TAVMA Newsletter Spring 2008
Appraisal Pressure The GSEs Agree to Sweeping Changes How will it affect your business? Q&A with Mark Oliver
2008 Conference & Exposition
Growing Your Business: Lessons from a Difficult Market
Finding New Business NOW Economic Futurist Keynote speaker, Jeff Thredgold will take the audience on an entertaining, informative, and humorous “tour” of the U.S. economy, financial markets, education, employment, competition, government, the global economy,
What does it take to offer what today’s real estate home finance industry professionals need? How can you get some of this business today? Our panelists have the answers!
technology, and the future.
Industry Leaders Roundtable
Interactive Discussions and Workshops x x
In this lively roundtable session, an All-Star panel of leaders and pioneers in the settlement services industry will engage the audience in a frank discussion about the state of the industry and ways to take advantage of the current down-market.
Appraisal Management Roundtable New Markets + Diversification = Business Growth
Effective Process Engineering in Today’s Environment Growing firms today must fully leverage technology on smaller budgets. How is it possible to do more, faster with less? Trends, new technologies, success stories and pitfalls to avoid will be featured.
www.tavma.ennectevent.com/2008conference
Table of Contents Executive Director’s Report Leadership Case Study Cover Story: Appraisal Pressure The Future of Vendor Management Q&A: Mark Oliver
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More on the Web Regulatory News: The GSE’s new agreement Legislative News: Texas & Virginia update Reports: Vendor Fees in AppraiseUtopia TAVMA Matters: The Quest for Leadership Find this and more at www.tavma.com!
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.
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From the Executive Director
Prepare to Grow Your Business
Trends are emerging throughout the settlement services industry. Some are positive, some are disturbing, and a few are very scary. One of the positive trends seems to be a transition from the Information Age, to what futurist and author Daniel Pink calls the Conceptual Age. In the Conceptual Age, the lifeblood of businesses and industries is the production, exchange, and cultivation of ideas. Access to information is no longer enough; competitors have the same information you do. You have to do something with information. It must be nurtured, shaped, and translated into new and better and more abstract creative ideas. In the Conceptual Age, winners and losers
interactive moderator-led roundtable discussion environment. Economic futurist Jeff Thredgold kicks off the show with an entertaining, informative, and humorous “tour” of the U.S. economy, financial markets, education, employment, competition, government, the global economy, technology, and the future. We’ve also assembled another Industry Leaders Roundtable, a panel of industry experts and pioneers, for a candid assessment of the industry and strategies you can use to gain market share in the current market. The conference is all about cutting edge business strategies for the Conceptual Age. You’ll learn how
2008 TAVMA Conference & Exposition, April 7-9, 2008, at the Royal Pacific Resort in Orlando, Florida.
will be judged on much more than access to information. Where do you start learning about the Conceptual Age as it relates to our industry? At the 2008 TAVMA Conference & Exposition, of course. The 2008 Conference & Expo will be held April 7-9, 2008, at the Royal Pacific Resort in Orlando, Florida. There, thought leaders from around the country meet in a highly
to grow your firm by leveraging technology, new products and services, title, appraisal and closing management, new opportunities and threats to the business model. In addition, you’ll learn how to market and promote your business using simple, effective, and affordable marketing tactics. Whether you’re in an up or a down cycle, these tactics need to be part of your marketing plan.
Phil Schulman, a partner at Kirkpatrick & Lockhart Preston Gates Ellis LLP, and one of our most popular speakers, joins us once again to talk about the past, present, and future of the financial services industry. Phil will also moderate the closing session, a roundtable discussion about current regulatory affairs. This session goes deep into “all things legal,” and you won’t want to miss it! Following the conference, TAVMA will host a golf outing at the Golden Bear Club at Keenes Pointe. The cost of the golf outing is only $125 per player. Golf outing proceeds benefit TAVMA’s legislative activities and public relations funds. Sign up today for the 2008 TAVMA Conference & Exposition, April 7-9, 2008, at the Royal Pacific Resort in Orlando, Florida. Additional information and registration forms are available on the Web, at www.tavma. ennectevent.com/2008conference. The road to the Conceptual Age begins in Orlando. Join us! • Jeff Schurman, Executive Director
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Leadership Case Study
DataSearch
In this season of uncertainty, we set out to find a business owner who exemplifies some of the leadership characteristics that are so abundant in our industry. Ben Renko, Sr., is the president of DataSearch, Inc., and a founding member and immediate past-president of TAVMA. We recently caught up with Ben to get his insights on leadership in difficult times.
