COMPANY
CITY
STATE
WEBSITE
Abstract Trust Company, LLC Alliance Appraisal Management, LLC AppraiserLoft Clear Capital, Inc. Coester Appraisal Group Digital Docs.net E-Appraisal, LLC Elliott & Company Appraisers, Inc. eTEC Appraisal Management Solutions First National Title Residential, LLC FNC, Inc. IRR-Residential, LLC Kirchmeyer & Associates, Inc./Real-Info, Inc. Lenders Choice, Inc. MDA Collateral Valuation Solutions Metro National Settlement Services National Title, LLC Peak AMC, LC Property Sciences Pro-Teck Services, LTD Quality Valuation Services, LLC Quantrix Valuation Real Estate Valuation Partners, LLC RELS Valuation SAMCO Appraisal Management Company Springhouse Appraisal Management US Deeds/Turbo Deed USA Real Estate Information Services, LLC
Russellville Saratoga Springs San Diego Truckee Gaithersburg Orlando Henderson Greensboro Phoenix Denver Oxford Westwood Buffalo Carlsbad Pflugerville Salt Lake City Denver Lees Summit Pleasant Hill Waltham Lake Forest Bloomington Toledo Bloomington Greenville St. Louis Brandon Belmont
AL UT CA CA MD FL NV NC AZ CO MS KS NY CA TX UT CO MO CA MA CA MN OH MN OH MO FL NC
www.abstracttrust.com www.allianceamc.com www.appraiserloft.com www.clearcapital.com www.coesterappraisals.com www.digitaldocs.net www.wapnv.com www.appraisalsanywhere.com www.etecams.com www.fnt-res.com www.fncinc.com www.irr-residential.com www.kirchmeyer.com www.lci-network.com www.mdasolutions.com www.metroclose.com www.natl-title.com www.peakamc.com www.propsci.com www.protk.com www.qualvs.com www.quantrixllc.com www.valuationpartners.com www.rels.info www.samco-amc.com www.springhouseamc.com www.turbodeed.com www.usareis.com
TABLE OF CONTENTS
Cover Story: Why Appraisal Management Companies are Important . . . . . .6 Now that AMCs are being featured heavily in the news, it is time to correct some common misconceptions about these important companies.
TAVMA and the Home Valuation Code of Conduct . . . . . . . . . . .5 Getting Started with Social Media: The Importance of the Profile . . . . . . . . . . . . . . . . . . . . . .10 When it Comes to Marketing, it’s Better to be Effective than “Cutting Edge” . . . . . . . . . .12 A Conversation with Ed Krug . . . . . . . . . . . . . . . . . . . . . . . . .14
About TAVMA Founded in 1998, TAVMA is a non-profit trade association tasked with enhancing public awareness and promoting ethical conduct to settlement services industry vendors and service providers. The Association acts as a forum for the exchange of vital information and presents the positions of its member companies to media, government, user groups and vendors. TAVMA member organizations are committed to promoting excellence and integrity while adding customer and consumer value to the settlement process.
Find this and more at www.tavma.org Fall 2009 — TAVMA 3
IS YOUR SALES STRATEGY LEAVING MONEY ON THE TABLE? Good salespeople close on the prospects you know about. Good marketing closes on the prospects you didn’t.
