Lender Processing Services is now marketing its hybrid valuation service to owners of distressed property portfolios as an alternative to traditional broker price opinions.
Hybrid valuation products combine an automated valuation model's value of a subject property with a human-reviewed component, generally an appraisal or BPO report, or an exterior property condition report performed by a licensed appraiser or real estate broker.
Jacksonville, Fla.-based LPS released its ValueSure Condition-Adjusted AVM in February, combining an AVM valuation with a broker's exterior condition report for a variety of uses. LPS's Applied Analytics division is marketing those reports as “Distressed Asset Reviews” for default servicers and distressed and real estate owned property owners.
As Mortgage Technology reported in a recent issue, in December 2010 the five federal banking regulatory agencies released updates to the 1994 Interagency Appraisal and Evaluation Guidelines that reaffirm requirements for appraiser independence, complete and accurate reporting of property and market conditions, and selection of competent individuals to perform valuation services. The update focused on AVMs and appraisal management companies, and outlines a standard of practice for proper documentation of a property's condition when an AVM is used to help derive value.
The problem with using AVMs is that the computer models used to derive values don't take the property's physical condition into account, while BPOs are often criticized for being too subjective in their estimates of value and often lead to servicers ordering multiple BPOs on one property.
The LPS hybrid product produces a single report combining the information from the AVM and the property condition report and is less expensive than a traditional BPO.
“This new product gives default servicers the best of both worlds – values that take into account property condition and an AVM that is not subject to the inconsistencies inherent in BPOs over the distressed property's lifecycle,” said Robert Walker, managing director of LPS Applied Analytics, in a press statement.
In addition to the subject property valuation, the Distressed Asset Review includes foreclosure and REO metrics on a ZIP code level for servicers and property owners to evaluate current conditions and future forecasts.
