Credit unions face a challenging environment. Focused on people rather than profits, credit unions have fought to preserve the value and service standards that have always differentiated them from other financial institutions. Many of these other institutions have simply increased fees and reduced services in the face of the dramatic economic and regulatory challenges over the past five years.
One area of business that presents both an opportunity and a challenge for credit unions is mortgage lending. A 2010 white paper on best practices in credit unions covered how a significant opportunity existed for credit unions in mortgage lending. The white paper stated, "Importantly, the financial crisis in America has consumers more aware of how a mortgage loan fits into their overall financial plan – building broadbased financial relationships using the mortgage as an entry point is a growing opportunity for credit unions."
One of the more important aspects of the mortgage lending function is the efficient and compliant management of the property appraisal process. However, most credit unions are still managing the appraisal process through a combination of spreadsheets and email. The inefficiencies and risks associated with such a system cannot be overstated.
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To take advantage of the mortgage lending opportunity, credit unions need a process and appraisal management technology solution that provides the following value propositions:
- Low-cost transactional fee model – High cost per use systems or expensive start-up costs are out of step with credit union demands for cost-effectiveness.
- Customizable technology that permits adaptation to individual process variations –Inflexible systems that fail to allow customization do not fit credit union needs for efficiency.
- Integration with other key systems – It is imperative that appraisal management systems integrate with a credit union's loan origination system, merchant account management system for credit card processing, and accounting system.
- Single-solution to manage both residential and commercial appraisals – Credit unions must be cost-conscious consumers of technology and simply cannot afford two separate technology solutions for appraisal management.
- Capability to facilitate appraiser sign-up and track appraiser credentials, specialties, and fees – Compliance requires that all appraiser information be up to date, easily searchable, and retrievable. Efficiency requirements demand a paperless process that can produce time savings for personnel and increase productivity. Capturing images electronically, directing them automatically to the appropriate locations, organizing them for easy access, and storing them for easy retrieval changes data from analog to digital and empowers workflow improvements.
- Process to manage the appraisal bid procedure (selection of specific appraisers from pool, delivery of request to bid and bid response receipt) – Compliance and efficiency demands require that the bid process be completely transparent and self-contained. It is simply not acceptable to have to use multiple software products to manage an appraisal bid process.
- Ability to manage all communication and documents relative to assigned appraisals (date/time stamp, image storage, search) – Once an appraisal assignment is made, compliance requirements necessitate an easily retrievable history of communication and documents exchanged between lenders and appraisers. Improving efficiency in these types of communications is a necessary step credit unions can take that will pay dividends across the enterprise. The ability to document and retrieve, within a few keystrokes, records of interactions with customers and vendors not only delivers quality service, but also saves significant time, increases transparency, and provides accountability.
- Capability to automate the status reporting of all bids and assignments – Efficiency and management insight require automated status reporting at various steps in the appraisal process. Moving compliance reporting from a manual to an automated process is not only efficient — it is essential to survival in the new regulatory reality. Benchmarking data indicates that credit unions have on average one risk management related employee for every 42 employees in the organization. These employees spend considerable time searching for data in disparate systems and putting together reports. However, many credit unions may not have the ability, or will find it difficult, to maintain this current level of risk management staffing. The question then becomes, "How can we do more with the same or less resources?" One answer lies in employing technology, including appraisal management technology, with auto-report generation capabilities.
- Ability to manage internal appraisal reviews and commercial evaluations – Good management of lending functions requires periodic reviews of the asset valuation of selected properties backing loans in the credit union's portfolio. Internally generated appraisal reviews and commercial evaluations must follow the same protocols and reside in the same system if efficiency is to be maximized.
Today, appraisal management technology is available that meets the imperatives for cost effectiveness, compliance assurance, and efficiency enhancement. With those requirements addressed, credit unions are in a position to capitalize on the mortgage lending opportunity.
Clint Cornett is founder and CEO of ValuTrac Software Inc. in Flower Mound, Texas.
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