3 Ways Lenders Can Improve Appraisal Compliance Operations
In the heavily-regulated mortgage environment we live in, appraisal compliance can easily become another tasks on a long list. Janice Buchele, SVP of Residential Operations at The William Fall Group & Valuation Partners explains how lenders can ensure that they are paying close attention to compliance efforts in appraisal operations.
MReport: What are the biggest challenges lenders face regarding compliance in their appraisal operations?
Buchele: They may not know yet since they have not experienced the spring market where there is an abundance of orders and a lot of activity from consumers. There is going to be some new uncovering of their challenges as they navigate through large volume, while simultaneously implementing new requirements, and the consequence of new requirements is predictably new internal polices and operating procedures. To try do all of that under volume is something they have not had to experience before. The biggest change came in October 2015 and the winter market is much softer than the spring market. Lenders' largest challenge is just ahead of them. With the implementation of TRID, what was centric in our business was the appraisal fee (which is a no-change fee). There was a lot of conversation and investigation last year, last summer and early fall, as to how the appraisal fees would be handled given that they would not be modified after they have been inscribed on the loan data for the consumer. The other part of that, that is not always thought through but is equally important are the two other components of the appraisal: the close-by date in the purchase agreements and appraisal corrections or changes. Those two things will be very influential in our space.
MReport: Are lenders paying enough attention to appraisal compliance? Why or why not?
Buchele: Yes, the requirement of locking down the appraisal fee so they won't see changes and outlining what it is that might warrant a change is acceptable through the new TRID process has become part of standard operating procedure and they need that appraisal to flow in line with their other regulatory steps inside the loan process. Lenders have to get the appraisals ordered, get it back, and know that they are using the best vendors so they have fewer changes to avoid other complications.
The memory on the financial crisis is not faded among any of the lenders so they are pretty hypersensitive in the compliance space. Most lenders are sincerely interested in secure loans and strong compliance on every level and I wouldn't hold appraisals off the board.
MReport: What advice would give to lenders to help them comply with these standards?
Buchele: The outreach program is going to be to the other participants in the industry that are also affected in the ripple effect. The banks have their regulations like TRID and all of the local and federal regulations that they have to follow, but inside of that, it is in their (and everyone else's) best interest to educate the agents. Realtors need to extend their typical 30-day closing period to maybe a 45-day closing period for the security of the borrower and the appraiser needs to be brought into the mix of understanding that if they read a purchase agreement with a 30-day closing, and they are 22 days into the deal, there is no possible way that report is going to go in. Appraisers have to be educated enough to know how vital it is that the lender is aware of this as soon as possible. It's imperative that all industry participants remain on the same page and each is responsible to the transaction and the requirements of the transaction.