Back in July, Collateral Risk Network (CRN) held their 3rd quarter meeting in Reston, VA. As is typical for this conference, the first day is devoted to a focus on compliance with the 2nd day consumed by various committee meetings. Day 3 is reserved for our featured guest speakers and topics that inspire – or incite – interest and dialog. I want to talk about Day 2.
Like the old car commercial (‘It’s not your father’s Oldsmobile’…), our committee meetings aren’t like our father’s Oldsmobile’s either. They have turned into events unto themselves. Historically, CRN committee meetings were staid affairs involving 6-12 folks with a murky agenda and no real deliverables. Not anymore. I chair the AMC committee which will be 1 year old this coming CRN. Our 1st meeting drew (surprisingly) just over 25 attendees, and, on occasion, we’ve had as many as 65 – but never less than that initial 25. And since you asked, it isn’t just comprised of AMCs. We have lenders, software companies, appraisers, technology companies. vendors and interested parties of every type and description. Together, all parties make the whole greater than the sum of its parts.
From the start, we defined a challenge: how do we plan for the future of appraising – and appraisers – in ways that match up with the evolution of the lending industry that many of us serve? The next step … the big step … involved translating that idea into action. So that’s exactly what we did. We embarked on creating a formula defining the steps and process around supporting a supervising appraiser in mentoring a trainee. And just to make it interesting, and hopefully help ignite adoption, we built an Inspection Module that can be a standard bearer for the industry and instill confidence in the process. In the ideal application (and conforming to individual State’s rules), a trainee who develops the skills to competently do solo inspections will dramatically reduce assignment delivery times, expand a supervising appraiser’s order capacity and increase their income.
Now … What if some of our vendor partners contributed temporary licenses to use software or supplied data or other tools gratis for 6 to 12 months to help ease the initial burden of both cost and structure on both appraiser & trainee? Could this be the beginning of re-engineering the appraisal process – and become a tipping point to more effectively compete with the heightened automation in the lending space? I believe the answer is a humble yes. There’s so much more to this story but time and space constrain me – and I want to ask one more ‘What if’.
There are a number of other interesting and important committees at CRN; Best Practices, Government Affairs, Emerging Issues, Industry Relations, and 2 newer ones: Agency Relations and the Lender Committee. They’re all doing great work and are led by terrific folks, but I want to isolate the newest, Agency Relations, for a moment. Led by Leland Trice, in its 2nd meeting in Reston the Committee assembled a panel that included Scott Reuter, Chief Appraiser for Freddie Mac, Zach Dawson, Director of Collateral Risk and Strategy with Fannie Mae, and Cheryl Walker, Director, Home Valuation Policy Division from HUD. A key element of the discussion revolved around, as you might have suspected, are Property Inspection Waivers (PIW). Fannie’s employed them to a modest degree for over 16 years and Freddie seems to be enthralled with them like anyone might with any bright shiny new toy.
Make no mistake, this is a looming threat. To appraisers it will mean diminished work and for borrower’s being told they don’t need an appraisal and “you’re saving’ $500”, it could translate to risking over-paying by 10’s of thousands of dollars … or more. Ultimately, as taxpayers, the possibility exists that we could suffer history repeating itself by following the path of another flawed system for ‘saving time and money’. But in the midst of this discussion, I asked a question: What If there is a way to use appraisals and PIW’s in concert? I then suggested that all loans be recipients of appraisals, but in those cases where the single point of value that an appraiser defines doesn’t quite work for the best loan pricing, Fannie or Freddie could use their vast reservoir of data to run a collateral analysis (their own internal Black Box which is at the heart of their PIW). If the value range supports the higher value point, Fannie or Freddie could offer the lender the better pricing for the lower threshold LTV.
I never got an answer, but I’ll ask it again because the GSE’s attend CRN and sit in committees and answer even the tough questions. My question to all of you is the same: What if? What if you could be a part of something that could help shape your industry? What if collectively we can foster real change. What if you can learn to better compete in a field where the needle is moving more toward the science of appraising and less toward the art of appraising? What if indeed.
We’ll save a chair for you.