The mortgage industry is packed with folks who were probably high school kids who didn’t start studying until the night before an exam. While it’s possible to get a decent grade with last minute preparation in high school, in the business world it’s also almost impossible to make sound financial decisions when a deadline is biting at your heels. Quality takes time. Smart business decisions can’t be made in a hurry.
If it’s been said once, it’s been said a hundred different ways: “Haste makes waste. Preparation is the key to success. He who hesitates is lost.” No matter how you slice it, great minds over the ages seem to agree on one thing. Waiting until the last minute is asking for trouble.
These days, the mortgage industry is being hit with a lot of new regulations. Most are accompanied by deadlines and penalties for noncompliance. One of the main issues causing concern among lenders is the Uniform Collateral Data Portal, which is basically a website that lenders will need to use to electronically submit appraisal reports to Fannie Mae and Freddie Mac.
Interestingly, I’ve heard that a significant percentage of lenders are either unaware or unprepared for the new UCDP changes. While there’s a lot of angst surrounding the UCDP initiative, few lenders are taking concrete steps to prepare for it. This is a big mistake. A big one. Waiting to the last minute to develop a UCDP program isn’t like waiting until the night before to study for a high school exam. Lenders can’t expect to pull an all-nighter and pass the test with flying colors. They can’t cram to create their new policies and procedures and then be rewarded with full compliance and a summer vacation of napping. There are a lot of moving pieces involved in setting your business up for UCDP delivery. It’s not a simple Point A to Point B move. There are inherent lag times and multiple stops involved. My advice is to get started. And that means now.
At United Fidelity Funding Corp. we started early. We had the time to learn the details of the regulations, evaluate our options and pick the solution that best fit our needs. We chose Global DMS’ Global Kinex and honestly, we’re glad we took the time to research all of our solutions because we feel it has saved us a bundle of money. We could easily be paying at least eight times more than what we’re paying with Global Kinex if we waited to the last minute.
If you haven’t yet started getting ready for UCDP, you should know that you must register with the GSEs in order to submit appraisal data to the UCDP. That means you will need an account with Fannie Mae, and another one with Freddie Mac. The process of getting set up in itself isn’t difficult—it just involves going online and filling out a few forms—but it does take time. I would allow a minimum of two weeks to get approved. If you wait until the night before, you’ll likely be at least two weeks past deadline.
Each of the government investors has its own guide to getting registered. You’ll need to designate an administrator within your company and you’ll also need to decide on the way that you’ll be delivering your appraisal data—whether you’ll be delivering it yourself, directly through the website, or if you’ll be using a vendor, such as an AMC or technology provider to do the delivery for you.
In order to make this decision, you should first take the time to know the facts about UCDP. This is one of those steps that lenders seem to want to glaze right over. I wouldn’t advise that. At the very least, get to know the basics. For example, lenders will be required to use the UCDP to submit appraisals to Fannie and Freddie as of March 19, 2012 for any loan that requires an appraisal and was originated on or after Dec. 1, 2011. Lenders can use the UCDP now—it has been available for use since June of this year.
If you start early enough, you can take the time to familiarize yourself with what the UCDP is—and what it isn’t. The UCDP is different from the UAD, or uniform appraisal dataset, which is a set of standardized data that appraisers use to fill out appraisal forms. Find out about the types of data formats that are compatible with the UCDP, like MISMO XML 2.6 GSE. Discover the specifics of the data submission itself, like the mandate that in addition to submitting the appraisal report data in the proper format, lenders will also need to include a PDF format of the appraisal embedded in the required format.
Enroll in some UCDP seminars and workshops. Watch webinars online and read the trades. There are an awful lot of details, and it’s unlikely that a lender could learn every single nuance. But there’s no excuse for not knowing the basics, deadlines and major pitfalls.
Make friends with your vendors, whether they are reputable appraisal process management or loan origination technology providers, or appraisal management companies. The good ones will have made it their business to know the ins and outs of appraisal-related regulations. Tap into their knowledge.
On that note, you’ll also want to take the time to get educated about your delivery options. Again, your research in this area can have a direct, immediate impact on your bottom line, so take your time. Haste can definitely make waste of your financial output.
Here are some basic facts, which surprisingly, a lot of lenders don’t know. You do not need a third party in order to compliantly deliver appraisal reports to the GSEs through the UCDP. The reason that lenders may opt to deliver to the UCDP through a third party vendor—which by definition charges for its services—is because delivering on your own means you’ll be forced to logon to the UCDP portal and manually upload primary appraisal reports, one at a time. This manually process can take several minutes per file. Multiply that by however many loan files you submit on any given day, and that can add up to hours.
There were 23 vendors, at last count, that have been approved by the GSEs to deliver appraisal data through the UCDP. These vendors will all be able to more efficiently deliver appraisal reports by incorporating the UCDP delivery into the lender typical workflow. Some vendors even provide an automated review to ensure that files will be approved prior to actual submission. You’ll be able to send files quickly—in one click, in our case with Global Kinex. We can even deliver the appraisal files automatically in a split second if we wanted to.
It’s important to remember that not all vendors are created alike. Some technology providers bundle their services. Some sell them a la carte. Some charge next to nothing, and some can get quite expensive.
Make sure to find the facts. There are a lot of misconceptions here. First, you are not obligated to use any one particular method or a specific vendor in order to be UCDP compliant. You can outsource your appraisal process to an AMC or you can handle it in house. If you opt for an in-house solution, you have several choices. You can deliver your appraisal data on your own, cost free, directly through the GSE website. You can use an appraisal process management or loan origination technology that allows faster, more efficient delivery. Or you can have an AMC—assuming it is approved to deliver appraisal data to the GSEs—deliver the appraisal data for you. Of course, if you opt for an AMC, make sure to ask how much they’re charging for UCDP delivery.
If you do opt to keep your appraisal process in house, make sure you understand what your vendors are offering. And make sure that those solutions work for you. Cost was a big factor for us. We don’t mind paying for quality, but we insist on getting our money’s worth. One of the reasons United Fidelity Funding has been so successful and profitable is because we really watch where we spend. We don’t believe in buying services that we don’t need, and we certainly don’t believe in charging our clients for them, either.
Our clients have come to rely on us to be fair and honest and to act in their best interest. We have earned that trust and we take it very seriously. That’s why we chose Global DMS, which allows us to only pay for the services we need. Because after all, why should we pay for an appraisal review or data extraction if it’s already been done?
Once you decide on your delivery method, you’ll be able to finish registration with Fannie and Freddie. At that point, you’re almost ready. It’s merely a matter of communication. If you’re using an AMC, make sure you understand the protocol for UCDP delivery. Find out when it will start sending you appraisal data in the required XML format.
Will they also provide you with a MISMO XML file, and will they extract the contained embedded first generation PDF appraisal report in the XML file? If so, will there be an added cost for this? Make sure that any AMC you’re working with is UCDP-ready for Dec. 1 and if you’re using an in-house solution, make a firm date for your go live date.
UCDP compliance is serious, detailed and honestly, a bit tedious.
Whether you decide to use a technology like Global Kinex, a loan origination technology, an appraisal management company, or simply the GSEs’ own portal, my best advice is to start preparing now.
As Benjamin Franklin once said, “You may delay but time will not.”
And neither, in this case, will lawmakers and regulators. the market place.
Kevin Marconi is the COO of United Fidelity Funding Corp.
