Enhancing the Appraisal Process
Mortgage lending is a growing opportunity for credit unions to capture market share while continuing to deepen the loyalty of their valued members. One of the key tools for securing a mortgage is the appraisal, which can make or break the relationship between a credit union and its member.
Given the unique affiliation these financial institutions have with their fields of membership, credit unions have a prime opportunity to deepen these bonds through the home-valuation process. When you consider the very essence of the credit union movement–“People Helping People”– credit unions also have the ability to add to their member education efforts through the appraisal management procedure.
Members need to understand that the final loan commitment is contingent on a satisfactory appraisal. In order to streamline and improve the appraisal process, credit unions should consider three key factors.
Employ a strong panel of independent, quality appraisers. Credit unions are within their rights to set up their own appraisal department or panel of appraisers, but they must have strong appraiser independence safeguards in place. Rather than adding an expensive independent staff person(s) to handle valuations, an appraisal management company offers a variable cost solution and provides an arm’s-length relationship to the credit union and property owners to provide an accurate valuation.
While credit unions are not required to use an AMC, doing so helps remove the possible consequences of not having a third-party facilitate and validate the valuation process, such as the unethical and illegal situation of influencing values that can result from having direct access and communication with appraisers.
AMCs have a deep data base of knowledgeable and qualified agents and appraisers that are experts at determining property values. They have nationwide access to professionals in every state, region, city and county with experience in and access to a variety of lending products. A credit union in Chattanooga, Tenn., for example, can quickly tap into an AMC’s database and identify the most fitting person(s) specializing in that region of Tennessee to handle the assignment, while ensuring appropriate licensing and insurance coverage.
AMCs perform the heavy lifting and remove many of the administrative tasks from the credit union so it can focus on its core competencies. Most important, a quality AMC partner understands the importance of a credit unions’ differentiator of premium service in the industry and are in the business to preserve that reputation. If your credit union decides against using the services of an AMC, it must make sure that it is working with a very credible and independent team of appraisers as mandated by the Appraiser Independence Requirements.
Be aware of all the changing regulations. Credit unions are expected to comply with the same state and federal regulations as banks, so they must be completely conversant with the latest requirements of the Uniform Collateral Data Portal, Uniform Loan Delivery Dataset, Appraiser Independence Requirements, Uniform Standards of Professional Appraisal Practice, changes to Truth-in-Lending Act, etc.
The rules under the CFPB, Dodd-Frank financial reform bill and the latest state licensing requirements have added to the quality control pressures on the appraisal industry. Not having this knowledge puts the credit union at risk of hefty fines, penalties and failed loans.
It isn’t enough for credit unions to have their own compliance measures securely in place; they also must ensure that each partner and contractor they work with also has strong compliance processes and procedures. On an ongoing basis, credit unions should make sure that orders from their appraisers go through a thorough review to ensure compliance with appropriate regulations. If a credit union finds even one instance of noncompliance, the order must get sent back immediately to the appraiser to rectify.
Focus on technology. Some credit unions may struggle with labor- and paper-intensive appraisal management processes. In order to optimize and accelerate the valuation ordering procedure, credit unions should connect with a partner utilizing a sufficient order management platform.
Technology automates the process from appraisal order to GSE submission via the UCDP. It also helps credit unions of all sizes eliminate duplicate orders and other manual errors associated with appraisals, which translate into significant cost savings for the institution.
Credit unions should not only look for technology that provides collateral valuation reports, but also provides supporting data in the MISMO industry-standard format.
There is an increasing demand for mortgage lending services among members, which translates into a growing opportunity for financial cooperatives. The key to capitalizing on this opportunity is for credit unions to offer its members painless mortgage lending experiences where they can acquire a loan with as little hassle as possible. This means the appraisal process has to be fast, accurate and cost-effective.
Relying on AMCs for quality control purposes, staying aware of the new compliance changes and using enhanced technology is the most reliable way to do so.