As technology improves, the concept of valuation modernization is gaining traction and some industry leaders say in a few years in-person appraisals could be a novelty instead of the norm.
Last month, leaders at Fannie Mae announced an update to their selling guide which includes newly available valuation options. They said valuation modernization helps lenders, appraisers, and risk investors manage collateral risk more efficiently while also benefiting customers with greater appraisal accuracy, lower costs, and an increased speed of loan decisions.
Matt Stepanovich, vice president of national sales, hybrid valuations and quality control at SingleSource Property Solutions, recently sat down with Editor Kimberley Haas to talk about what he is seeing.
SingleSource, located in Canonsburg, Penn., is a nationwide service provider that offers valuations, REO asset management, field services, titles and settlements, and document management, according to the company’s website.
Haas: I understand that you’re prepared to talk today a little bit about valuation modernization, specifically with what’s happening with Fannie Mae, but I’m hoping before we get into that you can tell us a little bit about yourself and your background so our audience has an understanding of your perspective and where you’re coming from.
Stepanovich: Sure. My background has been in valuations for the last 20-plus years.
I went to school for journalism and somehow ended up an appraiser. How I became an appraiser is funny, maybe for another time, but I didn’t have family in it or anything. I bought a house, I just kind of had an appraisal done and I thought, wow, this is interesting. What is this job? I’ve never heard of this.
I opened the phone book and started calling appraisers to see if I could get somebody to take me on as an apprentice. I eventually found one after about three days of calling that would at least talk to me. And then he agreed to train me and I became an appraiser after that.
So I ran my own business for a while and then I decided when the hybrid market started to come into play, it really piqued my interest – a different way of looking at this and modernizing the entire process and the technology and everything. I decided to start looking at the corporate route of appraising.
I started off as a reviewer and then I moved into creating products for different companies, more into a role of creating different types of products in the valuation industry that maybe were a little bit faster, lower cost, more efficient way of doing things. I’ve been doing that for about the last 10 years, off and on, working for different companies and developing different ways of doing these products.
The traditional appraisal process is the appraiser gets an appraisal order, schedules an appointment with the homeowner, goes to the property, inspects it, measures, takes photos, does a full walkthrough of the property, returns to their office, and then they type the report. They may go see the comparable properties they’re going to use.
In the last 10 years or so, people started looking into, well, how can we speed up this process? It’s taking a while to schedule the appointment. It’s taking a while for them to get to the property, to gather that information, and we started thinking about other ways to do that.
We started looking into other data collection avenues. That may be sending real estate agents while they’re out there to gather some property data. It might be using the homeowner to get some information. It all depends on the final product you’re trying to use.
Haas: All right. So tell me specifically what’s going on now, especially when it comes to Fannie Mae. If you could explain that to our readers and then talk a little bit further about how that might benefit the average consumer, and then of course people within your industry.
Stepanovich: Fannie has done an excellent job of doing a pilot program for the last four to five years to really test this program to make sure it’s going to work properly.
Covid has sped up the process because appraisers weren’t able to enter homes, they weren’t able to go out there and gather this data. I think that’s when really the technology started to move forward very fast. That’s when everybody started to look at alternate ways to get information on a property.
They saw that the valuations that we were getting back weren’t that much different than a traditional appraisal. It started to support the theory and Fannie Mae has done a great job of organizing all the information.
This new process will allow a loan officer to go into their system, put in an application, and it’ll tell them based on the application what to do next. They might have enough history on that property to say, okay, this is good to go. Does it even need an inspection? And it gets a full appraisal waiver.
Haas: A loan officer can go to Fannie Mae and type in this information so they’re getting directly from Fannie Mae what they’ll need to do next?
Stepanovich: Yes. It’s called the desktop underwriter. It’s a very common tool that’s used to be able to apply for these products and loans. They’ve done a lot of work on that. It’s a really good system that they’ve put together. They’ve taken the time with it. The technology for it is excellent.
Haas: What does this mean for the average consumer?
Stepanovich: It’s a step in the right direction for the consumers for sure. If they need to refinance or buy a house quickly it applies to refinances and purchases. They can get their loan done much faster. And I think that’s what technology does to multiple industries, right?
The technology is now just being applied to our industry and the consumers are going to benefit in the end, and we just have to make the adjustment as servicers to provide that as much as possible for the consumer.
A lot of what is going to happen, I think, over the next couple of years is just going to be education. It’s gonna be a big change for the industry itself and for the consumer. The consumers are used to that traditional process, scheduling an appraisal, having an appraiser come out there, then getting an appraisal report handed to them.
Now, there’s the potential where you apply for a loan, you might be approved within a day or so, and you’re just moving forward with your transaction. It’s a big change from the traditional methods that I think the education for the loan officers, the lenders, and the servicers is very important.
Haas: When did you start working with this Fannie Mae product? Did you start teaming up with them, like being shoulder to shoulder with them in consulting, prior to its release? Is it something that you picked up after Fannie Mae released it? Just to give our readers a sense of time here.
Stepanovich: Fannie Mae had this available for the past five years as a whole for everybody to pilot, but they only did it with certain lenders. So it was more on the lender side to then use companies like SingleSource and other service providers out here to be able to field those products.
I think it’s a good step in the right direction for everybody to use this technology. There’s a lot of data out there on these properties and to not utilize that wouldn’t really make sense. I think we have to take advantage of it. Not many changes happen in our industry, so I think it’s kind of exciting.
It may not be the right fit for every particular property, but for the ones that they are – places where there’s maybe more high turnover or more integration of electronic documents into local court systems – I’m sure that this will really pan out. In the next five years, people in these places probably won’t even necessarily remember a formal appraisal.
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