The Company DataSearch, Inc., is a nationwide provider of title, appraisal and closing services. Based in Glen Burnie, MD, DataSearch has built its reputation by consistently delivering fast and accurate information and services. Renko attributes the company’s success to retaining great people and cultivating innovation, encouragement, personal and professional development, and freedom to make independent decisions.
at DataSearch spend a lot of time communicating with employees at every level of the organization. Our conversation with Ben Renko, Sr., centers on the need for open communication with the workforce amidst a mortgage environment showing no immediate signs of recovery.
“When they feel a part of something bigger people tend to stay focused.” The Solution Though the company has not had any layoffs, executives share with employees the possibility should business stumble. Renko believes that encouraging communication and involving workers in business planning inspires commitment. “I don’t think we have anyone out there thinking how bad the market is or
“Small companies with a group of motivated employees and a strategic plan involve everybody.” The Challenge A reputation that turns on a commitment to excellence and customer-focused workforce challenges DataSearch to focus on opportunities of the future rather then circumstances past and present. With the recent decline in sub-prime and refinance lending activity – key drivers of the vendor management industry – executives
business plan,” said Renko. “Then we break the plan out in terms of who-does-what and the results expected. Then we track it. If we set a target to make say 5 sales prospecting calls a day, we keep track, and ask ourselves if that number is returning sufficient return to reach our goals. Maybe we
weather or not they will be laid off,” Renko said. “Small companies with a group of motivated employees and a strategic plan involve everybody. When they feel a part of something bigger people tend to stay focused. I don’t see an employee like that going somewhere else or sitting around worrying about how bad the industry is doing. “Everyone has helped with the
should be making 10 calls a day; or 20 a day. “We have always found that when the market turns down we pick up new customers. Last year about 25 percent of our customers were new. None are doing as much volume as two years ago, but over the long haul when this all works out we will be in tremendous shape,” said Renko.
Outlook Renko believes that what goes around comes around, and every 5-10 years the cycle repeats. “The difference in this cycle is that the reaction is going to be longer. Everyone has a different idea about the turn around. Some say that the second half of this year we may see a spark or something, but I don’t know how long it is going to last. We are going to sustain this down side longer than we have in the past,” Renko concluded. •
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Cover Story
Appraisal Pressure Toward a Workable Solution During the last year, the problems in the real estate market have brought increased attention to the issue of appraisal values and the impact that improper pressure could have on the market. More than a dozen states have new laws to address the issue of appraisal independence (AI). All of the federal banking regulators have issued specific guidelines about it. The appraisal industry has lobbied Congress about it for years, and there are now proposals in Congress for new federal laws to regulate the issue. An objective discussion of AI and appraiser pressure is needed to put it in perspective, and to develop clear, unambiguous solutions. The industry and the public deserve a workable set of rules that will be understood by all parties and have the desired result with as few unexpected consequences as possible. It will not help the problem if we overreact, or adopt vague standards that will complicate the situation further. TAVMA As A Forum for the AI Issue TAVMA has a unique perspective on the AI issue since many of its members are appraisal management companies (AMCs) and large appraisal shops. TAVMA has followed the issue closely for years and proposed a workable solution as early as 2004. Further, we need to engage in the dialogue now, as Congress adopts new laws
to address the AI issue. This article will seek to: (1) Define the AI problem and review the current state laws that address it; and (2) Propose a workable solution and statutory proposal that could resolve the issue at both the state and federal levels. TAVMA is uniquely positioned to describe the problem, since its member companies manage millions of appraisals every year and are on the “front lines” of the issue every day. In fact, TAVMA believes that AMCs are part of the solution and can provide a critical firewall function for any new AI rules that may be required by legislation or regulation. A second article in the next Newsletter will update TAVMA members on the status of the current federal AI proposals, as well as the recent “Code of Conduct” that has been adopted by the Government Sponsored Enterprises (GSEs, Fannie Mae and Freddie Mac.) Both the federal and GSE proposals are controversial, and the GSE Code was adopted literally as this article went to print.
