United Wholesale Mortgage (UWM) announced today that it will no longer require its brokers to use appraisal management companies to complete appraisals.
The Pontiac, Michigan-based wholesale lender will instead coordinate appraisals in-house, contracting with appraisers directly, offering appraisers and brokers a way to bypass AMCs altogether, which UWM CEO Mat Ishbia characterizes as “middlemen.”
During a Facebook Live address, Ishbia proclaimed that while AMCs add value to the industry, appraisals have been a stumbling block for the mortgage industry.
“It’s going to be cheaper for consumers and more money for appraisers, because there’s no longer going to be a middleman with UWM Appraisal Direct,” Ishbia said.
Appraisers say AMCs cut into their pay and introduce inefficiency into the appraisal process. AMCs came into prominence as a result of post-recession reforms, which sought to place a regulatory firewall between mortgage brokers and appraisers.
As rates change and the market shifts to a more purchase-driven origination environment, lenders need to carefully monitor margins and profitability. If we’ve learned anything in the past year, it’s that operational flexibility and accurate servicing valuation are key to lending profitability.
Presented by: Black Knight
Clearly, those complaints struck a chord with UWM.
“We’re going to take one of the biggest negatives in the mortgage industry out of play,” Ishbia said.
The UWM Appraisal Direct program will oversee the entire appraisal process — from scheduling, execution and delivery of the appraisal.
Appraisers will be selected for an appraisal based on a scorecard to assess geographic competencies and past performance. Likely the strongest incentive for appraisers is that UWM will pass along the full appraisal fee paid by the borrower. And, while AMCs have been dogged with allegations of late pay, UWM will pay appraisers the next business day after a successful appraisal completion.
Mark Schiffman, executive director of the AMC trade group Real Estate Valuation Advocacy Association, declined to comment on UWM’s move. Other prominent leaders in the AMC industry also declined to comment.
But UWM already has strong ties to AMCs. Until three years ago, UWM’s chief strategy officer, Alex Elezaj, headed up Class Appraisal — which subsequently rebranded to Class Valuation. It is now one of the largest AMCs in the country and, in recent years, has been acquiring smaller AMCs.
Elezaj said UWM’s move to offer an alternative to AMCs arose from complaints about bad service, slow turn times and overcharging appraisers.
In a pilot of the AMC-free option, UWM noticed a substantial improvement in time to complete appraisals, without compromising on the compliance and quality control that AMCs provide.
UWM has been working to tighten its grasp of the wholesale market, which it has said could be one-third of the overall mortgage market by 2025. It currently has about 35% of the wholesale market.
“If a broker has an opportunity to sell the loan to us or another lender, they choose us because of speed, technology and service, and they’ll look at appraisals the same way,” said Elezaj.
It’s a fine line for UWM to offer an AMC-free alternative for its brokers while not alienating the more than 100 AMCs it still works with. Although Elezaj was once the face of a prominent AMC, he said he could only speculate about their reaction to UWM’s AMC-free option, since he hadn’t spoken to any.
“But I have to imagine they’re not happy about [the announcement],” Elezaj said. “If Class Valuation or other AMCs step up, they’ll be viable companies and continue to grow. If not, there’s another option.”