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Leadership
TAVMA and the Home Valuation Code of Conduct By Jeff Schurman his year has been very busy for TAVMA and our coalition partners. As we reported in the spring newsletter, National Real Estate Information Services (NREIS) captured a big victory in an Unauthorized Practice of Law (UPL) lawsuit filed against the firm in Massachusetts. We’re encouraged that the ruling will establish a precedent in other UPL states. Moreover, we’re encouraged by the prospect that TAVMA members offering settlement services in that state should see benefits from the favorable outcome. And yet, another issue is occupying much time and attention here at TAVMA: the recently enacted Home Valuation Code of Conduct (HVCC). e HVCC, or the Code as it is sometimes referred to, came about as the result of an investigation by the office of New York Attorney General Andrew Cuomo involving appraisal oversight by the GSEs, Fannie Mae and Freddie Mac, and their regulator, the Federal Housing Finance Agency (FHFA, f.k.a. OFHEO).e investigation resulted in Cooperation Agreements between the parties aimed at curbing inappropriate client pressure on real estate appraisers. e HVCC establishes new rules for engaging and communicating with appraisers, as well as supporting long-standing appraisal requirements spelled out in the USPAP, the Uniform Standards of Professional Appraisal Practice, agency underwriting guidelines, and state appraiser licensing and certification laws and regulations. TAVMA, for its part, has taken a leadership role in representing the settlement services industry and our Appraisal Management Company (AMC) members in
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this evolving debate. We’re doing this mostly by responding to media inquiries about the Code, answering false claims by some bloggers and trade groups that are attempting to overturn or delay the HVCC by claiming that AMCs are causing delays in loan production at the expense of consumers and the financial recovery, and educating a lot of people on the role of AMCs and how they improve productivity, reduce loan production costs, and provide mortgage lenders with competitive advantages in the residential mortgage arena. Although some believe that TAVMA supports the HVCC in its entirety as a result of the emerging prominence of AMCs in the new way of ordering appraisals that is not the case.TAVMA has only taken a position on the Code as it relates to appraiser independence. TAVMA believes that appraiser independence is the centerpiece of the HVCC. erefore, to the extent that the HVCC keeps appraisers and originators at arms-length, TAVMA is supportive. At the same time, we recognize that the Code presents certain functional and practical challenges in real-world application. Among these challenges are portability, the ability of a lender to transfer an appraisal report to another lender, and the fact that mortgage brokers, who previously had direct access to appraisers, must now go through not one but two intermediaries, the mortgage lender and the AMC. Many mortgage brokers and appraisers don’t like that. When the HVCC was first proposed, TAVMA opposed the proposal and submitted a 28-page comment letter to the GSEs explaining our concerns. It is important to remember that neither
Jeff Schurman TAVMA nor the AMC industry asked for the Code. However, since its adoption, our members have been diligently at work managing the appraisal acquisition process within the confines of the final rule. Unlike some trade groups,TAVMA does not believe the HVCC should be withdrawn or postponed, but rather, that functional and practical issues should be monitored and improved over time. In this issue of the TAVMA newsletter we’ll focus on the HVCC, working with appraisal management companies, and illustrate the continuing evolution of the mortgage lending and settlement services industry. If you’d like to submit an article on this or any other relevant topic for consideration in a future newsletter please let me know. I can be reached at jeff@tavma.org, and will look forward to talking with you. Jeff Schurman Executive Director, TAVMA
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Fall 2009 — TAVMA 5
Cover Story
Why Appraisal Management Companies are Important e value proposition lenders can’t afford to ignore. By Charlie W. Elliott, JR., MAI, SRA ately Appraisal Management Companies (AMCs) have been in the news. In fact, few people had heard of AMCs until recently. Perhaps that is because they are businessto-business entities, usually not catering to the general public.