The AI Problem Appraiser pressure is not a new problem. It was a key consideration in the adoption of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) and the Uniform Standards of Professional
Appraisal Practice (USPAP), intended to address the savings and loan crisis of the ‘80s and then used in the New England real estate meltdown of the ‘90s. Therefore, it is clear that the real estate industry and its regulators are still struggling to develop effective solutions to halt this longstanding problem. The adoption of FIRREA and USPAP made the state appraisal boards responsible for licensing and regulating appraisers. USPAP contains guidelines and ethical standards that were meant to assure that appraisers performed objective, unbiased opinions of value. However, the state boards only have jurisdiction over the appraisers themselves, not the other parties involved with RE transactions. During the last 20+ years, it has been the appraiser’s duty to avoid conflicts and resist improper pressure for predetermined values. However, during the last five years, appraisers have increasingly complained to their state boards and state legislators about the pressure they are under, and many states have responded with new laws to address the issue.
A. The Interested Parties The first complicating factor in the AI issue is the number of “interested parties” involved with all purchase/ sale transactions. There are three
5 basic groups or sets of interested parties in most RE transactions – the borrower (consumer); RE agents and/or brokers (sales); and lenders and mortgage brokers (lenders and loan agents). Finally, the appraiser is needed as an “uninterested” professional to confirm the underlying value for the lender to underwrite the loan. Technically, although often forgotten, FIRREA provides that the appraiser’s only “client” is the lender in loan-related transactions. All of the interested parties want the value for the deal “to work,” so the transaction can go forward. However, the appraiser must maintain objectivity and provide an unbiased opinion of value. Although the other participants have their own interests at stake, in the final analysis, the “go/no-go” decision is often made by the appraiser. So, there is an inherent tension between the appraiser and all of
the other parties to the transaction. In a rising-value market, this usually does not present the same kind of trouble as can occur in declining markets.
B. Pressure in Rising vs. Declining Markets Every property seller wants his or her property to be valued as highly as possible – that’s human nature. Even during upwardtrending markets, sellers are often disappointed that the appraisal did not “come in” quite as high as they had hoped. But, such value differences are usually resolved, the parties come to an agreement, and the transaction closes. Unfortunately, during declining markets, a “disappointing” appraisal value can have serious adverse consequences for all of the interested parties in a real estate sales scenario. Each of them feels
pressure about the value; the seller may be found to be “underwater” on his mortgage, and unable to simply pay-it-off by selling; the real estate agent/broker will not make their fee if the deal fails, and will worry about the growing impact that RE devaluation will have on their local markets; and the mortgage broker and/or lender will not be able to receive a commission, or make a loan, respectively. Only the buyer can benefit in such a declining market scenario. The negative impacts of a low or “cut” value in refinance transactions can be just as painful. As described currently in mainstream media, borrowers in declining markets are often unable to refinance out of adjustable-rate mortgages, or to cash-out any equity from their home, because, for the first time in almost a decade, there isn’t any equity in the property. As values faltered, and foreclosures
6 began to rise in number, all of the parties to almost every transaction became acutely aware of the critical valuation decision. The appraised value became the key, and all eyes focused on the appraiser.
