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HousingWire Magazine: December 2021/ January 2022

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Mortgage

Surging mortgage volume puts pressure on appraisal turn times

The pandemic has only made it worse

Just as it has for every other industry in the country, the COVID-19 pandemic has impacted the U.S. housing market in unexpected ways since March. In this case, record low interest rates and spikes in mortgage applications have created a backlog many companies are struggling to manage.

Appraisers in particular are having a hard time keeping up with the volume for both refinance and purchase mortgages, resulting in increased turn times at one of the most critical junctures in the underwriting process.

A HousingWire survey of lenders showed a handful were being quoted two to three weeks, but they said it’s changing rapidly. One source said an appraisal originally quoted at 10 days finally made its way back into their office nearly 27 days later. A lender in a particularly hot market in Colorado said several AMCs couldn’t guarantee they would be able to get an appraiser out to a property in less than four weeks.

Several factors are at play here as people are shopping around for the lowest prices and potential homebuyers are “watching the carrot of 2.5% and 1.88% rates being dangled in front of their face.”

The No. 1 issue noted across the board was appraiser attrition, which has only been exacerbated by the pandemic.

“What’s happening is because it’s difficult to become an appraiser. And because you have to go through third parties whenever you have a spike in production, those agencies and appraisers get backed up,” said Phil Treadwell, vice president of development and regional manager for Mason-McDuffie Mortgage. “There’s not a whole lot that can be done — at the end of the day we have a finite number of appraisers. You all of a sudden have to hire more support staff to maintain your current level of support.”

Brian Covey, vice president of regional production for loanDepot, agreed the industry is seeing a constraint in capacity not just in the appraisal space, but underwriters and complex areas of the lending sphere as well.

“There’s not enough underwriters in the country that have skills and training to underwrite the amount of velocity in this mortgage demand. That’s why everybody’s turnstiles are impacted,” Covey said. “The same thing with appraisers — there’s not enough qualified appraisers with the amount of volume that is coming in.”

In terms of which markets are being impacted the most, Lori Noble, appraiser for FindMyAppraiser.com, said she is seeing urban areas with high volume feeling the strain of high turn times with suburban areas holding steady. Covey stated he saw higher turn times for unique properties and those outside of metro areas that create a challenge for appraisers to get to.

All were in agreement that record low interest rates are creating the surge of needed appraisals.

“We get the overflow of those customers when they get their loan estimate of what they are being charged, or they realize, oh this rate is really only for this basically unicorn of a borrower,” Covey said.

The silver lining pointed out by several sources was a spike in appraisal waivers. Property inspection waivers through automated underwriting systems and consumer friendly online document exchanges have helped to speed up the process and keep employees and families safe along the way.

Treadwell said it’s not just the technology on the back end but across the loan origination process that’s making it more efficient for appraisers to turn paperwork around.

Covey, who completed his own loan through loanDepot, said the technology he used and what other appraisers are using is what will save companies in the long run, perhaps even 18 months out.

“It was super easy, they literally digitally verified my income and assets online — I clicked a couple buttons and I was done. So what that meant was me not having to turn in any income or asset documents because they were digitally verified — the underwriter didn’t take an hour to look at my document,” Covey said. “I think people are not talking about it because many companies don’t have the technology to do what customers really are asking them to do.”

Where companies may lack technology to speed up the process, lenders agreed that old-fashioned customer service and transparency is what has been helping homebuyers overlook higher turn times.

“What I’ve been encouraging people to do is just be really honest with the customers. My clients who are honest like that are definitely being successful and it’s not causing any discomfort, just success,” Noble said. “People in the industry forget we are selling a home – this is more than a bottom line and if you are realistic people will understand that.”

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