We know that compliance is front and center in today’s lending environment which is constantly changing compliance requirements. Whether it’s Dodd-Frank, the Consumer Financial Protection Bureau, the GSEs or other federal and state regulations, keeping up is no easy task to manage. When I look at what’s transpiring in the valuation compliance space as it relates to compliance, I observe many lenders and AMCs struggling to keep up with the volatility of complying with valuation regulations, which has become a big focal point of mortgage compliance. The fines are steep for being out of compliance, and the effort required to be in compliance has increased lenders’ costs thus pinching their profits and creating exposure for lenders.
In addition, lenders are faced with managing a very involved, complicated, extensive evaluation process where there are a number of different entities and tasks that must be executed flawlessly on in order to complete an appraisal from start to finish—compliantly. If you have errors there can be kick backs and you then have to spend the time to correct those errors. Time is money. And, if you’re found to be out of compliance at a later date, you could have a buy back on your hands. Even if you use an AMC, the buck stops with the lender and they’re on the hook for fines. It’s not uncommon for this to reach the tens of thousands of dollars per day. Not a pretty scene.
Valuation compliance has become a very important piece of the compliance landscape that has engulfed the mortgage industry post the meltdown with the eventual introduction of Dodd-Frank. Even though HVCC is “officially” gone, most of it is still in affect wrapped into Dodd-Frank’s massive 25,000-plus page act.
The bottom is that lenders need a bullet proof plan and tight processes to ensure they don’t get a kick back, buy back, or fine. What does that mean? Be in compliance with appraisals 100% of the time. Bring control and transparency to your process. Being a software firm that automates valuation compliance, among other functions, I’m of course impartial to utilizing technology to handle appraisals and streamline the entire workflow. Let the vendor be responsible for updating changes to rules and regulations and implementing new mandates. Don’t try to do it yourself.
I’m always amazed when I come across lenders that are attempting to handle everything that accompanies completing valuations manually with spreadsheets and Microsoft Outlook. It’s incredibly dangerous. Lenders can always use an AMC, but make sure it’s established, proven and of high quality. There are many fly-by-night shops that produce questionable results, don’t pay their vendor and sometimes dissolve. Weigh your options carefully. It’s simply too risky not to.
Vladimir Bien-Aime is president and CEO of Global DMS LLC.