C. The Appraiser’s Role Has Not Changed The appraiser is required to play an objective and uninterested role in the process. Unfortunately,
during both the last period of rapid value increases and the current falling values and prices in many markets, appraisers have said that they are under increased pressure from all parties to the transaction. Recent industry surveys by October Research have confirmed this feeling among the appraisers. (Such surveys also confirm the important role that AMCs can play in managing the whole appraisal process and the AI issue specifically.) However, it is important to note that the
basic role of the appraiser as a non-interested, objective part of the RE process has not changed. The pressure upon them may have increased, but they must, to borrow a sporting phrase, “hold-the-line.” Unfortunately, it has come to the point that appraisers often feel that any communication about the value is a form of improper pressure. This problem was recently addressed in a report by the Mortgage Bankers Association of America, “Appraiser Independence: Issues from a Business Perspective” (February 2008). Therefore, it is clear that some additional guidelines are needed to more clearly address the problem. The existing rules should not be replaced, but strengthened as narrowly and objectively as possible to protect appraisers from truly improper pressure. In the final analysis, appraisers themselves must continue to make the final decisions under USPAP about the nature of the influence upon them and their value opinion. In sum, the AI problem is not new and has been controlled by USPAP and Federal guidance for years. Improper pressure upon appraisers must be more clearly defined and prohibited. The line between appropriate communications with the interested parties and improper pressure must be drawn, so that appraisers can continue to perform their critical function in an appropriate way. New, objective definitions are needed to clearly identify and address the problem.
The State Law Response There are now at least fourteen (14) states that have laws addressing the AI issue and there are numerous new proposals being made as this article goes to print. TAVMA has tried to keep up with the various
7 proposals, and has maintained a Survey of State AI Laws located at http://www.tavma.org/images/ tavma_state%20ai%20laws_ 102407.pdf. (Note: It is maintained by volunteers and the proposals have changed and keep coming, so it should be viewed as an information tool rather than a formal compliance guide.) One of the earliest states to address the AI issue was Arkansas, which adopted the following provisions in 2006 in the language of bills relating to guidelines for mortgage lending: “… a licensee may not fail to promptly pay for services…, (or) influence or attempt to influence through coercion, extortion or bribery the development, reporting, result or review of a real estate appraisal sought in connection with a mortgage loan ( AR HB 424 / SB 272).” Many states have adopted similar proposals, with some adding extra defining words or restrictions upon behavior that could be pressure. Unfortunately, some states have adopted more subjective language that allows an appraiser to decide whether s/he “felt” pressured. Examples of such unworkable, subjective wording include “intimidate” and “threaten.” However, California recently adopted SB 223 which follows the Arkansas model and provides a set of objective standards by prohibiting any “coercion, bribery or extortion.” All other descriptive or subjective words tend to be covered by and to fall under those three, broadly defined terms. Further, those three words (coercion, bribery, extortion) define criminal behavior, are found in all state criminal codes, and have clearly defined meanings under existing state laws. The use of preexisting and already defined terms is helpful to assure that everyone knows what they mean. That is
very different than trying to define how and when someone has been intimidated, or threatened. The state models are instructive because they were the first to recognize the problem “in the trenches.” State efforts to adopt new laws have provided a valuable starting point and testing forum to evaluate the language and options available to address AI. A recent proposal in South Carolina is instructive. HB 4596 would include all of the interested parties to a real estate transaction as subject to the
has died in committee in the SC General Assembly. TAVMA will coordinate future discussions with the sponsors and other interested parties to arrive at a more workable alternative. A similar bill is now pending in Hawaii, and there are numerous other states that have already adopted new, subjective AI language, referenced above. Unfortunately, there has been no coordination of the state AI proposals, and they contain many different definitions and solutions to the AI problem. After considering
“… a licensee may not fail to promptly pay for services…, (or) influence or attempt to influence through coercion, extortion or bribery the development, reporting, result or review of a real estate appraisal sought in connection with a mortgage loan ( AR HB 424 / SB 272).” new law. It would ban “coercion, bribery and extortion” as improper pressure, but added “blacklisting, boycott, intimidation and threat” as newly defined offenses as well as “comp checking.” It would make such offenses an unfair trade practice under SC state law. Although definitions for the above, new terms are provided, they will not be able to clarify the personal, subjective issues that often arise when an appraiser “feels” intimidated. Or, when an appraiser has performed poorly by objective criteria in related to value issues, and is placed on a “watch list,” that action should not be assumed to be improper. However, some of the SC proposal has merit and, hopefully, it can be amended to eliminate the unworkable, subjective language and focus upon the clear prohibition of improper coercion, bribery or extortion. As of the time of this article, it appears that the bill
all of the options developed in the “laboratory” of state legislatures, TAVMA believes that the AR and CA models provide the best, most workable proposals.
