Mortgage bankers have three options in controlling the communications between Loan Production Staff and Appraisers.
Option #1. Do nothing - Ignore the regulations. This has been a popular choice.
Option #2. Create an internal Appraisal Compliance and Management Department.
Option #3. Outsource the appraisal compliance and appraisal processing to a 3rd party provider.
If you are a member of the option #1 club, stop reading now!
For those of you considering staying in the business, read on;
In order to determine which option is best for your organization, you must understand the complexities involved in the appraisal compliance and management processes and how it is segmented organizationally.
Department Segments
Compliance
Dodd-Frank Act
Appraiser Compliance
USPAP Compliance
State Compliance
Communications Management
Communication Examination
Communications Flow
Communications Processing
Document / File Management
Document Examination
Document Flow
Document Processing
Document Storage
Quality Control
Appraisal Review
Bookkeeping
Borrower Payment Processing
Appraiser Payment Processing
HUD-I Recordation
If you remove the compliance segment from the department, the management of the remaining segments may seem straightforward. Unfortunately, the application of compliance flows through every segment and sub-segment. There are two additional elements of the department management that leave internal departments vulnerable.
1. Lack of compliance knowledge / expertise
2. False sense of confidence in appraisal management technology / platform(s)
Compliance Knowledge:
Compliance concerns are excessively burdensome on the banking industry, so much so that most banks have compliance departments working diligently on ever-changing compliance applications and modifications. Compliance departments can certainly interpret the applicable regulations to create the necessary operating procedures to apply to the individual department segments, but where we see most failure is in the implementation and day to day management of the proper compliance procedures. This is most commonly the result of unqualified and / or uneducated staff. As required by the regulations, "the individuals working in the department must at a minimum, be trained, qualified and understand the AIR and Dodd-Frank Act, appraisal regulations and enforcement, as well as the Uniform Standards of Professional Appraisal Practice".
Technology:
Technology plays a large role in all facets of banking and includes appraisal management. There are many providers of appraisal management processing platforms including loan origination system providers, all of which claim to offer a compliant solution for internal appraisal management. Unfortunately, this simply is not the case. If it sounds too good to be true, it typically is. The Compliance Team at Appraisal Logistics has extensively test driven many of the compliance ready platforms in use across the industry and have not found a platform that offers a satisfactory solution for appraisal compliance.
In reality, the following resources are needed to effectively manage appraisal compliance and processing.
l Appraisal Compliance Officer / Manager
l Appraisal Processing Manager
Keep in mind, the staff associated with the appraisal management department cannot be considered Loan Production Staff. We have seen cases where lenders have attempted to have an employee such as a receptionist manage the process. The question you have to ask yourself is "has our Receptionist ever; called an Employer for a VOE, contacted a Lender for a VOM, requested paystubs from a Borrower etc.?" If so, they are considered Loan Production Staff. There in-lies the dilemma. Do you currently have any member(s) of your staff that are not considered Loan Production Staff? If so, will you be able to prepare them to attain the necessary training and qualifications to manage the process. The individuals must understand the AIR and Dodd-Frank Act, appraisal regulations and enforcement, as well as the Uniform Standards of Professional Appraisal Practice and State regulations.
Ironically, there are two similar but different definitions of Loan Production Staff.
Loan Production staff - The loan production staff consists of those responsible for generating loan volume or approving loans, as well as their subordinates. This would include any employee whose compensation is based on loan volume. Employees responsible for the credit administration function or credit risk management are not considered loan production staff.
Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of Thrift Supervision, National Credit Union Administration
“The loan production staff consists of those responsible for generating loan volume or approving loans, as well as their subordinates. This would include an employee whose compensation is based on loan volume or the closing of a loan transaction. Employees responsible for the credit administration function or credit risk management are not considered loan production staff.”
Fannie Mae, Freddie Mac
We consider the 1st definition to take precedence due to its source.
Given the above information, you have the basis for a solid / compliant business plan. The link below will take you to a management calculator we've created to assist in the development of a workable business plan, but keep in mind that these are hard costs to the bottom line of your balance sheet. Said costs may be eliminated by utilizing our services.
Appraisal Logistics is the alternative to the expensive, and increasingly complex task of managing the appraisal process in-house.
Appraisal Logistics is an appraisal compliance company. The value propositions in engaging the services of Appraisal Logistics are our appraisal management services and service platform. We efficiently and effectively manage your appraisal compliance and processing at no cost to your organization.