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AMCs, by definition, are vendor management companies acting on behalf of appraisal users. AMCs are becoming more popular among lenders
Appraisers and appraisal organizations are banding together to promote anti-AMC legislation at the state level that would require AMCs to register with state appraisal boards. and not everyone is pleased. Why would anyone care whether a bank outsources its appraisals? Further, why would a bank want to farm out its appraisals? Lenders outsource these services for three reasons. First, it helps reduce fraud between the lender’s salespeople and the appraiser, thus reducing losses while pleasing the regulators. Fannie Mae and Freddie Mac recently implemented new rules regarding this which
some say favors outsourcing to AMCs. Secondly, it saves the bank money. Banks have high overhead and cannot compete with the efficiencies AMCs offer. Finally, some banks are subscribing to vender management because of federal RESPA laws. RESPA, in part, is designed to protect consumers from fee gouging. Banks must account for closing cost fees charged to customers. It is hard for them to define and recoup all of these costs. Collectively these issues cause banks to outsource their appraisals. It is easy to explain to regulators, it protects their bottom line and it frees management to do what they do best, make loans. Now, back to who would object to banks outsourcing appraisals. Ironically, the idea seems to be okay with everyone except some in the appraisal profession. One may think that all appraisers would appreciate the reduced loan officer pressure offered by the AMCs. is is simply not always the case. Some appraisers villainize AMCs. Appraisers and appraisal organizations are banding together to promote anti-AMC legislation at the state level that would require, among other things, that AMCs register with state appraisal boards. Among those continued on page 8 Fall 2009 — TAVMA 7
Cover Story
continued from page 7
other requirements are large registration fees and complex regulatory demands. Some say that requiring AMCs to register in 50 states and to comply with all regulations will put AMCs out of business. is would appear to be the goal of those sponsoring the legislation. ere are two primary reasons these groups are opposed to AMCs. First, many appraisers do not like the scrutiny offered by AMCs, opting for the more relaxed relationship and oversight offered by the lender. ere is opposition to delivery schedule timetables sometimes imposed by some AMCs. ere is further opposition to the AMC appraiser fee controls, similar to that experienced by
the medical profession regarding doctors and insurance companies. It should be noted that not all AMCs operate in the same way nor do they have the same policies. Just as with banks and appraisers not all AMCs are perfect. Secondly, in spite of what many appraisers say about wanting independence, some are willing to trade this for the cozy relationship they enjoy with lenders, who select them to do work. Appraisers have the option of either doing AMC work or declining it. Appraisal management is part of our free enterprise system. ere are misconceptions about fees collected and paid by AMCs. I have
heard appraisers say that AMCs collect full fees and pay out only a portion of the fee to the appraiser. AMCs do operate on a gross margin of profit, just like many other businesses. No management company is going to be any more willing or able to perform services for free than an appraiser would be. Fees charged for a standard home appraisal vary from region to region, but we can talk about percentages.Typically, the gross margin a well-managed appraisal management firm will earn will fall between 20 and 40 percent. at means that the AMC will operate on about 1/3 of the fees typically charged for the valuations delivered to lenders. erefore, of every $100 earned by the
Getting the Story Right he electronic and print media have been abuzz since the May 1, 2009 implementation of the Home Valuation Code of Conduct (HVCC), with stories that often mischaracterize the role and value proposition of the appraisal management industry. At the same time, more and more entrepreneurs are considering appraisal management as a core business endeavor, as a means to augment an established directshop appraisal business, or even to work with existing regional and national AMCs as a member of their fee panels. ere is a need for a source of accurate information about the AMC industry and TAVMA is committed to meeting that need.
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TAVMA recently announced the launch of a new educational series to benefit TAVMA members who want to capitalize on changes in the collateral valuation and Appraisal Management business. This area is very hot right now for the very reason that it offers a great deal of opportunity to professional appraisers and appraisal vendor managers who are willing to learn what it takes to build this kind of enterprise. Indeed, as our members can attest, there is more to it than just putting AMC on your letterhead. Success leaves clues, so the TAVMA educational series features articles by leading 8 TAVMA — Fall 2009
providers of collateral valuation services that we hope will help you in your business. The adjacent article by Charlie Elliott, Jr., MAI, SRA, entitled Why Appraisal Management Companies are Important, is the most recent in our series of articles on the subject of appraisal management. The first article in the series, entitled AMCs, friend or foe?, by Bill Fall, principal with The William Fall Group, is available on the TAVMA website, at: http://www.tavma.org/index.php?option=com_content&task=view&id=187&Itemid=32. Please share these (2) articles and future articles in the series with your staff, fee panel, and customers as a means to bolster or reaffirm their decision to work with your firm and the appraisal management industry. TAVMA takes its responsibility to its members very seriously. Our mission is to help you succeed and providing great educational opportunities is one way we do that. Those of you who are interested in taking your businesses into the AMC space will find this educational series a great benefit. Enjoy!
