Indecomm Global Services, a business process outsourcing company, is expanding its Collateral Review Service to a broad base of clients. Indecomm’s Collateral Review Service employs licensed appraisers to perform independent reviews of appraisal reports and collateral-related documents for residential mortgage transactions. The service identifies deficiencies and inconsistencies, which may arise as a result of collateral appraisals and evaluations and put the lender at risk.
“The Federal Reserve’s guidelines regarding appraisals and evaluations are only the first step in a financial institution’s implementation of the rules,” said Rajan Nair, president of the financial services division for Indecomm Global Services. “A regulated institution must apply them in a cost-effective and competitive fashion. Indecomm has established a process in its Collateral Review Service to accomplish this for our customers.”
At the end of 2010, the Federal Reserve issued its final regulatory guidance on appraisals and evaluations. This established the rules and procedures, in general terms, which institutions are required to follow in selecting appraisers and reviewing their work. The range of inquiry required of a financial institution once it has received an appraisal of property is broad. Essentially, they must ensure that the evaluation of the property is reasonable given its condition and location. The institution is also required to establish criteria and a process for reviewing the appraisals. This includes internal controls and the monitoring of third parties. Indecomm’s partnership approach with financial institutions achieves these goals. Indecomm’s subject matter experts and independent appraisers enable their customers to meet the regulatory guidance for collateral reviews with minimum cost.
“Indecomm’s depth of experience in this area has resulted in numerous examples in which the Collateral Review Team identified collateral deficiencies for its customers,” said Nair. “These ranged from misidentifying the property as including unfinished housing areas to the failure to disclose easements on the property. The team also found cases in which there was non-disclosure about previous appraisals, listings, and zoning. All of these represent situations in which a loan would have been issued far in excess of collateral value or made in non-compliance with the Federal Reserve’s guidelines. Following the guidelines is good procedure and good business.”