Our services and platform are tailored to suit your individual needs while guaranteeing full compliance. We focus on the areas of the processes that concern you the most and work with you to understand your problems, needs and ultimately solutions. With this information, we build a platform to provide the quality of service you demand and truly manage your appraisal processes. If given the opportunity to sit down and discuss your immediate concerns and goals as well as long term issues, I’m sure you will be convinced that Appraisal Logistics is the precise industry partner you can depend on to manage all of your appraisal compliance and management needs.
The foundation of Appraisal Logistics is built from appraisal and mortgage industry experts. Our dedicated staff has the precise combination of industry knowledge and practical experience that our Clients rely on. Our expertise is cultivated from but not limited to; D.E Underwriters, Loan Processors and Certified Real Estate Appraisers that fully understand your needs and problems from direct experience. Our industry knowledge is unmatched in the business of appraisal management.
Compliance
Our Compliance Department is working with regulators and professional associations in an attempt to stay ahead of the issues and concerns that drive the industry. We are constantly monitoring regulators and the chatter at the state and federal levels to research and analyze the latest laws and regulations as they evolve. When needed, we rapidly implement the necessary modifications to our compliance and management processes.
Communications Management
Our state of the art technology affords the opportunity to efficiently manage and monitor all communications flowing through our system. All communications are examined for compliance and clarity as part of our continual compliance audit prior to being delivered to their recipients. Compliant, effective and efficient communications processing is a key factor to our success.
File Management
Similar to communications management, all files flowing through the system are examined for compliance concerns. Once a file has passed our compliance audit processes, the file is delivered to the recipient.
Quality Control
One of the main hurdles in today’s lending environment is maintaining appraisal quality levels. To overcome these challenges, all completed appraisal reports pass through a three stage quality control review process prior to delivery.
Stage 1 - PDF Review: Our PDF Reviewer electronically reviews 3,000+ data sets in the appraisal report for completeness, correctness, consistency, compliance, and cross-checks. This PDF Review Report is available to your Processing Department as an aid to underwriting and pre-underwriting.
Stage 2 - Visual Review: A member of your Appraisal Logistics Processing Team will physically review the report for common mistakes that appraisers make, such as missing photos, missing signatures, location map flags, and missing sketches to name a few. Once we confirm that all aspects of the appraisal report are complete, the report is delivered. If we discover corrections are needed, the appraiser is immediately notified with a Request for Corrections. Appraisal reports that are sent back for corrections are escalated to priority status. Additionally, we immediately advise your Processing Department of the situation.
Stage 3 - UCDP-UAD Scan and Up-Load: All reports are scanned with our exclusive UAD Reader. The UAD Reader scans the appraisal report to be sure the report will pass GSE standards for UAD delivery. All reports are uploaded to the UAD prior to delivery.
Upon satisfactory QC processing, the completed PDF Report, XML/MISMO Report and satisfactory UAD Up-Load Report are delivered to your User.
Bookkeeping
Appraisal Logistics manages the collection and disbursement of the appraisal fees, thus eliminating potential post-closing issues while reducing your bookkeeping efforts. We have the ability to process your Borrower’s credit card within the Appraisal Order. Simply enter the card information and click “Save.” The card is immediately processed.
Approved Appraiser Panel – Appraisal Logistics is unique to the business of appraisal management. You provide your Approved Appraiser Panel, qualifications criteria, and set the limits of your Approved Appraisal Panel with the ability to limit their coverage areas. We will work exclusively with your approved appraisers for your appraisal assignments. We recognize the significance of the quality working relationships you have developed with your appraiser vendors, therefore we strive to partner with, maintain, and build on those relationships.
We will not, under any circumstances, blend outside Appraisers into your Approved Appraiser Panel. If for some reason you need an Appraiser from outside of your network, Appraisal Logistics has a nationwide network of Appraisers at your disposal. We will implement your minimum requirements for an Appraiser and guarantee that any Appraiser that performs reports for your organization will meets your minimum standards. Additionally, the Appraisers on your Approved Appraiser Panel will have opportunities to expand their businesses by continually providing outstanding service and high-quality reports to get to the Appraisal Logistics Preferred Appraiser Network.
Appraisal Fees / Pricing - Appraisal Logistics fees are among the lowest in the industry. We pass the cost savings on to the Appraiser. We firmly believe that higher fees to the Appraiser will result in higher quality reports and reliable service. Appraisal Logistics is 100% committed to paying Appraisers fees they are accustomed to. Additionally, the appraisal fee is crucial in the selling process of a loan product. HUD-1 fees can be a breaking point in negotiating a loan for a Borrower. You know your market and Borrowers better than anyone, and this is why we work closely with you to determine the fees to be charged to the Borrower. We have the ability to implement a variety of market specific pricing schedules for the many different regions throughout the country. We will tailor a price schedule that best suits your needs.