9 minute read
DESKTOP APPRAISALS — WIN OR RISK?
Fannie/Freddie Desktop Appraisals?
A WIN, OR A RISK TO OUR INDUSTRY?
By CHRISSY BROWN, CMB, AMP, CRU, Special contributor to Mortgage Women Magazine
Jan. 19, 2022, Fannie Mae released its new Desktop Appraisal Option through DU. Freddie Mac has announced it will follow. Since then, the industry has weighed in. Some are excited about this new option, but most are skeptical of the risk. Let’s start with what exactly does this mean.
Loan casefiles, as of March 19, may receive the Desktop Appraisal Option. Lenders must ensure the file meets the following requirements to be eligible: • includes a complete subject property address; • is a purchase transaction; • the loan is secured by a one-unit principal residence; • the LTV ratio is less than or equal to 90%, and • the loan casefile receives an
Approve/Eligible recommendation.
If those requirements are met, the lender could order a desktop appraisal. Keep in mind that the lender and the borrower always have the option to order a traditional appraisal or execute on an appraisal waiver, if offered. If you choose to move forward with the desktop appraisal, it must be on Form 1004 Desktop.
Acting FHFA Director Sandra
CHRISSY'S CORNER
Thompson announced the coming of this program at the MBA National Conference last October. This was in effort to help solve multiple issues our industry was facing, including but not limited to, the ability to get appraisal orders accepted, timeliness of appraisal completion, limited acceptance rates for rural areas, etc. Lenders across the nation were very relieved to hear a solution was on the horizon. The appraisal process and timing delays were a significant pain point over the last couple of years. This is all great news, right? Well, that’s the sticky point. Let’s dive into the requirements and liability for lenders and appraisers.
There are requirements appraisers must meet when completing this form. They must conduct analysis and develop opinion of value with the inclusion of the following: • Use Form 1004 Desktop. • No physical inspection of the subject property; data may be provided by various parties (buyer/ seller agent, homeowner, builder, appraiser files, etc.) and through secondary data sources (public records, MLS, internet, etc.). • Must include floor plan with interior walls. • The appraiser must have sufficient information to develop a credible report. • Data provided by the parties with a financial interest in the sale or financing of the subject property must be verified by a disinterested source.
Let’s look at the third bullet: must include floor plan with interior walls. Now reference bullet No. 5: must be verified by a disinterested source. So how does one do that? Well, here is the trouble with these requirements. The appraiser is liable for all of the data, but will be relying on other sources to provide it. The good news is
that we are in the era of fintech. There are companies out there that claim (I say that because I have not demo’d them personally) that they have the solution to this hurdle. One of them being “RemoteVal.” They claim to have developed technology that will allow them to virtually develop an interior floor plan. If those tech solutions do deliver the data appraisers need to meet that requirement, this becomes a no-brainer, right? Well not exactly. Below I will list the risks I have been made aware of from our industry partners: • Fannie Mae’s rules surrounding ordering multiple appraisals still stand. If you are dissatisfied with the results of the desktop appraisal, you cannot just order a new appraisal without ensuring you meet the requirements of their policy. • Some appraisers are claiming the form is very cumbersome and may not be worth the minimal cost savings in relation to the amount
of additional work that needs to be completed. In turn, unsure they will accept these orders. • Some appraisers note that their
E&O policies are discouraging them from performing these appraisals. • If Fannie Mae is dissatisfied with the data provided on the report, they have the right to require a repurchase. (Think back to ’05 & ’06 and I’ll just leave that there). • The appraisers and lenders are liable for all of the information that they receive from third-party sources.
The appraisers are also required to ensure they do not make any extraordinary assumptions. • The third-party data in the remote areas is slim to none. Where do they obtain this data? • Will appraisers truly pick comps that are “like properties and neighborhoods?”
So, is this a win for our industry? Jury is still out. I, personally, am a huge fan of the adoption of tech in our industry. I constantly say if Amazon can put groceries in my refrigerator, then anything is possible! I do think there are a lot of areas in the process of a loan application that can be streamlined by the advancements in fintech. So, potentially, what we are hearing may be the natural skeptics when fintech revolutionizes your sector of the process. Or, potentially, this does carry unintentional risk that has not been resolved. My advice to each company is to complete a full-risk analysis for yourself and make the decisions and polices that meet your risk appetite.