TAVMA’s Position As we stated in a letter to Representative Paul Kanjorski last November, in commenting upon the federal AI proposals contained in H.R. 3837: TAVMA has worked diligently to advance a uniform definition of what constitutes improper client pressure on appraisers. Several states, most recently California, have adopted language within appraisal legislation that defines illegal client pressure in this way: “No person shall knowingly bribe, coerce, or extort a certificate holder or licensee for the purpose of
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corrupting or improperly influencing the independent judgment of the certificate holder or licensee. However, this section shall not prohibit a lender, mortgage banker or mortgage broker from asking the appraiser to do one or more of the following: (1) consider additional, appropriate property information, (2) provide further detail, substantiation or explanation for the appraiser’s value conclusion, or (3) correct errors in the appraisal report.” TAVMA believes that the use of the legally defined terms bribe, coerce, and extort is far preferable to overly subjective words like intimidate, instruct, compensate or influence that can undermine the effectiveness of state anti-pressure statutes. TAVMA believes that its position on appraiser independence and inappropriate client pressure is the most common-sense and legally enforceable position on the issue. Moreover, we are convinced that the appraisal management industry is uniquely positioned to keep the appraiser and client at arms-length. Since writing that letter, the increasing proposals for state AI laws have continued to demonstrate the national nature of the problem, which calls for a federal solution. H.R. 3837 is still pending in Congress, and TAVMA members should stay informed about this important issue. Whatever is adopted during 2008 could drastically change the way
that appraisal work is conducted throughout the country.
Conclusion When FIRREA and USPAP were adopted, the individual appraiser was required to carry the ethical burden of avoiding pressure and resisting any influence that might affect an objective appraisal. Now, state legislatures have increasingly decided that more regulation is needed to assure that appraisers are protected from improper pressure. TAVMA believes that an objective federal response is needed as soon as possible, and that AMCs should play an important role in the overall solution. Perhaps AMCs should employ more licensed, staff appraisers to assure that AI issues are a higher priority. AMCs could also offer another service to address the AI problem: AMCs should create AI Hotlines or call-in numbers for appraisers to complain about improper pressure. This type of value-added service does not require legislation to implement, and would be a logical new service to add to the AMC business model. During the last year, and for the next two years at least, most observers of the RE industry expect a significant increase in the number of foreclosures. Delinquency and default rates are moving higher, and RE values continue to soften. Just as there has been “pressure”
felt by the appraisers, our elected officials at both the state and federal levels are being lobbied heavily for sweeping reforms and consumer assistance programs. Unfortunately, this type of crisis mentality can lead to overreaction and short-sighted solutions with unintended consequences for the longer term. Whatever wording is finally chosen, it must be clear and understood the same way by all who read it: the wording must be chosen carefully to eliminate ambiguity. Personal or subjective “feelings” and interpretations must be avoided to be workable. TAVMA urges Congress to take a step-back from the current rush to solutions. As described previously herein, there are workable solutions to the AI problem, but there are others that go too far and could create untenable requirements for the RE and mortgage lending industries. We urge Congress to have the GAO study the problem and for a rational discussion of the objective standards that will be needed to resolve the AI issue. It is clear that only a federal solution will be able to effectively address the AI problem, with preemption, so that inconsistent state laws will not create a “Balkanized,” patchwork effect. Federal law and regulations have always formed the backbone for issues of national scope and for the appraisal industry in particular. Finally, TAVMA believes that the AMC business model is actually a part of the solution. AMCs acting as a “middle manager” between the parties involved in the appraisal process should be able to provide a guarantee of separation and control over the appraisal pressure issues. AMCs may be the only way to effectively control the parties, the ordering process and the appraiser’s ability to avoid pressure and deliver an impartial appraisal. •
Vendor Management
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Going the way of the Dinosaur? Don’t bet on it!
