Without an investment in modernizing origination and servicing systems, adapting to a new appraisal data standard will be a challenge
Appraisal modernization efforts from Fannie Mae and Freddie Mac are going to dramatically alter the way appraisers and lenders handle collateral valuations over the next 18 months.
These updates aim to balance traditional appraisals with appraisal alternatives including automated tools that expedite turn times, reduce costs, and improve collateral risk management through data analytics and automation tools.
How Appraisal Modernization Will Impact Business Technology Investment
The large-scale of planned changes is effectively an overhaul of the methodologies that have historically defined the appraisal industry to further advance the new technologies and data availability that have arrived in recent years.
While appraisal waivers have been available on eligible loans for a number of years and desktop appraisals have already become a permanent option for valuations, the adoption of appraisal modernization tenants is expected to have far-reaching implications on the mortgage industry.
“The changes are so comprehensive that a word like ‘gargantuan’ is inadequate to convey the depth and breadth of work the industry will be doing for the next two years” CoreLogic’s Chief Valuation Officer Shawn Telford explains.
As the GSEs move forward with their modernization efforts, putting the industry on notice regarding expected timelines for implementation, there have been questions surrounding how these solutions will work and who can use them.
Untangling these questions is the key for both appraisers and lenders looking to orient themselves amid this push towards modernization. It all begins with confidence in your tools.
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How Did the Mortgage Industry Get Here?
People across industries have come to expect an increasingly digitized experience for transactions. The mortgage industry is no exception. So, when the expectation for digital solutions is coupled with the rise in the prominence of mortgage technology companies, it is evident how dramatically real estate processes like valuations have transformed in recent years.
“More than 10 years ago under the direction of the Federal Housing Finance Agency, the GSEs implemented the Uniform Collateral Data Portal (UCDP) and the first Uniform Appraisal Dataset (UAD) to centrally collect standardized appraisal data,” Telford said. “This new iteration of the UAD is unconstrained by the existing forms, allowing the industry to collect data more naturally, with more objective accuracy and without the constraints of a legacy form-filling mindset. This will impact both lenders and appraisers, significantly touching everything in the workflow.”
It is imperative to ensure valuation data is standardized, which has proven to be a somewhat complicated proposition in the valuations sector over the past decade and thus driving the expansion of the UAD. This is why as organizations work to comply with appraisal modernization practices, they must ensure that their technology partners across the origination and servicing spectrum are ready to ingest the updated UAD data in existing processes and integrations.
How to Prepare to Modernize Appraisals and Collateral Valuation
Aligning an industry around change — particularly one so regulated as appraisal — is a monumental undertaking.
The appraisal process and the data that powers it touch all components of mortgage origination. This means lenders, appraisers, appraisal management companies (AMCs), and industry systems will all need to coordinate to accommodate this Fannie Mae and Freddie Mac-driven shift to a new appraisal data standard.
“An appraisal is vitally important in the risk management equation for lenders and is not exempt from the consumer’s demand for speed and innovative technology. Innovations that use existing technology and hardware solutions are being enabled by data-based GSE policy changes, regulatory updates, and consumer demand to modernize valuation. While change can be uncomfortable at times, the process will lead to better outcomes for consumers and lenders.”
— Shawn Telford
As part of this process, appraisers must adapt to new technologies and methodologies, such as automation and advanced analytics, to deliver more accurate and timely valuations, as well as elevate the quality, consistency, and credibility of their appraisal reports. Similarly, lenders can embrace these updates in workflow and data availability to enhance customer experience, mitigate risks, and improve operational efficiency through digital solutions and data-driven insights.
To accommodate these improvements to the appraisal process, lenders and all their technology and service partners will need to first understand the gaps in their current appraisal processes, including industry fragmentation and manual processes. Doing so will take support from technology partners with seasoned technology and teams and whose access to extensive, accurate, and comprehensive property data will be an invaluable foundation as both appraisers and lenders prepare to adopt these innovations.
Successfully executing this change will require preparation. By laying the groundwork to seamlessly transition to these modernized valuation requirements, organizations within the mortgage industry will set themselves on the path to flourish and move forward to support the needs of the customers and the businesses they serve.
CoreLogic is committed to supporting our clients’ needs in modernizing valuation and adopting new technologies and appraisal options by providing unmatched expertise, support, and technology.
Learn More About Appraisal Modernization
April 24 Webinar
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