Desktop appraisals became a permanent option for certain loans earlier this year. HousingWire recently spoke with Kenon Chen, Executive Vice President of Corporate Strategy at Clear Capital, about desktop appraisal adoption and appraisal modernization.
HousingWire: Desktop appraisals became a permanent option for certain loans in March 2022. How willing are appraisers to adopt desktop and hybrid appraisals?
Kenon Chen: We have discovered an incredible amount of willingness from appraisers to adopt desktop appraisals, even before the market slowdown. The COVID-driven appraisal flexibilities accelerated the introduction of completing appraisals from home, so already some mindsets were starting to change. We have been very active in hybrid appraisal pilots and we have seen the benefit of providing accurate, digital data about the property to the appraiser, which has been crucial to adoption. I applaud the GSEs for requiring a minimum standard of available data and digital floor plans to ensure the desktop appraisal process is more robust. With over 235,000 hybrid and desktop appraisals under our belt and over 5,200 appraisers ready and willing to accept desktop appraisal assignments, we feel confident that the industry is ready for the change.
HW: What are the concerns about new products impacting deals in a low-volume environment?
KC: Every deal is crucial in today’s purchase-driven environment and current market conditions. Any change to the standard process becomes a concern, especially the risk of the unknown. The good news is that desktop and hybrid appraisals are not only battle-tested in various market conditions over the past few years, but we have enough data to demonstrate that the results are overwhelmingly positive. The quality and accuracy of modern appraisals have proved to be on par with, or better than, the traditional process, all while reducing turn time by 5 days on average. Beyond just speed, we have seen much more certainty in the process for the borrower with a 75% reduction in appraisal times that impact closing dates and a 50% reduction in customer-related escalations. Like every new process, education, training, and technology are key to success. So at this point, staying status quo is riskier than being prepared to provide a competitive appraisal experience and taking advantage of the FHFA and GSE-led innovation.
HW: How does appraisal modernization reduce appraisal costs and fees?
KC: As I previously mentioned, appraisal modernization is driving more certainty. This certainty shows up in reducing the cost and fees as well. We simply don’t have as many fee increases on desktop and hybrid appraisals as the traditional process. So the all-in cost to the borrower is less, and if the lender is subsidizing the fee increases, there is also an enormous benefit. Faster turn time also drives down costs. Every day an appraisal order is outstanding affects operational cost and management cost. As we are seeing consistent modern appraisal product turn times under 5 days (even under 2 days for some desktop appraisals), there is an enormous opportunity to continue to improve the cost structure moving forward. Better data through digitization, more efficient process, and improved quality will drive down cost as we move forward.
HW: Freddie Mac’s ACE+ PDR (automated collateral evaluation plus property data report) solution laid out in their March bulletin is effective as of July 17, 2022. What does the ACE+ PDR bulletin mean for appraisal modernization?
KC: The most exciting aspect of Freddie Mac’s ACE+ PDR solution is that it represents the next generation of appraisal waivers. The lender has greater certainty since a full appraisal is not required, but also technology-enabled property data is being collected to provide transparency for the condition and characteristics of the property for all stakeholders. The time and cost savings are significant compared to a traditional appraisal process, which means less burden on the borrower. And the pattern of automated models plus standardized on-demand property data takes us further along the path of modernization. We have developed a unique set of tools to support this program, including our ClearInsight mobile data collection app powered by CubiCasa’s automated floor plan and digital GLA capability. The CubiCasa app is wielded by our nationwide network of over 4,000 background-checked, certified data collectors who enjoy providing convenient scheduling options to our customers like evenings and weekends. I think solutions like ACE+ PDR force us to rethink the appraisal process and prioritize the borrower’s experience while minimizing collateral risk and potential bias.
To learn more about how Clear Capital is working to further the future of real estate valuation, analytics, and platform technology solutions, visit clearcapital.com.