AMC in gross income, the appraiser earns, on average, about $70, leaving the AMC with $30 to pay all of its expenses and provide any profit that it may make. For this fee the AMC must: • Accept the appraisal order • Proof and edit it • Select the best appraiser • Negotiate a fee • Place the order • Monitor the progress • Take product delivery • Review the appraisal • Supervise corrections • Ship the appraisal • Field any client questions • Bill the client • Pay the appraiser • Collect client fees, and • Securely store the product for five years
AMC registration in each state is simply a burdensome minefield and is perceived by some as a violation of free trade. work for one. Lenders and appraisers have the right to pursue a variety of different business relationships. They should be allowed to exercise this right without disruption from those who do not have a dog in the fight. AMC registration in each state is simply a burdensome minefield and is perceived by some as a violation of free trade. Any AMC regulation should be at the federal level, only one fee should be charged and rules should be uniform across the country.
ese functions involve mostly labor expenses associated with communicating with the client and vendor and processing information. ey do not reflect other overhead costs incurred by the AMC, such as rent, utilities, janitorial, liability insurance, equipment, supplies, advertising, legal, accounting, technology, and more. Nor do they reflect the extensive sales and marketing or travel and entertainment expenses that come with marketing the AMC and its fee panel appraisers to national and regional lenders. There will be varying opinions on AMCs and their role in the vender management process. It is not suggested that every lender should use an AMC or that every appraiser should
accomplished in this manner. Separating these processes removes most of the opportunity and temptation for participants to become involved in collusion, which is the root of most valuation fraud cases. AMCs also represent our best option for holding down mortgage fee cost to consumers and encouraging competition among appraisers. In these trying economic
times given the mortgage crisis and the economic meltdown, AMCs represent a bright ray of positive direction for the mortgage industry. ❍
Finally, there can be no question that AMCs offer by far the best possible solution to deter mortgage fraud. The true separation of the lending and appraisal processes can only be
Charlie W. Elliott, JR., MAI, SRA, is president of Elliott & Company Appraisers, a national real estate appraisal company. He can be reached at (800) 854-5889, charlie@elliottco.com or through the company’s Web site at www.appraisalsanywhere.com. Fall 2009 — TAVMA 9
New Media
Getting Started with Social Media: The Importance of the Profile What you say about yourself is the fuel that drives the conversation. By Rick Grant ocial media is red hot right now because it finally allows the Internet to be the personal connector that the World Wide Web promised from the beginning. It was never enough to create a web of information. People wanted to connect. We saw that on Compuserve and AOL back in the very beginning. It’s still true today. We now have LinkedIn, Facebook, MySpace, Twitter, blogs, online video and many other tools that allow us to connect with one another. These tools are very useful for allowing friends from the real world to stay in touch, but what about people who don’t know each other? That’s the most common case among people who are using Social Media as a source of new business. What’s the online equivalent of a handshake? Or even a step before that, what’s the online equivalent of a first impression. In the real world, we take in much of what we’ll later remember about a person over a very short period of time, which usually occurs the first time we see the person. Our brains factor in the person’s general look (features, height, clothing, posture, etc.) as well as attitude, the tenor of voice, strength of handshake and many other attributes when forming a first impression. That impression is later very difficult for a person to overcome. The very same thing is true in the online world, but instead of the per-
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son’s physical self that gets that first glance, it’s the person’s profile. Where you can put profile information Just about every social media site provides the user with some place to put a personal profile. Many people ignore this, to their detriment. The profile provides an opportunity to tell people how you would like them to see you. A well written profile will bring you to the attention of people who see the value you bring, and that will lead to new business. Your opportunity in this area differs by the social media outlet, so we’ll take a number of popular social media platforms and share some information specific to each that can help you make a great first impression online. Linkedin.com Arguably the No. 1 site on the web for professional business executives, LinkedIn boasts over 45 million users worldwide. It offers a wide range of opportunities for the profile writer and rivals the resume for its power to attract new opportunities. e first section of the LinkedIn profile allows users to create a headline that describes themselves. is is the place to attract attention quickly. Users are given space to write a summary that describes themselves and even gives them a place to list their specialties. What follows that is similar in most respects to a resume, where users can enter any information about their past
