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   ARTICLE   |   From Scotsman Guide Residential Edition   |   November 2016

Get the Service You Deserve

Add timeliness, compliance and communication to the list of qualities you require from appraisal partners

Get the Service You Deserve

Loan originators are generally not valuation experts, although at times they must feel like they have to be. When an issue with an appraisal affects a loan or a closing date, it is typically the mortgage professional who is charged with communicating those issues to the borrower. Appraisal issues do happen all the time.

A late appraisal, for example, can trigger changes in fees and require new disclosures to be drafted and sent out. If the appraisal comes in lower than the sales price, the financing could be jeopardized unless the borrower comes up with the difference. If an appraisal is found to be noncompliant or if there is an issue with the licensing of the appraiser, who knows what could happen?

Typically, loan originators are not the ones creating problems with appraisals. Yet when they occur, the originator is frequently left holding the bag and struggling to explain what happened to the borrower’s appraisal — often without knowing the whole story.

It’s no secret that today’s valuation professional faces unique challenges and pressures, and that some of these issues are having an impact on the quality of appraisals. Yet loan originators still deserve a basic level of service and competency — and so does the person ultimately paying the bill for a property appraisal: the borrower. So what is fair to expect from your appraisal partners?

Commitment to timeliness

It may not be realistic in this day and age to expect an appraisal management company (AMC) or appraisal partner to deliver a completed report within three days, or even within a week. That doesn’t mean, however, that the appraiser shouldn’t do everything possible to deliver a well-supported opinion of value as quickly as possible.

Of course, appraisers are not entirely in control of how quickly an appraisal gets done. In some markets, the demand for available appraisers far outpaces the supply. Appraisals themselves are becoming more complex and time-consuming, thanks in part to increasingly strict interpretations of guidelines provided by secondary-market investors, as well as new rules from the Federal Housing Administration (FHA) that require appraisers to essentially become home inspectors.

At the same time, borrowers want to be assured that the appraisal will be completed within the time period established in the purchase contract, and speed is important to lenders and mortgage professionals as well. In today’s highly competitive marketplace, the ability to deliver a fast closing is a coveted differentiator for any lender. So if appraisals are taking longer, what does a commitment to timeliness really mean?

It means that your appraisal partner should have processes and controls in place that ensure every appraisal takes no longer than it absolutely has to. Appraisers do not have total control over when an appraisal report can be completed and delivered; however, the entire system through which appraisals are ordered and delivered should be engineered so that efficiency is built into every step.

When an appraisal order comes in, for example, the AMC should have someone contact the listing agent or owner to verify the location and access to the property. Protocols also should be put in place so that appraisers are automatically contacted after a certain amount of time to ensure there are no delays. With such a system in place, loan originators can at least speak to borrowers with confidence about the status of the appraisal.

Total compliance

Every day, we see increasing evidence that regulators, investors and agencies are sharpening their focus on appraisals. Quality continues to be a growing concern with the government-sponsored enterprises (GSEs) and the FHA. Fannie Mae even launched a collateral-review tool designed to ensure that appraisals are sound on properties destined to be sold to the GSE. In addition, the Consumer Financial Protection Bureau (CFPB) has increased its attention on third-party valuation providers, and yet it is the lender that is held responsible when an appraisal partner is out of compliance.

The bottom line is that loan originators cannot be left in the
dark, regardless of the difficulty of the issue facing the appraiser.

There is virtually no limit to the number of things that can go wrong with an appraisal. Sometimes problems are not caught until after the closing. Although many appraisal problems are attributable to incorrect data or a lack of information, there have been cases of appraisers submitting reports when they had no insurance, appraisers viewing properties when they had zero expertise in the particular market, and AMCs sending out appraisers who did not meet state licensing mandates.

Despite all of the dangers and the potential for buybacks, fines or worse for the affected loans, many appraisal companies and AMCs have failed to institute safeguards to prevent these problems from happening. Few bother to check with any regularity whether an appraiser’s licensing status is up to date or if an appraiser is even properly insured. Unfortunately, lenders are counting on these companies to keep them compliant. Many assume their partners have the proper checks in place when, in fact, many do not.

So how do you know if your appraisal partner will keep you safe? Ask questions. Find out if the appraiser knows the local market. In fact, ask if your appraisal partner automatically checks whether assigned appraisers have local market expertise every time they receive an appraisal order. This might sound like a difficult task, but it really isn’t, especially with the online tools available today.

A trustworthy appraisal partner also will have a system to review every appraisal for quality prior to delivery. This review must be supported by human expertise, because to maintain quality, every report should be reviewed by a second, experienced valuation professional.

A loan originator does not need to understand all of the intricacies behind creating compliant appraisals, but a competent appraisal partner should be able to explain the process to the mortgage professional, who in turn can educate the consumer. This type of relationship creates trust between the originator and the borrower. Then, even if there is an issue with the appraisal, the borrower will have confidence that their mortgage professional understands the problem, and that the issue will be handled in the proper manner.

Constant communication

The vast majority of problems in the mortgage process can be classified as communication issues, but the biggest problem is when there is no communication at all. In the appraisal industry, communication — or the lack of it — is a huge concern.

A reliable appraisal partner should have a clear process in place for delivering purchase appraisals that includes multiple levels of communication. Every appraisal order should be monitored from start to finish by someone other than the appraiser. If there are any delays or issues with the appraisal — and there are bound to be some from time to time — the lender needs to be told immediately.

Appraisal partners should actually take communication matters a step further. If the assigned appraiser does not respond within a certain length of time, or if too much time passes between updates, the AMC should proactively reach out to the appraiser to determine why communication has been interrupted and then communicate the reason as well as possible options to the lender.

The bottom line is that loan originators cannot be left in the dark, regardless of the difficulty of the issue facing the appraiser, because the originator is the borrower’s lifeline. Constant and diligent communication can help calm nerves and keep everyone focused on the end goal — a successful closing. 

•  •  •

There’s no hiding the fact that today’s appraisal process is more complex and challenging than ever. That does not mean that providing a quality finished product by the deadline should be the exception rather than the rule. Lenders and mortgage professionals deserve these three things from their appraisal partners: timeliness, compliance and communication. When you find an AMC that delivers all three, you’ll know it — and so will your customers.


 


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