ClearValue Consulting’s Don Juhl on the Latest in Appraisal Automation

MBA NewsLink spoke with Don Juhl, the CEO of ClearValue Consulting, a leading provider of enterprise-class vendor management technology for mortgage lenders and appraisal management companies (AMCs). He has over 35 years of experience in the valuation, credit and title industries and has helped multiple companies reduce costs and streamline operations through large technology initiatives. He can be reached at djuhl@clearvalueconsulting.com.

MBA NewsLink:  How have technology and automation changed the traditional appraisal process in recent years?

Don Juhl: Over the past two or three years, mobile technology has gone from a nice-to-have tool to must-have technology, not just for appraisers but for all professionals who gather property data. Another major change has been the accelerated use of customized appraisal and valuation forms. Fewer appraisals are being created through the traditional 1004 appraisal form, which has limitations when it comes to reporting the growing variety of data that can be used for a valuation.

Automated technologies and AI have also had a growing impact on appraisal reviews, particularly when it comes to streamlining quality control (QC) processes. For instance, we’ve seen an increase in the use of AI to examine property conditions and automate comparisons between the property data and photos taken of a property. AI tools can help determine whether the verbiage and data in a valuation report is consistent with the visual evidence.

MBA NewsLink: What are some pros and cons of desktop appraisals, hybrid appraisals and BPO reports?

Juhl: Alternative valuations like desktop appraisals, hybrid appraisals and BPOs are quick and inexpensive, and growing more so with new technologies. BPOs, for example, are an extremely fast way to generate an opinion on a property’s value, especially when aided by mobile technology. Plus, there are a lot of brokers available to do them at a very efficient price. The downside, of course, is that these products generally lack the quality of a full appraisal. But the differences are shrinking.

For one thing, the technologies and data that drive alternative valuation products continue to improve. Mobile technologies that are integrated with the GSEs’ appraisal databases enable non-appraisers to perform visual inspections of a property and gather accurate data faster and more thoroughly than ever. Alternative valuation products have also become more useful as more appraisers age out of the industry. Increasingly, alternative valuation products, particularly hybrid appraisals, have stepped in to fill the void by enabling an independent expert to inspect the property. Then, an appraiser reviews the report for quality. This way, a lender can get fast valuations, but the appraiser is still engaged in the process.

However, the pros and cons often depend on a lender or AMC’s valuation technology provider. Most providers, for instance, serve either the origination or servicing sides of the business, so they are either appraisal-centric or BPO-centric. We made the decision early on to accommodate valuations for both origination and servicing. We have clients that have never done a full appraisal and others that only do appraisals. Our goal is to provide the technologies that enable any company to get the valuations they need as quickly and cost-effectively as possible.

MBA NewsLink: What prompted Fannie Mae’s recent value acceptance + property data options and Freddie Mac’s similar ACE+ PDR (automated collateral evaluation plus property data report)?

Juhl: The GSEs’ new valuation offerings were driven in large part by the dynamics of the appraisal industry and the housing market. Every time there is an uptick in refi volume, appraisal turnaround times are pushed back six to seven weeks due to the shrinking pool of available appraisers, which is just unacceptable. At the same time, the mortgage industry’s push to reduce costs and enhance efficiency created momentum for Fannie and Freddie’s new offerings. Additionally, new technology has enabled innovative ways to gather property data and combine it with the GSEs’ appraisal databases.

The combination of these factors is the biggest driver behind appraisal modernization. Ultimately, it’s about helping lenders and servicers be less dependent on appraisers for gathering property data while generating the best, most accurate and efficient valuation for a particular type of transaction.

MBA NewsLink: How are the GSEs’ offerings different, if at all?

Juhl: There are a handful of small differences. For example, Fannie Mae’s offerings support valuations for multi-unit properties, but Freddie Mac’s products currently do not. In addition, both GSEs are gathering similar types of appraisal data, but they each do it a little differently. However, the gist of their offerings is generally the same.

We understand the GSEs are working together on a new Uniform Property Dataset specification that will be identical for both agencies and will support a broader range of property types and data that the current forms do not support. Many lenders want to be able to meet the valuation requirements of both agencies. While the joint UPD specification effort is separate from the GSEs’ appraisal modernization initiatives, it could prevent instances in which a lender may need to get separate inspections depending on whether they are using a Fannie Mae offering or Freddie Mac’s, which could draw out the valuation process.

MBA NewsLink: How does appraisal modernization help lenders and AMCs?

Juhl: There are many benefits, including shorter timelines and more cost-effective valuations. Appraisal modernization also enables lenders and AMCs to access a larger pool of vendors to fulfill valuation orders in a timelier fashion. It’s worth noting that the most time-intensive part of an appraiser’s job is physically inspecting a property. Because the number of housing professionals who are available to gather data on-site is far greater than the number of appraisers, it’s more efficient for lenders and AMCs to use them instead, and to hold off using an appraiser until one is truly needed.

MBA NewsLink: What do lenders and AMCs need to take advantage of the GSEs’ new offerings? What role does automation play?

Juhl: It really boils down to having the right resources in place. Lenders and AMCs will need a robust, diversified vendor panel of inspectors, realtors and other experts that may be different than the panel they currently use. They also need properly trained panels, too. You could have access to qualified inspectors, but they may not necessarily be familiar with the terminology the GSEs are using in the same way an appraiser would. They’ll need customizable forms for different types of valuations for different types of transactions as well.

You’re going to need partners with strong, highly integrated mobile technology that enables collected data to be placed right into a form, as well as the ability to build custom forms on the fly. That includes automated QC technologies and AI that can review every aspect of a valuation for exceptions and things like photos that may have issues. Then, automated workflows can be used to pass on valuations to the right person to be able to clear it. It’s all about workflow—it’s having a system that’s able to determine what to do with a particular valuation order based on certain milestones and be able to QC orders at any time in the process.

Ideally, you want to find a partner that’s spent years working with the GSEs and developing these technologies and resources long before appraisal modernization became a thing, because it’s not something a provider can come in at the 11th hour and successfully do. Most technology providers require a significant amount of manual effort and some “stitching together” of valuation reports. This may be fine when volumes are slow, but it simply won’t be scalable when the market changes.

MBA NewsLink: How do you see appraisal and valuation processes evolving over the next several years?

Juhl: Over the next few years, mobile technology is going to be ubiquitous in our industry. Everyone has a smartphone, which is probably the most powerful tool for data gathering since the internet. I think we’ll also see more comprehensive QC tools that can better support conclusions of value, as well as detect whether appraisal bias is present. There will still be a need for human oversight, but gradually, automated QC tools that leverage AI will be able to determine when and where human resources are effective.

I’ve been in the industry a long time. I’ve seen appraisers start to use computers to write up reports, then incorporate digital photos, then transmit reports over the internet instead of sticking them in a FedEx envelope. Today, nobody could do business without these things. But appraisers—and people in general—don’t always appreciate change, so adapting to these innovations has rarely been easy. And yet overall, technology is making valuations faster and better. Because the industry will keep evolving, lenders and AMCs will play an important role in driving these changes.

(Views expressed in this article do not necessarily reflect policies 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 Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)