have felt at CU's mercy and have been practically begging for a way to identify these issues before submitting their loans," Huff explained in a press release.

"There's always going to be discrepancies" between appraisals, he says. "Effective communication upstream and downstream can help lenders, AMCs and appraisers to correct any issues before a loan is submitted to the secondary market."

Fixing errors early can reduce the work that would be required later on, Huff adds. He notes that Platinum's technology is more comprehensive than CU, which vets appraisals just against Fannie Mae's underwriting standards.

Monthly reports to clients summarize the discrepancies found by RealView and how they were handled.

Platinum's technology is employed by the nation's top-10 lenders, the company says. That's a strong validation of a firm that was founded in 2002 and has fewer than two dozen employees.

Mortgage automation can assist lenders of all sizes, asserts Huff. "Technology's a great equalizer," he notes.

Another positive trend that Huff sees helping the industry is the development of technology tools by private companies and associations. Not that long ago, technology standards for the industry typically were established by secondary market giants Fannie Mae and Freddie Mac. But Huff cites work performed by the Mortgage Industry Standards Maintenance Organization (MISMO[R]) over the last 15 years as "really beginning to pay off."

MISMO has developed data-sharing protocols that work across industry functions. Borrower information entered into loan origination software no longer must be rekeyed by a mortgage purchaser or servicer.

Simpler information transfer improves collaboration. Industry players then can work as more of a team.

Today, thick loan files aren't simply being translated into digital images as the industry ramps up electronic loan processing. Instead, mortgage technologists are turning documents into searchable data. Underwriters, compliance officers and investors all are finding ways to pull out the information they need.

Huff observes the mortgage business has coped with lots of regulatory changes recently. But he believes the expansion of mortgage technology is producing "an inflection point" that will offer lenders "the opportunity for significant growth over the next three years."

Howard Schneider is a freelance writer based in Ojai, California. He can be reached at mtgnews1@outlook.com.
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Title Annotation:DEPARTMENTS: TECH TALK
Comment:A new standard for appraisal review.(DEPARTMENTS: TECH TALK)
Author:Schneider, Howard
Publication:Mortgage Banking
Geographic Code:1U9CA
Date:Jun 1, 2016
Words:1018
Previous Article:Toward a 'new normal'.
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