Technology innovation is rapidly permeating every aspect of mortgage lending to streamline the loan manufacturing process and open the door to a better borrower experience. This is increasingly apparent when it comes to valuations. Efforts are well underway to make appraisal production and delivery more accurate, transparent and efficient. The influencers of this change are not who typically come to mind for technology disruption, such as Uber or Amazon, but rather veteran industry insiders, including appraisers themselves.
The proliferation of automation is creating efficiencies and placing greater emphasis on the value of data analysis at every stage of the valuations process. In fact, technology was the primary catalyst in bringing to light the fundamental challenges and inefficiencies inherent in the industry.
Historically, appraisers have had to spend a great deal of time combing various data sources for public records and past and present listings. Gathering information on a particular property has involved taking manual measurements and conducting rigorous physical inspections. This process typically has resulted in long turnaround times in order to deliver quality results.
The technological paradigm shift underway is setting a new standard for valuations. We are already seeing a measurable reduction in turn times with no degradation in quality, and more progress is expected. The desire to achieve more efficient and accurate valuations that will bring consumers to the closing table faster is no longer an aspiration, but a reality.
Building the Foundation
Meaningful technological advancements, using cloud-based, software as a service products, along with data and analytics, have laid the groundwork for how valuations could be executed and delivered. There has also been an increase in the use of alternative and hybrid valuations outside of secondary market transactions, enabled and enhanced by these same cloud-based technologies.
First American Mortgage Solutions, through its division ACI, has been innovating cloud computing alternatives to traditional appraisal software. Our ACI Sky solution gives appraisers access to applications they need from any device at any time. The availability and accessibility of data has provided flexibility in how properties are inspected, and for some assignments, a visual inspection by an appraiser may no longer be needed at all. Collateral risk assessments can be conducted more quickly and affordably with the infusion of data and analytics, helping make sure the quality remains intact or improved. Importantly, valuations are performed in the context of the risk profile of a particular transaction, which provides for a more positive consumer experience with no increase in credit risk and no degradation in quality.
In addition, the ability to connect to vast amounts of data via the cloud has enabled unparalleled quality assurance crosschecks during the production of both traditional and alternative/hybrid appraisals, dramatically reducing the intensity of quality control at the end of the process to catch defects and quality-related issues. Quality assurance is much more effective because it allows for errors to be detected during the development and report-writing process—and before the report ever reaches the lender—cutting down on time and resources tagged to administrative back and forth.
Connecting Data and Analytics to Technology
Data and analytics are driving technological workflows to make every step of the valuations process more efficient and effective—and everyone involved benefits. Appraisers are able to accomplish more in less time, with less effort, and see the quality of their reports increase. There is greater transparency in the process for lenders, investors and borrowers, which translates to a better customer and consumer experience.
Service providers are able to compile public record data, real estate listing data and appraisal data that is captured across many different channels of their businesses. This data and analytics infrastructure is being utilized to select the best appraiser for particular property type and engage only those performing at the highest level. This will lead to the most accurate and timely collateral valuation possible because the appraiser is already deeply familiar with the area and property type.
Data-driven appraiser selection will become increasingly important as we transition from a market dominated by refinance transactions to a purchase-dominated market. Timelines become even more critical for purchase transactions. For example, if a deadline is missed on a purchase, the entire closing is put at risk, preventing the end-consumer from moving in on time. Several additional transactions can be impacted if one gets delayed, setting off a chain reaction. Data and analytics allow service providers to track the most qualified active appraisers in the market.
This data is being funneled through cloud technology to appraisers in the field. One example is First American Mortgage Solutions’ Sky valuation platform, which assists in the transition to computer-aided data collection as a means to autopopulate reports with factual property data. The ability to connect to large quantities of synthesized and collated data is not only making it easier for appraisers to deliver more timely reports, but this level of data accessibility is also yielding more credible valuations.
Another benefit of data autopopulation is how it reduces the burden of filling out forms and researching information, allowing appraisers to focus instead on providing analysis, which is an activity better suited to their level of expertise and what generates the greatest value for lenders and borrowers.
Transforming the Workflow
Advancements in mobile and web-based solutions, along with enhanced data and predictive analytics, have also given way to a reconfigured workflow that will take hold industry-wide in the near future.
Historically, the appraiser has been responsible for everything from start to finish, including inspecting the property, conducting the analysis, shipping the report and handling lender addendums. The reconfigured workflow will essentially recast and compartmentalize the appraisal process. Instead of the appraiser having to go into the field, a trained and vetted real estate inspector conducts the field work and collects and verifies property characteristics. This data is fed back to the appraiser through seamless cloud and mobile technologies, allowing him or her to simultaneously perform analysis of market, property and inspection data.
Under this transformed workflow, the appraiser remains central. By splitting up the process, the appraiser is free to focus solely on activities of highest priority and value, which are breaking down property information, understanding market data, and conducting an analysis to arrive at a credible valuation.
Over the next several years, as automation continues to streamline the valuations space, we are likely to see the industry consolidate around service providers who are embracing and investing in data and new technology connected to their networks of appraisal professionals.
In addition, data and analytics are likely to lead to a more sophisticated way of classifying housing assets by consolidating information into one easily accessible location. Having all property information in one place will not only create incremental efficiency in the market, but also empower and educate consumers by providing them with readily available details on their largest asset: their home. This will allow consumers to be able to utilize this information in many different ways—to gauge adequate insurance coverage, use for financial planning, assure alignment with property tax value, and plan for potential renovations.
The future is here for smarter valuations, and we at First American Mortgage Solutions are eager to play a leading role in the transformation. Technology is connecting data and reconfiguring workflows, freeing up appraisers to focus on higher-value tasks, and creating industry-wide efficiencies that will forever change the borrower experience. How’s that for innovation!