work experience they choose. But perhaps the best part of LinkedIn is the ability to solicit recommendations quickly and easily from those you have worked with in the past. With a single click, you can send a request to anyone who worked at the same company during the same period who is also a registered LinkedIn user. LinkedIn allows outbound links to your current company website and any blogs you have. It also makes certain application interfaces available that will allow you to share information from a WordPress blog, send updates from TripIt and more. To update your profile, click on “Edit My Profile” in the left sidebar. Facebook.com Facebook may have started out as a way for college students to stay connected, but it has quickly moved into the business world. e ability to add pages and attract fans to a Facebook site and the new functionality that extends the site’s social media components to other websites has done a great deal to increase its popularity. The Facebook profile offers the user four basic sections of information: basic information, personal information, contact information and education & work. Together, these sections offer a user a great deal of space to tell the world who they are. Some of the questions are quite personal in nature, which springs from the site’s collegiate beginnings. You can tell the world that you’re interested in hooking up with
others, but it’s not recommended if you hope to use the site for business purposes. To edit your profile on Facebook, click on the “Edit my profile” button on the left underneath your profile picture. Twitter.com Micro-blogging platforms like Twitter are becoming more popular, partly because celebrities have found them useful ways to stay in touch with an audience. It can be very difficult to know if it’s actually the celebrity posting to the services, so it’s easier for these professionals to outsource the function. Visitors to a user’s Twitter page generally end up on the user’s profile, which is the most recent “tweets” and some basic information about the user. To update the profile, click on “Settings” at the top of the page. Users are only allowed 160 characters to describe themselves in their Twitter bio, but they can point to a website that contains more information. They can also specify where in the world they are located and what language they speak. For most folks on Twitter, it’s the profile picture that makes the first impression. Photos should be square and not larger than 700k. The service will automatically reduce the picture to fit on the profile. Visitors who click on the picture will be taken to a page that includes the full sized version. Google Even Google has a place for users to enter profile information. While not the most social of the social media sites, you never know who might check you out there. Sign into your Google account and then click on the “My Account” button at the top of the page. If you haven’t created a public profile yet, Google will alert you to this fact and provide a link.
By following the link, you can add a bunch of personal information and even choose a unique URL that others can use to find out more about you. There is room to put information about where you grew up, what schools you attended and where you work now. There’s even a place to put information about your personality, complete with formatting tools. It’s not clear how often people are
vide the information that people looking for someone like you will hope to find. Don’t waste space talking about aspects of your personality that would not be interesting to the people you want to attract. Keep the information short and concise and make sure that at least one other person you trust reads the material before you post it. Make sure you tell them
reading Google profiles, but the company clearly hopes people will adopt them and use them as central locations for information about themselves.
what kinds of contacts you’re hoping to make online and see if they agree that this information will get that job done. As you make new contacts, be sure to analyze them and make sure that your profile is attracting the kinds of people you want to meet. If it’s not, adjust it. Finally, don’t forget to update your profile when things in your life change ❍ to keep it fresh and accurate.
The basics of a good profile When preparing information to upload to any social media site, be sure to consider your goals. You should try, as best you can without providing inaccurate or misleading information, to pro-
Fall 2009 — TAVMA 11
Marketing
When it Comes to Marketing, it’s Better to be Effective than “Cutting Edge” Social media and other next-gen approaches won’t help if your strategy and message aren’t well-planned. By Brian Rieger t is very easy to get caught up in the buzz over social media (LinkedIn, Twitter, Facebook) these days. What’s not to like? ey’re relatively easy to use.ey can offer instant access to customers, prospects and vendors. And they’re basically free.
