The foreclosure crisis has enhanced the need for accurate asset valuations at the secondary market level and data transparency from loan origination to the servicing of securitized loans.
"The extent of today's mortgage crisis would not have been nearly as great if there were confidence in the underlying collateral of the mortgages held," says CEO and chief valuation strategist of Valligent, Jeremy McCarty. "At the end of the day, if a loan goes into foreclosure, you are left with the collateral. It is imperative the appraised value is thoroughly supported and accurate at the time of funding."
According to Coester Appraisal Group of Gaithersburg, Md., factors like a tenuous housing market, falling property values and heightened scrutiny of whole loan pools and portfolios have led to an increase in lenders' and servicers' use of alternative valuation methods, which save time and costs when a full appraisal is not yet necessary.
"Many lenders and servicers recognize desktop appraisals as a reliable, cost-effective alternative to a full traditional appraisal," says CEO Brian Coester. "The issue arises when a full appraisal is needed on that same subject property, after a desktop appraisal has been completed."
ValueSafe, a pricing program developed by the appraisal management company, allows residential mortgage lenders to "piggyback" a full appraisal onto a previously ordered desk appraisal, while all the original fees paid are credited toward the full appraisal price. Users have the option to access ValueSafe "in a cost-protected way" Coester said, since they can first inquire and determine whether a full appraisal is necessary on a given transaction.
Coester argues that most AMCs would charge the client for the full appraisal on top of fees they've already paid, "which seems like they're penalizing their customers for being diligent in their efforts to transact quality loans." And that is why Coester SAYS "quality should be supported, not undermined" by the pricing structure.
Similar to traditional full appraisals, desk appraisals are completed by a local licensed or certified appraiser and are based on the same logic as a traditional full appraisal, the company said, yet a traditional appraisal includes a full interior and exterior inspection of the property that is not part of a desk appraisal.
ValueSafe enables users to order a desktop appraisal report, then upgrade it into a full appraisal at no additional cost. Funds used are applied toward the full appraisal if much of the research is still current and appropriate. Valuations are on a network of 100,000 certified appraisers in 50 states.
Roseville, Calif.-based collateral valuation and risk management services provider, Valligent, is using the same efficiency based strategy to cater to secondary market needs.
Valligent created V-Cert to assist secondary market investors looking for reassurance that the collateral value of the loans they purchase is reviewed properly. It reduces the cost and time of loan pool purchases "by shifting the collateral due diligence to the prior-to-funding stage, eliminating the need for extensive back-end valuation investigations."
V-Cert enables investors to have licensed professionals evaluate each loan using stringent testing and reviews based on the latest market analytics before they reach a conclusion.
The Valligent V-Cert software certifies whether desk reviews are completed in accordance with secondary market investor and rating agency requirements and is offered as a specialty service at no additional cost to users of its mortgage quality control tool. Valligent combines into one product a USPAP-compliant desk review, fraud and foreclosure risk analysis, and asset valuation.