By Edward J. Krug, Esq.
Recently, there has been a lot of turmoil in the credit and mortgage industry. Naturally this has impacted those who provide their services. Have we turned the corner and do these events signal the demise of vendor management? There have been consolidations and there have been implosions among a handful of independent vendor management companies. There certainly have been layoffs and not unexpectedly. Does all of this suggest that the era of the VMC’s has passed? Some have already pronounced its death. From my perspective, the era has not passed and frankly I am quite bullish about its future. The entire real estate industry, let alone the settlement services segment, rarely understand or even use the term “vendor management”. It seems to be a title given by its various original founders. By its terms it refers to a company that manages the products provided by
third party service providers such as abstractors, appraisers, building inspectors, closers, etc. With that description many companies would fit into that title though the use of the term is foreign to them. By and large, VMC’s are title agencies licensed on a multi-state basis who also provide services ancillary to title insurance such as appraisals, closings, flood reports and many other products nationwide. From this standpoint, there are a very large number of these entities and many more are being created though they may never use the term vendor management. Vendor management has grown from a real estate services outsource firm for lending institutions to a “one stop shop.” As the prominent members of the mortgage industry have moved from local and regional shops to nationwide lending thanks to bulk mail advertising, the internet as well as other means, the process
of centralization has occurred. In order to establish greater control over the quality and uniformity of their products and to meet the demands of the secondary markets, these institutions established mortgage processing and underwriting centers throughout the country serving all fifty states. The loan processor in Kansas cannot afford to spend its time searching through exhaustive nationwide lists of vendors to provide all of the third party reports it requires. That lender and that processor look for a one stop solution to these services and therefore the VMC becomes the natural alternative. Whether that lender is national in scope or regional in its footprint there are VMC service providers ready and willing to render those services. The highly competitive nature of the mortgage origination business and the trillions of dollars of servicing portfolios require a faster, cheaper and better process.
10 The VMC has answered this need. In an interesting chicken and egg scenario, the lending industry and VMC model have evolved together in a symbiotic way. One could not exist without the other. With Bank of America’s takeover of Countrywide and the likely acquisition of leading mortgage lenders such as WAMU, Indy Mac and others, the industry may change faces but it will not alter the successful platform operated by these lenders. Their acquisitions are not only the result of overall performance issues because of the imbalance of credit risk in their portfolios but also the value of their processes in originating and servicing loans. That very process is dependent upon the quality and turn around times created and maintained by their VMC one stop solutions. I believe that the centralized processing of mortgage loans has improved the performance and increased the production of the major lenders. I cannot see the industry moving away from this concept but I see them enhancing it with more technology in order to trim the timelines even further. This can only be accomplished with the
greater speed and quality of third party reporting and settlement services that a VMC can provide. One might argue that the recent VMC failures indicate a basic flaw in the concept and that the VMC industry has out lived its viability. I strongly disagree. Just because Chrysler, Ford and GM are struggling financially, it does not mean that the automobile has lost its value or appeal. Their overhead or reliance on certain designs and features as well as strong foreign competition may be the root cause of their decline but not because of the need for the product they are producing. VMC’s may also have placed too great an emphasis on certain product offerings or unique segments of the industry but it does not mean that the overall value of their services has diminished nor has lost its place in the market. Just as with the auto makers as they retool, adjustments in overhead, advances in technology and new approaches to products and services will have
to be developed. The VMC’s developed their processes to serve the needs of the mortgage industry and they can continue to make the adjustments necessary to continue to support it. The mortgage industry is not doomed nor is its primary partner in support services, the VMC. Am I bullish on vendor management? I certainly am! Whether you call yourself a vendor management company or still struggle to remember that title, as long as you can serve the needs as a one stop shop your future will be bright. • About the author: Edward J. Krug is an attorney with Commercial Loan Services, LLP, Moon Township, Penn. He can be reached at ekrug@clslegal.org.
