Valuation technology, opinion, daily practice and an industry have just found an event horizon.
The valuation industry is forever changed and the processes we thought were "wrote" have become nothing less than a fallacy. Why? Mother – or Fannie Mae, has developed Collateral Underwriter.
Collateral Underwriter is a review tool with some regression technology thrown in for good measure. Your work is being compared to your past work as well as to your peers based upon a massive database. Hopefully everyone has been consistent in their reporting within reports because frankly… Big Mother is watching. Literally.
Technological advances have transformed the daily process of valuation to a level never seen before and some of this has been propagated by the user of appraisal services. Those primary users over the past several years have been the GSE's. Fannie and Freddie have once again become the stalwart for the mortgage industry with several bit players thrown in. I'm confident that short memories will prevail and we'll eventually see a newer improved version of the early 2000's once the entire non-Qualified Mortgage space is figured out and diced up by someone smarter than myself.
History tells us that the GSE's were formed after the Great Depression to normalize and support an entire industry that has always been considered part of the "American Dream". Homeownership was a buzzword long before Barney Frank declared it a virtual right.
Well, they're back with a vengeance to normalize and turn the industry on its ear.
Net and gross adjustments, 10% line items, distance... the basic tenets of producing an appraisal report – a "credible" appraisal report at that are things of the past. We are now being told that because of these legacy guidelines appraisers were put in a box and have been "under adjusting" for component values. "Under adjusting"? Yep. Under adjusting.
In other words we've been backing into values by manipulating the grid much like a magician manipulates the viewer. A little bit here and a little bit there and like magic a clean looking report with a nice tight adjusted range.
We've also become experts at comp selection because of that box too.
Collateral Underwriter is actually doing a number of things aside from reviewing your reports. It's fundamentally changing and challenging the industry to provide better quality valuations by allowing appraisers to use their local market expertise, but it's also asking them to prove their work. That's not necessarily a bad thing. At all.
There are many tools available for appraisers to prove their work. It's incumbent upon professionals to always improve their craft and now is a great time to seek out, understand and implement technologies and techniques that will no doubt challenge your concepts of valuation. In many cases you'll scratch your head and say – "but, that's not right!". Even though it's supportable and supported. Things have changed. And they're going to continue to change.
Time to think outside of the box boys and girls. That box has been opened and you're no longer restrained so get out there and get it done. Educate yourselves. Educate your peers and your clients. It's a brave new industry so let's learn, develop and expand ourselves to become better valuation professionals.
Anthony Roveda is a veteran of the lending and valuation space with specific expertise in the Valuation Technology sector.
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