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However, the backlash in the settlement services and mortgage industry is already beginning. Many executives, after dutifully registering for an account and painstakingly building some kind of following, are still waiting for the avalanche of sales to roll in. e grumbling is becoming more audible: “I haven’t gotten a single sale out of Twitter.”“I don’t see the benefit of being on LinkedIn—I just get pitched all the time.” Well, they’re right. To a degree. But the problem is this. Any time a new gadget or toy comes along, it’s quite natural to ascribe to it mystical powers and silver bullet-like attributes. Ask some marketing pros, and they’ll tell you social media is the way to go, no matter what. ey’re right, but they’re also wrong. If you don’t have an effective strategy for using social media, you might as well close your account.at’s right. I’ll be the first to say it. Social media, no more or less than Web advertising, direct mail or even telemarketing, is a tool. It is neither magical nor the answer to all questions. It’s just a tool. And, like any tool, it’s only as effective as you make it. So what does 12 TAVMA — Fall 2009
one do to make it work? Just like any business function, or any marketing you do, it needs a foundation: a strategy. Blast marketing is dead If you haven’t heard yet, the verdict is in: the era of “blast” or “broadcast” marketing is long over. It has been killed by years of bad advertising and, more importantly, the rise of customization and choice for the consumer, led in large part by the universal adoption of almost all things Internet. Web-based pioneers like Amazon, Google and the like have conditioned the modern consumer (B2C and B2B alike) to expect choice in the market place, and to expect a customized or even personalized pitch as he or she makes that choice. Moreover, the consumer expects not to be bombarded by information about products in which he or she is not interested at the moment. Rather, the consumer expects to be left alone (more or less) until such time that he or she chooses to learn about your brand, at which time he or she expects comprehensive and accurate information almost immediately. Broad advertising does have its purposes, to be sure. But if you are working on a limited budget, or anticipating immediate returns on your marketing dollar, widespread advertising is probably not your first or best option. To reach the market today, a marketer needs to consider three things long before choosing the medium (media relations, social media, e-mail marketing, etc.). Customization, per-
sonalization and value must all be elements of the message you choose to present to your prospect. In the world of the savvy (and fussy) customer, the absence of any of these three factors will most likely result in your message being discarded. Customization If you are marketing in 2009, your one-size-fits-all message fits no one. The modern consumer is absolutely inundated with blast messaging, SPAM, legitimate marketing and data or information of all shapes and sizes. We work longer and harder, and have increasingly less time to ponder products or services for which we are not, at the moment, in the market. When we do, we have laptops, tablets and notebooks, Blackberries, iPhones and a myriad of other electronic tethers providing a steady torrent of information. As a result, we’ve developed our own mental SPAM-filters, if you will. When we see clichés and buzzwords, when we get a message that is clearly going to everyone and anyone who can fog a mirror, or when we have to work at all (e.g. read more than two lines to figure out what the product even is) to determine the point of a marketing piece, we press the “delete” key, or we toss the piece in the garbage. And that’s assuming we get it in the first place. Although “deliverability,” or the ability to get an email or other marketing piece in front of a target in the first place, is another story for another day, if your message doesn’t clearly and effectively spell out
your value proposition and differentiate it from that of your competitor, as well as why the reader should care, then your message is pointless. Customize your message to what makes your product different, and to the needs of your target market. Personalization Although there is overlap with customization, personalization and customization are not identical. As members of an Internet-driven world of communications, we have come to expect better treatment from our advertising and marketing. Anybody can blast a message. But doing so implies to me that I’m just a number and I’m not important to the sender of the message unless I seek him out. Is that a routine message your sales people deliver? Probably not. Blame Amazon or the countless other effective Internet marketers, but a message that doesn’t imply that it understands its recipient and that its recipient is not just a number, is best left unsent. Personalization goes beyond having a name in the subject line. Sometimes, that’s impractical or impossible, especially as privacy concerns increase. However, if you’re going to offer your solution to a market and anticipate its needs, your message had better indicate that you know who your recipient is, and what, generally, folks in your market are looking for. This can be as simple as using smaller but more accurate marketing lists (e.g. one message for title agents, another for title technology providers, etc.), more copy about the person reading the e-mail, and so on. Value Your prospects today no longer have the time or tolerance to read the old fashioned “pitch.” When they receive a