Questions & Answers
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Mark Oliver
About Mark Oliver: Mark is the president of Service First, a Pittsburgh-based Vendor Management Company (VMC) providing settlement services for the mortgage lending industry. He is the former COO of Nationwide Appraisal and Title Services, a founding member of TAVMA. Mark has been involved in the settlement services industry since he was 8 years old, when his father was instrumental in the formation of TAVMA. Mark is past board member of TAVMA and has supported the organization throughout his career. A down market is the very best time for new companies to get into the business. In times like this, companies are forced to push hard and earn every opportunity. They have to prove they are a viable company on a daily basis. We saw this happen in the early 90s. They were bad times, but many upstarts grew into big firms.
Q: In the current environment, is
there any opportunity left for new entrants into our industry?
A: Absolutely. While it is true that
the industry’s largest and most successful companies have all been acquired and that the nation’s largest title underwriters now have unprecedented influence over the industry, there is still a lot of opportunity here.
12 disinterested third party service. Having a VMC involved gives national lenders a sense of security and a sure knowledge that a trained team of professionals can handle high volumes and that the resulting valuations will be honest and true representations of the market. Now is the time for national, independent companies that are service driven to do extremely well.
Q: In an industry that is so heavily
regulated and governed by Service Level Agreements, why do you think have an experienced team is so important? And we have to remember, that even though this may be the worst market we’ve seen in a long time, the volumes today are still higher than they were 15 or 20 years ago. The subprime market only accounted for about 25% of the market. There are still a lot of prime borrowers that bought into adjustable rate mortgages that will soon refinance. Many of them will refinance. I’d say there is definitely room for new companies here if they understand what it means to provide real service.
Q:
What do you mean by “real service?”
A:
What I mean by that is that service is where companies have a chance to demonstrate a distinctive competence, to rise above their competition. It may be the only place. With nationwide technology platforms from ValuAmerica, FNC, RealEC and others, technology and the Internet have made our business a commodity. The barriers to entry are a lot lower than they were in the past.
The good news is there aren’t as many experienced people out there who really have developed an expertise in what we do. The companies that have these skilled workers and who can manage them effectively will stand out. That’s why we called our company Service First, because it really does come first.
Q: What do you see as one of the
most critical problems the industry faces right now?
A:
It’s a problem that we’ve been pointing to in our part of the business for a long time and that the importance of having a disinterested third party involved anytime a property is appraised. Now, we’re not the only people saying that this is important. A lot of people who closed their eyes to this in the past are getting hurt. Fraud is now and will continue to be a major issue for lenders. And we’ll see more fraud in the days ahead. Lenders are aware of this and they realize now how critical it is to have someone else involved in the transaction. The companies involved in TAVMA provide that
A: There are a lot of moving parts
in the mortgage industry. From the outside, it may look like a single transaction to finance a home, but it is much more than that. There are still plenty of opportunities to gain efficiency. That takes skilled and experienced people. Even though we’re dealing with large companies that have been in the process of centralizing their operations for many years, there is still a great deal to manage. There are many appraisers out there--and title agents, attorneys and signing agents. And there are so many consumers. With one primary purpose, we may be a simple industry, but--as many people have learned—it isn’t very easy. It takes a certain level of experience to be able to do it effectively. That’s where we have an edge. The companies that operate with a high level of integrity and that really have a desire to serve the consumer in this process, that intend to make a difference and serve their clients, are going to do very well, regardless of what the environment is like. •
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