Have smartphone, will travel. Countless new technologies are shaking up how we do things. Mobile apps are revolutionizing the ways we work and play—from organizing our days, communicating with others, managing money, planning travel and navigating unfamiliar territory. On the business front, mobile apps have implications for the way that professionals retrieve and analyze data remotely, and use third-party data to produce and share reports. It is getting easier and easier to access property information on a smartphone or tablet from any location and populate forms electronically in ways that were never possible before. The appraisal process, in particular, according to an industry insider, is ripe for a technological upgrade. And it makes perfect sense, considering that property valuation is rooted in data analysis and much of the work is conducted in the field.
In this Q&A, EDR Insight is fortunate to have the input of leading expert Elizabeth Green, a mortgage technology veteran in software product leadership for solutions in residential property valuation, loan origination, mortgage servicing and secondary marketing. Liz shared with EDR Insight her thoughts on how technology is creating much-needed efficiencies for appraisers and lenders, and is poised to reshape the appraisal process of the future.
Characterize the changes you have witnessed since the first appraisal form appeared back in 1972.
The most significant change is technology. Unfortunately, appraisal forms are an old-fashioned form of technology used to gather information in the responses to collateral policy questions that underwriters need to satisfy. This type of information gathering was required in the days before the Internet. Now, there are better ways to leverage information, but the forms have not changed accordingly.
Why haven’t the tools and reporting capabilities for residential appraisers changed over the past 30 years?
The primary reason is that an appraisal form is an expression of policy, and in regards to residential lending, the forms used are owned by Fannie Mae and Freddie Mac and represent part of the package outlined in the Seller/Servicer agreement applied to the loans sold to them. These forms have acted as the de facto standard since their inception.
What kinds of inefficiencies do you see with the current residential real estate appraisal reporting process?
The professional appraiser is still working with rudimentary tools to gather data and assemble answers in a “check the box” and “fill in the blank” standardized form presented in a desktop publishing environment. And, in general, the industry spends more time checking completed appraisal reports than preparing them.
What do you view as the primary advantages of harnessing technology to modernize appraisal reporting?
Primarily, the advantage lies in improving collateral due diligence and supporting better lending decisions.
Are there currently any industry efforts to modernize the appraisal process?
The first wave has been under the Federal Housing Finance Agency’s Uniform Mortgage Data Program (UMDP) that introduced a Uniform Appraisal Dataset based on the MISMO 2.6 data format for loans sold to Fannie Mae and Freddie Mac. The enterprises continue to consider future changes to their appraisal report requirements. The MBA’s Mortgage Industry Standards & Maintenance Organization (MISMO) has a Property & Valuation Services Workgroup that has been driving hundreds of new data definitions in the latest MISMO versions. And, the Collateral Risk Network (CRN)—a group of dedicated chief appraisers, collateral risk managers, regulators and valuation experts recently collaborated on a day long discussion to prepare a recommendation to modernize appraisal reporting.
In general, how do you think new technology has impacted lenders?
We can now do so much more with the assistance of technology—at a fraction of the cost and time. Today, we can weigh the impact of outsourcing beyond just the immediate impact on the transactional cost and measure the RFI in terms of relative long-term compliance and operational risk.
Technology provides the means to ensure that all transactions are consistently managed to credit policy requirements. And, automation can be leveraged to ensure that human resources are applied to the mission-critical tasks within the lending workflow.
What are some of the most important technologies or apps that you’ve seen come on the market to help appraisers?
Sketching tools, digital photography, GPS and regression analytics tools.
And specifically for environmental due diligence, what improvements has technology brought?
Usually, environmental considerations fall into the category of “property eligibility.” In actuality, they are sleeping risks in defaulted loans and REO. Borrowers fleeing environmental contamination are often hidden in typical defaulted mortgage behaviors & responses.
- Vapor Intrusion (updated by EPA 2013)
- Proliferation of Meth Labs and Grow Houses (estimated over 90K nationally)
- Increased linkage to environmental contamination and health risks
- Not just in mortgage origination, but a concern over the life of the loan
Proactive environmental due diligence is not only more easily attainable today thanks to technology and data, but should become a new standard in borrower benefit and collateral risk mitigation.
A shift away from “form-filling” and a leap forward with technology and an emphasis on analysis of bigger datasets using linear regression assisted by appraiser expertise in expert systems.
About Elizabeth Green
Elizabeth Green, Principal Consultant with rel-e-vant Solutions, is a strategist, solutions architect, speaker and valuation advocate. A recognized mortgage technology veteran in software product leadership for solutions in residential property valuation, loan origination, mortgage servicing and secondary marketing, Green is helping to foster a new level of understanding in property valuation and collateral risk assessment through the application of digital intelligence.
She is the third term chairperson of the MISMO Property and Valuation Services Workgroup, Chair of the MISMO Development Workgroup for Unique Property Identification and MISMO Governance Member. Additionally, she is a Collateral Risk Network member and a member of ECCMA. She holds an ISO 8000 Master Data Quality credential and studied as a residential appraiser.