Tom Hutchens, president of the Atlanta-based company, said it is the only tool that he is aware of that takes an underwriter’s viewpoint when looking at the data within an appraisal.
The formal name of the proprietary tool is Automated Appraisal Underwriting, and it allows users to identify problems and deficiencies in the processing of an appraisal on the front end at a time when they can be addressed and cleared promptly.
It does this by using algorithms, an automated rules-based engine and underwriting logic.
“An appraisal is a 30-page document and an underwriter’s job is to go through that entire document. There are lots of data elements and a human is a human. Missing something happens all the time, it happens every day.
“What the AAU does, it is an automated review of the report from an underwriting perspective,” Hutchens said. His examples included comps not meeting program guidelines.
It was approximately one year ago that his lender clients were stating that they all needed more underwriters because they were so backed up with business. It was taken some companies’ weeks to approve a file. Specifically regarding appraisals, the originators were commenting on how long it took an underwriter to go through the appraisal.
“Each underwriter has to spend 30 minutes to an hour on an appraisal. That is where the whole idea (for AAU) came from, because that is a lot of time,” Hutchens said. AAU reduces the review time down to just minutes.
And if one hurries through a document, there is opportunity to miss something. Human error, he reiterated, “is the biggest collateral risk that a lender has” in his opinion. They are relying on the underwriter dealing with a large document and the underwriter simply misses something. The underwriter did not make a bad decision, they simply missed something.
Novo is looking to help underwriters not miss anything. AAU does not make underwriting decisions; it is just a tool to show the underwriter what to look out for.
It gives underwriters and originators the confidence that they made a good, solid lending decision from the collateral standpoint.
Novo uses underwriting logic to see if those comps and other parts of the appraisal meet investor guidelines and puts out red flags to the underwriter if there are elements to be concerned about, he explained.
If certain word or words appear in the appraisal document, they might indicate conditions that could move the property outside of the loan program’s guidelines. However, if that word appears on page 14 of the document, it could easily be missed by the underwriter.
So an underwriter can look at the findings from AAU first and use it to go into the report and find those possible conditions which need to be addressed from the lender’s perspective.
The only thing in the report the tool does not analyze is the pictures accompanying the report, Hutchens said.
For those lenders which are clients of Novo, an AAU report is generated and presented to the originator, along with the appraisal report without having to do anything extra.
But the service is available for those who use another AMC or have their own panels in place. The completed report can be uploaded into Novo’s system, Hutchens said, and an AAU report will be generated for that appraisal. It can be uploaded to Novo’s portal and the report will be delivered in seconds.