James "Kevin" Raney, executive vice president and chief operating officer of UnitedTech Lender Services
, has worked with some of the world’s leading corporate and personal financial service firms for over two decades. Raney led integration efforts for multiple acquisitions at PHH Corporation
and GMAC Mortgage
For this edition of In This Corner, Raney gives an update on operations it purchased from LandAmerica
and why appraisal costs could be going up.
You recently purchased some operations from LandAmerica Financial Group after its bankruptcy. What have you done with those since?
We purchased assets from the LandAmerica bankruptcy. We bought their default operations, their technology division, and their origination division.
We immediately resold the origination division to one of the previous managers, because of the services they were offering, and the operational proesses they used were completely redundant with teams that already existed in the default division. We do offer the valuation and title services in support of originations, but we know longer have that LandAmerica origination division. We resold that.
What are the challenges of valuating a home when prices seem to keep declining?
That's a great question. We're trying to stay abreast of where values are going and give realistic values without exaggerating the current trend line. I think that's always a challenge and thankfully that's the work of the appraisers on the origination side to really look at what's driving their individual markets.
Making intelligent choices on whether or not the default industry is really the market or the exception to the market and weighing those properly in their opinions of value.
For the lenders, I think certainly, the Dodd-Frank Act is certainly have a profound impact not only in terms of the obligations for separation between the origination and those who order and value the property valuations but also the legislation that's pending to go into effect in October that dictates what appraisers are going to be paid.
Dodd-Frank contains very specific language that says appraisers for origination valuatons are to be paid the normal and customary for the market, and in that definition, they specifically exclude any appraisal management company fees. So, you literally have to go to Federal site to see what they're paying or look at market surveys that look at what other local banks are paying, and the AMCs will be required to pay appraisers in that range as well.
With the Dodd-Frank Act, what is the extent of the adjustments company's are making?
I think the adjustment is significant. We have to invest more heavily in the quality control, and technology to ensure the impartiality of the assignment process and the ability to track it and report to make sure there's no collusion and be able to audit and monitor the utilization to avoid any undo influence.
We've also had to invest heavily in educating our clients, because our clients valuations are just a price of entry, and they really don't put a lot of focus on it except as a compliance obligation. So, they've been surprised by some of the things they've had to deal with.
What are you seeing that is significant in the market right now?
There is a tremendous bubble of unresolved delinquent properties out there. I think there was a beginning of a stabilization of the residential markets. We're also seeing the beginnings of some stabilization in the commercial markets. The fear that lingers out there is a very real dynamic, and I think the potential is very real for a double-dip, particularly in the residential arena.
Because of the current economic environment or the underlying strength int eh commercial sector, we're seeing more loans workout on the commercial side that may help avoid the huge collapse that everyone is predicting on that side. But residentially, I think it's a very tenuous time, and it's a time to move cautiously.
The resulted impact on the ultimate cost of the borrowers, because the way that's structured right now, there's really no way to avoid that being passed onto the borrowers. The cost of appraisals are going to go up rapidly and dramatically. That's going to further hinder originations as far as I'm concerned.
That legislative control environment is certainly a challenge as well.
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