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Investing in Appraisal Modernization Can Boost the Bottom Line

Time and time again, proverbs across time and cultures tell a tale of a protagonist who refused to get with the times by refusing to accept modern ways of doing business or new technologies. But, according to Fannie Mae’s Economic & Strategic Research Group (ESR) appraisal modernization could affect your profits depending on the speed at which it is adopted. 

Continuing a quarterly survey of mortgage executives that initially started in 2014, Fannie Mae has published its latest Mortgage Lender Sentiment Survey for the first quarter of 2022 finding that lenders see considerable value in modernization. 

The survey, which was conducted during the first two weeks of February polling 200 senior executives, intends to assess their views and outlooks across varied dimensions of the mortgage market. The 200 executives represent 188 institutions of which 83 were non-depository mortgage banks, 62 depository institutions, and 40 Credit unions. 

As a whole, the survey revealed that nearly all lenders surveyed believe that appraisal modernization is valuable to the mortgage industry and that Collateral Underwriter (CU) and other third-party tools have been helpful in managing collateral risk. Lenders identified inspection-based appraisal waivers and non-traditional appraisals (desktop appraisals or hybrid appraisals) as the most beneficial areas to adopt. 

As a whole, 94% of respondents say modernization is valuable, while 61% say it is “very valuable.” 

32% say inspection-based appraisal waivers are the most important adoption when considering speed, then integration with LOS (loan origination systems). 30% say non-traditional appraisals (such as desktop appraisals or hybrid appraisals) are the key to speeding up the process. 

The biggest reported benefit to modernization was shortening the loan origination time, but even then, that is hampered by the lack of industry-wide adoption. 

Respondent ranked appraisal modernization as third on their list of priority upgrade. The most popular (40%) area of modernization was consumer facing allowing the applicant to submit documents, sign disclosures, and monitor their status during application process. The second most popular area (39%) of modernization was e-mortgages. Placing third was modernization (29%) which entails appraisal modernization technology, tools, and processes (new or updated software, adapting internal processes to take advantage of new options such as desktop appraisals). 

“Appraisal costs and turn-around times have gone up considerably while UCDP valuation feedback has declined,” one anonymous appraiser was quoted as saying. “This points to inefficiency that needs to be addressed. AUD feedback should allow for more appraisal waivers and AVM valuation instead of full appraisals.” 

Another was quoted as saying, ““Currently, the appraisal process is the biggest issue facing the mortgage industry. It causes significant delays, higher costs (due to involvement of AMCs, and there are fewer experienced practitioners that understand more complex collateral assignments).” 

Those against modernization in the survey cited different standards from municipality-to-municipality and increased fraud as reasons against it. 

But by far, the largest amount (59%) of respondents modernized to shorten the loan cycle time in appraisal modernization. 

About Author: Kyle G. Horst

Kyle G. Horst is a reporter for DS News and MReport. A graduate of the University of Texas at Tyler, he has worked for a number of daily, weekly, and monthly publications in South Dakota and Texas. With more than 10 years of experience in community journalism, he has won a number of state, national, and international awards for his writing and photography including best newspaper design by the Associated Press Managing Editors Group and the international iPhone photographer of the year by the iPhone Photography Awards. He most recently worked as editor of Community Impact Newspaper covering a number of Dallas-Ft. Worth communities on a hyperlocal level. Contact Kyle G. at [email protected].

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