Again and again collateral risk industry concerns deriving from differences between appraisals and broker price opinions, and related fraud, are being solved by hybrid valuation options that some say are making more headway in the market.
"Our industry is in desperate need of reliable and economical ways to address the pervasive issue of mortgage fraud," says Mark Linne, executive vice president of AppraisalWorld, San Jose, Calif., so the emergence of alternative valuation products "will redefine our industry by enhancing transparency and credibility for our lenders and service clients."
That philosophy appears to prevail among other providers.
National collateral valuation provider Equi-Trax Asset Solutions LP of Santa Barbara, Calif., offers the option to hedge accuracy concerns by adopting a line of hybrid valuation products that include ValuePlus Enhanced BPO. It aims to bridge the gap between BPOs and full appraisals, the company said, by focusing on a meticulous quality control process designed to qualify as an enhanced BPO in compliance with Fannie Mae requirements. (Fannie has already agreed to accept BPOs as an indication of collateral value under certain circumstances relating to its Home Affordable Foreclosure Alternatives program.)
Guy Taylor, CEO of Equi-Trax, argues that the GSEs recognized that demand for hybrid BPO collateral valuation products continued to increase among lenders over the past several months. In addition, Fannie Mae recognized that BPOs offer good value and they provide a cost-effective method for obtaining an estimate of a property's value, he said. "To be sure, when the work is reconciled by a licensed, certified appraiser the product can be very accurate. In addition, with default servicing active and origination volumes down, more servicers have ordered valuation products, and they often rely on BPOs during the default process."
The demand, however, was there prior to the downturn, which is why Equi-Trax began to develop ValuePlus and other hybrid valuation products combining the best elements of BPOs, AVMs and desktop appraisals. ValuePlus features property photos of the side yard, back yard, back of house, all rooms and any damage, as well as an area map, MLS photos and data from three comparable sales and three listing comps, CMA and a reconciliation by a certified appraiser with additional data points.
Included in the valuation package is information about valuation techniques used and other data including a final value reconciliation.
Besides accuracy, valuation fraud is anther industry concern. AppraisalWorld has taken valuation reporting one step further by focusing on combating mortgage fraud "by educating lenders and servicers on the precarious nature of various valuation methods." Its Collateral Valuation Report, serves as an alternative to BPOs and AVMs, which are increasingly under scrutiny for their inability to properly value properties in times of crisis. The firm partnered with Forsythe Appraisals LLC, an independent provider of residential real estate appraisals, and Valocity LLC, a management company with over 4,000 appraisers.
"Lenders and servicers need an alternative to the often haphazard and dubious valuation methods like BPOs and AVMs," says AppraisalWorld CEO Jeff Bradford, and the CVR is USPAP-compliant and fully transparent.
"Fraud continues to plague the collateral valuation function, and the fact that more than 12 million unregulated BPOs were produced in 2009, and are increasingly used by lenders and servicers simply due to a lack of effective appraisal solutions," says Linné.
Mark Chapin, chief valuation officer at Interthinx, Agoura Hills, Calif., also anticipates more lender demand for appraisal solutions. "Doing business the same old way simply won't work anymore. That's why we've begun to apply our proficiency in fraud analytics to modify the way appraisals are analyzed, by providing additional data sources and better tools for examining property valuations." Interthinx combined its experienced appraisal team with the technical prowess of the Appraisal.com platform developed by ACI of Palm Coast, Fla., to offer lenders a way to mitigate the risk of investor buybacks due to collateral valuation issues. It uses licensed appraisers whose opinions are supported by data from public and Interthinx sources.
