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Combining Valuation Technology With Data Analytics Takes Appraisals to New Heights

Vladimir Bien-Aime
Jul 17, 2014

Most lenders understand that having a sound collateral risk program is essential component of sound credit administration and is mandated by the Dodd-Frank Act. However, there are many aspects that may be overlooked in the actual implementation. For example, reviewing appraisals and evaluations thoroughly before engaging in a loan transaction is critical exercise. This process ensures the value conclusion is reliable and enables informed credit decisions, minimal credit risk, and compliance to supervisory requirements. A comprehensive review process would allow lenders to assess the reasonableness of their appraisals or evaluations, including whether the valuation methods, assumptions, and data sources are appropriate and well-supported. This requirement may be difficult for lenders or appraisal management companies (AMCs) to meet if there using expensive manual processes that are resources intensive. Using automated workflow technology, an appraisal can easily be ordered, tracked, reviewed and compliantly delivered to the Uniform Collateral Data Portal (UCDP) via lender’s in-house appraisal department or an AMC. But in addition, the advancement of sophisticated data analytics can also be incorporated with appraisal technology to deliver even more information and value. Specifically, the utilization of rich data analytics tools can be applied to the collateral review process. These tools rapidly analyze appraisals for compliance, completeness and consistency based on industry guidelines. Further, subject property details are verified for accuracy to help warn against fraud. Data analytics also renders highly accurate valuations via the use of property area metrics, trending and other factors that are not typically looked at when loans are underwritten. This type of market intelligence takes into account things like data from multiple listing services (MLSs), house price indices (HPIs), housing inventory levels, sales figures, foreclosures and more. These systems conduct a detailed analysis of the comparable sales and listing data provided in the appraisal report. This information is then compared to independent public records and local market data to determine whether the report used the most proximate, similar, and recent available comparable sales and listings. Using data analytics, reviewers and underwriters are now able to quickly identify potential issues regarding estimates of value and the supporting data provided by appraisers to determine that estimate. Many lenders using these types of tools have seen a significant reduction in review time and errors by as much as 60 percent. When a lending entity has a need to extrapolate hard-to-find information within the appraisal report, they should look at leveraging a valuation management software solution that is seamlessly integrated with data analytics technology. These review findings can provide insight to monitor and evaluate the competency and ongoing performance of appraisers and persons who perform evaluations. This is a powerful combination of robust technologies that maximizes reporting, minimizes risk, ensures accuracy, and provides the highest quality appraisal possible. There are many factors that must be taken into account in order to determine highly effective property valuations and reporting in today’s mortgage market. Depending on needs, the combination of valuation management technology with data analytics tools delivers intelligence that takes appraisals and collateral review to new heights. Vladimir Bien-Aimé is president and chief executive officer of Global DMS. Since cofounding Global DMS in 1999, Bien-Aimé has grown the company into a leading provider of Web-based valuation management software solutions catering to lenders, AMCs, appraisers and other real estate entities. He may be reached by phone at (877) 866-2747, e-mail vlad@globaldms.com or visit www.globaldms.com.
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