If we can solve for the risk issues surrounding this option, this will be a huge win for our industry. Just ensure you, as the lender, fully understand the requirements before moving forward. n
Chrissy Brown is chief operations officer for Atlantic Bay Mortgage.
Where Women Succeed—and Lead.
In 2021, 56%* of our top Originators were women.
Atlantic Bay promotes and inspires growth for women in our company, and beyond.
*Based on internal data. This communication does not constitute a promise or guarantee of employment. Atlantic Bay Mortgage Group L.L.C. NMLS #72043 (nmlsconsumeraccess.com) is an Equal Opportunity Employer.
Experian Boost … Or Bust?
WHEN A $5 BILLION COMPANY OFFERS A PROGRAM FOR FREE, YOUR DATA IS THE PRODUCT.
By TYNA-MINET ANDERSON, special to Mortgage Women Magazine
In a recent CE class, I asked if students had seen success from Experian’s 2019 Boost program. According to Experian, the program can instantly boost consumers’ credit scores by allowing them to add their cell phone, utility, or video-streaming bill payments directly to their Experian credit report. They claim that consumers’ credit scores will be boosted immediately if they have been making qualified on-time payments. The average Boost user will see their score rise by 13 points.
“You can link your bank accounts such as your checking and savings,” said Britney Velasquez, a Mortgage Loan Originator, who has used the program on a few borrowers. “Experian Boost analyzes the automatic payments and accounts that you have coming in and out of that bank account and after a couple minutes it tells you what your Boost credit score is.”
Velasquez saw credit scores go up more than 10 points for those who used the system.
This year, Experian launched another program called Experian Go, a free program to help people with no credit history begin building credit on their own terms,
“We believe every individual
Tyna-Minet Anderson is vice president of Mortgage Educators and Compliance.
deserves the opportunity to reach their fullest financial potential and we’re proud to be the only credit bureau with a program to help credit invisibles build their credit history in minutes,” said Craig Boundy, CEO, Experian North America. “This new program is a direct reflection of our mission to bring financial power to all.”
In theory both programs sound great, but it is likely that Experian is getting more out of the deal than the borrower with the additional 10 points on their credit score. Rather than just receiving basic data about the number of open accounts and the timeliness of payments, with Boost and Go, borrowers are allowing Experian an in-depth look at how they spend each penny. Mind you, this is the same company that had a massive data breach they didn’t announce for years after it happened, that exposed the personal information of 147 million people.
Perhaps we could give Experian more of a pass if they had done a decent job of responding to consumer complaints, but in 2021, Experian — along with the other two credit bureaus — reported relief in response to less than 2% of covered complaints, according to a CFPB report, as compared to 25% in 2019.
“America’s credit reporting oligopoly has little incentive to treat consumers fairly when their credit reports have errors,” said CFPB Director Rohit Chopra. “[This] report is further evidence of the serious harms stemming from their faulty financial surveillance business model.”
Of the more than 700,000 consumer complaints submitted to the CFPB from January 2020-September 2021, 50% were related to the
three agencies. Consumers submit more complaints about inaccurate information on their credit and consumer reports than about any other problem, stating that the inaccurate information belongs to someone else, and they often said they were victims of identity theft.
The findings from this study show that the system is not working for consumers, and that there are serious consequences when inaccurate information is — and remains — on their credit reports.
CFPB further states that consumers are “frustrated and stressed when the consumer reporting companies’ automated processes for correcting inaccuracies do not work or when they do not get responses to their concerns. Consumers report that they spend time, energy, and money to try to correct inaccuracies.”
While these new programs may benefit consumers, it is equally — if not more — important to ensure that
consumers with inaccuracies on their reports, or those who are victims of identity theft, get the help they need.
The Fair Credit Reporting Act clearly outlines the requirements of the bureaus related to direct disputes. Based on the number of complaints, and even more on the resolution of those complaints, it seems the credit bureaus are not complying with the most fundamental of their duties.
Experian states that “increasing financial inclusion depends on creating opportunities for underrepresented consumers to succeed. And this starts with ensuring all consumers have a financial identity.” Hopefully, Experian will also work harder to protect the financial identities of all consumers, not just new ones, since their mission is to “bring financial power to all.”
It appears Experian has some good intentions, but until they are able to cover their basic duties, maybe they should focus on following what the law requires of them rather than look to gain additional profit from their access to consumer data. n
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