letter, e-mail or text, they likely want the actual message to be of some value to them—beyond offering a product that purports to solve their needs. Hence, the rise of newsletters or the increasing use of media relations to convey more subtle marketing messages. As viewers and users become more savvy and less inclined to tolerate a bare “pitch,” advertisers and marketers seek to insert their messages into content-driven forums
such as trade publication Web sites, industry forums and, yes, social media. e problem, in many cases, is that the pitch isn’t adjusted accordingly. Too many times, one will find a pitch more appropriately placed in an advertisement in the middle of a discussion forum on LinkedIn. When one stops to consider that many executives go to discussion forums to learn something or hear from colleagues and peers, one realizes that the equivalent of a Craig’s List posting is not going to do much other than irritate the viewer. In short, if you’re doing an advertisement in the appropriate place, go right ahead and pitch. But if you’re trying to get the message out in a more sophisticated forum (the media, social media, a trade conference), your message will need to be crafted to deliver some kind of informational or educational value (beyond the fact that your product can help).
I often tell clients that, in using media relations, one is better off discussing the need or the problem in a public relations forum, rather than the solution (the product). As a result, their quotes or comments are the natural segue to the solution (said product). If you’re already using social media,and you’re using a message strategy that makes use of customization, personalization and value, you’re probably getting some results. But realize that there are other perfectly effective ways to reach your audience. Twitter won’t work as a messaging tool if your market hasn’t adopted it yet.ere are plenty of good ole’ fashioned tactics in the world that work just as effectively, such as sales letters (possibly sent by e-mail), customer-referral programs (within the realm of RESPA, of course) or even simple, direct e-mail marketing.e point is that companies shouldn’t get caught up in whether they’ll be Tweeting, blogging, cruising LinkedIn or going viral. Not until they’ve figured out what their markets want, and what they really need to say. ❍
About the author Brian Rieger is the principal of True Impact Communications (www.trueimpactcommunications.com), a full-service marketing and public relations agency serving the mortgage and settlement services industry. He has served as a trusted advisor to large and small firms in the industry for seven years. Brian was also the Vice President of Seminars and Studies at publisher October Research Corporation for five years. You can contact Brian at (330) 348-1678, or at brian@trueimpactcommunications.com, and you can see his weekly blog (on similar topics) at www.trueimpact communications.com/blog. Fall 2009 — TAVMA 13
Q & A
A Conversation with Ed Krug Q: How has this industry performed at weathering the current downturn?
What has happened through the downturn is that vendor management companies have been forced to really analyze their strengths. A strength that vendor management companies have always had is their ability to diversify. For as long
as I’ve been doing this, almost 35 years, lenders have had a very bad habit, in a downturn, of laying off qualified, competent processors and underwriters and outsourcing those functions to companies that can perform those services for them. en when they’re busy again they can’t find enough qualified people. is all creates additional pressures and actually benefits
About Ed Krug Ed Krug has been a practicing attorney for the past 36 years. He graduated from Duquesne University in Pittsburgh in 1968 and went on to receive his law degree from its Law School in 1972. Prior to establishing his own firm in 1975, he commenced his law
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practice as an associate counsel with Alter Wright & Barron. Throughout his career, Krug’s law practice has consistently focused on real estate, lending and title insurance. In 1997, he joined Stewart Title Guaranty Company as Western Pennsylvania Man-
ager and Counsel and in 1999 was promoted to Vice President for the company’s multistate division. In 2001, Krug was recruited to serve as President and General Counsel for Service Link, LP, a Pittsburghbased Vendor Management Company specializing in title and settlement of residential transactions on a multi-state level. In 2005, he returned to private practice, specializing in small balance commercial lending and closings. Krug has been a licensed title insurance agent in Pennsylvania since 1977 and has been licensed as a title agent in 21 additional states. He has served as a Counsel, Director and past President of TAVMA, The Title Appraisal Vendor Management Association. He has also served on the Board of Directors of RESPRO, the Real Estate Service Providers Organization.
the VMCs and AMCs who perform those kinds of services, who have been more successful at managing their business and branching out to other product types.
