The COVID-19 pandemic is changing life for everyone and disrupting entire industries–including the real estate appraisal industry.Traditionally, the appraisal industry has been high touch. Appraisers pride themselves on being thorough and accurate, lenders want to ensure that the property valuation is adequate to cover their risk and complies with regulations, and the government-sponsored enterprises (GSEs) have defined standards that often necessitate an interior inspection. This results in a large portion of home inspections being done on-site, inside the home and often, in the presence of the borrower.
Suddenly, we are in a period where social distancing is required with no definitive end date. This new state of business is causing disruption across the real estate lending markets. Both the GSEs and lenders are working to quickly adapt their policies and procedures to keep business flowing. This includes changes as to how appraisals are conducted.
As a lender or an appraiser, your ability to adapt to these changes is critical for both current and future success. This means keeping pace with evolving regulations, embracing new technologies, and adapting both your processes and mindset.
KEEP PACE WITH EVOLVING REGULATIONS
Over the past two years, the GSEs have been working on appraisal modernization guidelines. These projects, while stalled in the short-term due to the pandemic, are likely to resume with renewed intensity post-pandemic. The outbreak is bringing to light the critical role that desktop appraisal technology could play in keeping the mortgage industry running smoothly, in both good times and bad, if the GSEs allow for desktop appraisals on more loan types.
Under the revised GSE appraisal guidelines announced in April 2020 to directly address the social distancing and stay-at-home mandates,to keep business flowing the GSEs will allow either a desktop appraisal or an exterior-only appraisal if an interior inspection is not feasible due to COVID-19 concerns, with desktop appraisals being preferred for purchase transactions.
While these recent GSE policies are intended to be temporary, they are likely to accelerate more permanent guideline changes,particularly the requirements on which loans are eligible for desktop appraisals. So, investing in technology to power appraisals is not only a safe investment right now, but a smart one.
EMBRACING NEW TECHNOLOGIES
Even before the pandemic, lenders who invested in modern technology to streamline appraisals and improve transparency found it a highly effective way to improve operational efficiency and lower operating costs.Software-as-a-service and cloud-based applications have become the new standard in technology and, in most cases, require no upfront investment. Lenders who had already embraced technology to power appraisal management are in a good position relative to their competitors both from an agility perspective and the ability to support remote work environments thanks to the online access to critical data and processes.
Through automation and better visibility, the right appraisal technology can accelerate processes, reduce errors and enforce compliance checks, while also improving productivity and lowering costs, thus having a direct impact on profitability. The best appraisal management technology platforms also enable all constituents to collaborate more effectively and give everyone visibility into appraisal status and information–a capability that is critical in today’s environment.
Desktop appraisal technology also plays a crucial role in the social distancing environment and requires minimal upfront investment. They offer a big payoff in productivity, enabling appraisers to handle more volume at a lower cost with less administrative effort. Adopting the right desktop appraisal platform is mission critical for short- and long-term value.
In addition, mobile technologies are suddenly in the spotlight.Remote data collection solutions are necessary to collect accurate interior inspection data and photos, and both lenders and appraisers are rushing to adopt them. It is likely that directed remote data collection, which allows for remote collection of property information and photos, will become the wave of the future due to benefits including speed, accuracy and safety.
While I am focusing on the appraisal industry, it is worth mentioning the accelerated pace of adoption of remote video notaries and e-closing technologies. After all, a property appraisal is of no value to the lender or borrower if social distancing prevents the loan from closing in a timely manner.
ADAPTING YOUR PROCESSES AND MINDSET
New GSE guidelines, technology and modes of working all necessitate process changes. This includes aligning your systems and vendors in a way that automate workflows and maximize productivity, while also ensuring profitability and compliance. Change is never easy, and it is definitely not at a time when every aspect of your life – and the lives of your family, friends,colleagues and co-workers – has been upended.
But because appraisals have historically been viewed as a necessary evil by many lenders and borrowers, any changes that streamline the process, accelerate turn times and make them a more interesting facet of the loan process – cloud and mobile-technologies, for example – are likely to be welcomed, especially when it is critical to keeping the mortgage industry afloat.
While appraisers in the past may have been skeptical of change, they too are likely to appreciate new tools to make their jobs easier and keep themselves safe in the current environment.
NAVIGATING THE NEW NORMAL
Traditionally, lenders, AMCs, appraisers and regulators have not been the best of friends. But the era of social distancing is requiring more collaboration than ever to ensure the stability and sustainability of the mortgage and real estate industries. There has never been a more critical time for agility and openness to new processes and technologies–embrace them. Your ability to survive and thrive now and in the future depends on it.