Modern residential lending requires much tighter focus oncompliance and valuation standards than ever before.

Prior to the inception of the Home Valuation Code of Conduct inMay of 2009, credit unions typically did not sell loans backed byprimary residential real estate to the GSEs, and thereby felt noneed to be concerned regarding compliance. Similarly, banks thatportfolio their residential mortgage loans assumed the risk withoutfear of compliance issues.

With the sun-setting of the HVCC this past November and theintroduction of Appraisal Independence Requirements within theDodd-Frank legislation, any institution lending on primaryresidential property is required to comply not only withDodd-Frank, but also with the much broader scope of theInter-Agency Guidelines as well.

This process marks a significant change from the nature of homevaluations and appraisal standards and requires an immensecommitment to upholding new regulations.

For a growing number of credit unions, managing this processin-house is becoming cumbersome and expensive, with many uncoveredcosts associated with poor quality appraisal reports and autonomyrequirements. Ultimately, an appraiser's fee will be slashed inorder to compensate for this additional burden on resources.Unfortunately, lower appraiser fees are directly related to lowerquality reports and inadequate turn-time on appraisal reports,eventually affecting the bottom line.

Most lenders try to cover these costs with an application fee,processing fee or just absorb it in their overhead. Managing theprocess internally spreads the department's cost over the entiremembership, which negatively affects dividends for all members.

Credit unions are known for keeping the cost of lending to anabsolute minimum by providing lower interest rates on loans andmaximum dividend benefit to members on their share savingsaccounts. Because of this, looking outside the institution forappraisal management could prove to be a cost-effective andefficient option – and one that supports newly implementedregulatory requirements.

There is potential in outsourcing for an institution to minimizeoverhead costs, which increases the potential for a higher dividendto the overall membership. Although the cost of the loan willincrease to the member obtaining the loan, the member will benefitfrom higher dividends: loans get to closing faster with lower turntimes, higher accuracy and reduction in revisions.

The credit union movement is committed to lower costs and higherdividends for members. This drives credit unions to uncover themost accurate, cost-saving solutions that will enable them to passalong those savings to members.

Dodd-Frank has launched credit unions into a new era ofresidential lending, one with tighter regulatory scrutiny. It is atthis point that it becomes imperative for credit unions to buildthe appropriate answer to appraisal independence standards, and onethat optimizes benefits to members.

Dennis Ashcroftis vice president of sales at Appraisal Logistics in Annapolis,Md.