Q:
Q:
I think the essential thing is to educate not only the public but also the other professional organizations that represent appraisers, Realtors and brokers so that they understand that we’re not the ones creating the problem. We are the natural outsourced entity. I think TAVMA has to continue to confront, be proactive, and begin publishing an explanation of the real role of AMCs and VMCs in the appraisal process. We help the venders get the job done, but we are very much aware of the dynamics that have changed as a result of the HVCC.
How did technology work for the industry during this downturn?
I think the technology has always been one of the largest expenditures for any of the VMCs and AMCs. They know they have to be able to provide delivery as an automated process. They learned long ago that the key to their business growth was to do it cheaper, faster - that’s what the lenders wanted. We’ve seen the technology budgets for most vendor management companies increase over the years and maintain that competitive edge. Even through the downturn technology has been pretty consistently state-of-the-art. The vendor management companies still continue to have the best delivery portals for two-way communication.
Q:
How is the industry handling HVCC?
Appraisers were feeling a lot of pressure from the brokers or the Realtors who needed a certain valuation to make their deal work. e HVCC now removes that from the process. is creates a lot of negativity toward the HVCC and therefore toward appraisal management companies because lenders now have to do all the ordering themselves.e problem is, it’s not just ordering one appraisal in one area - you’re talking thousands - and the only way they can effectively do it is by using AMCs or VMCs. is puts a lot of focus on diminished control of the deal and lenders blame AMC’s for causing their problems. Another issue is appraisal portability. Brokers used to shop appraisals among lenders as part of the loan. Now, the appraisal must be ordered up front by a lender. To transfer the appraisal the lender has to certify that it was ordered and performed according to the Code. When you look at the dynamics, you see that it's not going to work for some lenders. e HVCC was a wonderful exercise in the abstract in that if I only had one appraisal this is how it should run through the system. But it doesn't account for how the industry works today. We support the HVCC because of its intentions in keeping the appraiser and originator at arm’s-length but, in operation, it has made it more difficult for commerce in the broker channel in mortgage lending. Yet like most everything else in mortgage lending it will work out over time.
Is there anything the vendor management industry should be doing now?
Q:
What impact has unauthorized practice of law had on the industry?
In the recent case in Massachusetts, the resulting decision that there was a violation of the commerce clause of the Constitution by REBA is really critical for TAVMA members because TAVMA has always sought to have a level playing field in every state where their members do business. But if you go state-bystate with individual statutes,there is going to be a different standard in each state.is gave TAVMA the option of conforming to the practices of the strictest states to avoid complication. e cost impact is significant, not only to the industry but also to the consumer. e Federal Trade Commission agrees with us on the idea that, when the consumer does not have a choice, costs tend to increase because there is no competition. When certain processes are not deemed to be the practice of law in the majority of states, the question arises as to why it is the practice of law in your state. I think that’s because the Bar Associations have carved out in a monopolistic way a piece of commerce that they want to control. TAVMA members have tried to work in every state with the customs practices and maybe the requirements of the bar in that state but then there are times when the position just becomes totalitarian.
Q:
Is there anything that our readers can do to help?
ey have to be conscious of the antagonism that’s being created in the industry. When objections are raised, they’ve got to be capable of educating people (clients and antagonists alike) that the industry has changed. It is now a nationwide business that is very competitive among major lenders and the only way that they can be adequately served is by an efficient, one stop ❍ solution - and our members represent that formula. Fall 2009 — TAVMA 15