Among the consequences of the mortgage bust is that any number of parties in the mortgage chain, including the secondary market and regulators, are scrutinizing the quality of appraisals tighter than ever.
Among the companies introducing products in the appraisal quality control area is Quality Mortgage Services, Brentwood, Tenn., which has come out with its Appraisal Defect Detection and Prevention solution.
“We know that many appraisal-related issues are not the result of increased valuation fraud, but rather defects in the appraisal report,” said Tommy A. Duncan, QMS president.
“We developed the ADDP technology and related methodology to empower our own loan auditors, but in today's environment, every underwriter should have access to this tool.”
Duncan added most underwriters are not trained to find every possible appraisal defect and that leaves lenders open to increased risk.
QMS is so strong in its belief regarding this product, it will provide free mortgage repurchase defense or mortgage put back rebuttals regarding loan collateral if an investor makes a repurchase request.
DataQuick, San Diego, has come out with AppraisalQ. This product looks at appraisals and broker price opinions, and evaluates and scores them based on six criteria: appropriateness of sales comps, sales comp adjustments, accuracy of property value, accuracy of assumed market conditions, administrative accuracy and potential fraud.
It provides a full audit trail for lenders to defend themselves against claims of under- or over-valuation.
Now, Lender Processing Services, Jacksonville, Fla., along with its affiliate RealEC, has Valuation Insight in pilot mode.
Andy Higgenbotham of LPS explained that the company is not doing appraisal evaluations. Rather it will be giving lenders a tool to help them do their own evaluations.
Bob Jennings, executive vice president of RealEC, said Valuation Insight is an appraisal quality scoring tool which will be available through the RealEC loan quality gateway.
It breaks down the appraisal into four categories, evaluating the data within those categories and providing “an easy-to-read report and score that alerts the lender to potential risks within the appraisal itself,” Jennings said.
Those categories include the subject property complexity, the appraiser's credentials, and the comp data and opinion of value. The last thing it looks at involves RealEC's SMART Rules, where it houses it own proprietary rules, any lender-configurable rules, USPAP standards and secondary market guidelines.
“It streamlines the appraisal review process. So instead of a lender having to review every single appraisal that comes across their desk, they are creating 'swim lanes' where the appraisal that are clean and good to go can keep on moving down the path,” Jennings said.
Appraisals that might have a couple of issues that might need further review are highlight in the report.
Finally there are the appraisals with major issues that need to be sent back to the appraiser or appraisal management company for further details and fixing before the process can continue.
The product came about because lenders are worried about the higher level of scrutiny placed on appraisals by the secondary market.
He said they need a tool to help them manage that scrutiny better and in a more automated fashion.
Typically, this kind of work is now done manually and there are a lot of different data sources that need to be accessed to get the information needed, Jennings said.
The aim is to “alert the lender this a cookie-cutter property that should be able to move through relatively quickly assuming all the rest of the data checks out. Or is this a very difficult property to appraise and should get a higher level of scrutiny regardless,” he said.
