Mark Walser of Incenter Appraisal Management on Maximizing the Integrity of Remote Appraisals
Mark Walser is President of Incenter Appraisal Management, a national firm providing professional appraisal services and the RemoteVal mobile appraisal inspection technology. More information is available at Incenteram.com or 866-222-6205. Walser can be contacted at email@example.com.
MBA NEWSLINK: Since the Federal Housing Finance Agency announced it would allow desktop appraisals in late 2021, the appraisal landscape has changed—with desktop and hybrid appraisals becoming much more common. What technologies are now in use? What should lenders know about them as they ready for the spring homebuying season?
MARK WALSER, INCENTER APPRAISAL MANAGEMENT: During a challenging time for the mortgage industry, lenders are showing increased interest in appraisal management companies and appraisers who are fluent in these solutions. As the spring homebuying season begins, they’re hoping that the technologies will give them a competitive advantage by responding to today’s expectations for faster close times.
However, it’s important that lenders understand the differences between desktop and hybrid appraisals. Solutions have emerged so fast that there is still a great deal of confusion about them—and these differences have implementation and risk implications.
NEWSLINK: Could you explain the differences?
WALSER: A true desktop appraisal (Form 1004 Desktop/70D) is managed by professional appraisers remotely and without a third-party inspector involved. But while appraisers don’t need to drive to a property, they must still verify the data they are using in their valuations and can do so by using remote virtual inspection technology where they can see the property, or verified third-party data sources. Most appraisers want to have their ‘eyes on the property’ so they know that the property condition and supporting data are accurate. The 1004 Desktop also requires an accurately measured, compliant floor plan with interior walls and GLA (gross living area) calculations.
New remote inspection technologies exist that allow appraisers to visually inspect properties and gather the data they need in real time through a property contact’s smartphone instead of having to visit the property or rely on third-party photos.
Appraisers guide the contact through the property – directing them on what to look at and where to point the phone’s camera. They can also use remote measuring tools using the phone camera to capture room-by-room dimensions that can be turned into compliant floor plans. Importantly, these newer technologies enable appraisers to affirm the accuracy of the data and information that underlies their reports, since they can see it themselves.
Desktop Appraisals are in permanent policy by the GSEs for Purchase loans, and also can be used for portfolio/HELOC lending scenarios, and private lending. The current environment is a great opportunity for lenders to leverage the Desktop Appraisal and develop competency with it. As we see the continued reduction in appraiser population and the time it will take for new trainees to replace them, mortgage lenders can benefit from using the Desktop Appraisal to reduce turn-times and increase access for borrowers to an appraisal.
Hybrid Appraisals follow a different process. In this case, a third party inspects, measures and takes images of a property in person. That data helps the appraiser complete the Hybrid Appraisal (Form 1004H/70H), which is generally used for refinance transactions, but eventually could expand to other scenarios. Third-party data can come from a variety of sources.
New developments are adding more complexity to the landscape. For example, Property Data Reports come into play when a traditional or Desktop Appraisal is waived on certain refinance transactions. The GSEs are working toward standardizing this process, which combines an automated collateral evaluation result with a property data report provided by trained onsite inspectors. Freddie Mac’s version is called an ACE+PDR, and Fannie Mae has also been working on these types of offerings and will announce their programs’ availability at some point in the future. Eventually, the GSEs are expected to allow this type of property data to be used in the Hybrid appraisal scenario for a lender when needed on qualifying loans.
Although both Desktop and Hybrid Appraisals are very helpful for streamlining transactions, some mortgage bankers consider the former to be particularly strong because of appraisers’ greater involvement in the inspection. Basing the valuation of assets on a Desktop or full appraisal is especially reassuring to the capital markets from a risk mitigation perspective.
NEWSLINK: How do the latest advances fit into the drive for mortgage modernization/digitization?
WALSER: Both of these solutions have value for the mortgage appraisal process. In my opinion, the Remote Desktop Appraisal truly enables the “digital mortgage” in the strongest possible way. A “digital process” eliminates not only paper, but also minimizes physical operations.
This does not signal the end of the physical, full 1004 URAR appraisal, as certain property types and loans will always require them. For the vast majority of conventional mortgage products, though, we believe Desktop Appraisals provide the collateral veracity that lenders, appraisers, and investors need.
NEWSLINK: How are technologies like these being used to cut costs and improve margins?
WALSER: Because the appraiser doesn’t have to drive to properties, AMCs don’t have to charge lenders for trips, rural/distance fees, etc. An individual with an interest in the transaction, such as a seller or homeowner, is already there, and has a built-in incentive to open their smartphone and help an appraiser move the valuation process forward.
NEWSLINK: What potential do these technologies have to make homeownership more affordable and accessible to everyone?
WALSER: Lenders traditionally bundle appraisal costs into the value of a mortgage. Remote Appraisals are often less costly, so borrowers’ charges are often reduced. Moreover, those in underserved or rural areas can benefit doubly. It can be hard to find appraisers who will go to these properties, and those who do often command higher fees. Remote Desktop Appraisals eliminate this issue—which, by the way, is really a form of bias against certain borrower populations underserved by appraisal availability.
Bias and discrimination in lending continue to plague pockets of the mortgage banking industry. Remote Appraisal technologies help mitigate them by reducing face-to-face meetings between homeowners and appraisers that might result in negative personal interactions. Appraisers are able to just assess the properties themselves in an unbiased way.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at firstname.lastname@example.org; or Michael Tucker, editorial manager, at email@example.com.)