Veros Real Estate Solutions has developed a solution for lenders specializing in PACE (Property Assessed Clean Energy) loans in the state of California, where new compliance requirements went into effect Jan. 1, 2018. VeroPACE, available through the VeroSELECT ordering platform, will generate, analyze, rank and report the multiple Automated Valuation Models (AVMs) now required for PACE lending by California State Assembly Bill 1284 and the companion State Senate Bill 242.
"The passage of this legislation significantly changed the valuation process for PACE loans, which are used to finance greater energy efficiency in homes,” said Veros Vice President of Sales Rob Walker. “Historically lenders could process a PACE loan in California using the results of a single AVM, but they now need three AVMs and must use a new method of calculating the final value."
AB 1284 intends to enhance PACE underwriting by requiring lenders to obtain the three AVMs from a third-party vendor, then choose the one with the highest confidence score and calculate the midpoint of that AVM's high-low value range. The resulting value, combined in a report with data from the three AVMs, becomes the valuation submitted with the PACE loan application.
"Ordering three AVMs on the same property can be difficult," Walker said. "And because different AVM providers have different methods of producing confidence scores and values, the mid-range requirement has presented some significant challenges for many PACE lenders. Also, if lenders cannot get three AVMs, they have to get an appraisal, which will add time and cost to the loan application process. To combat this, lenders need to achieve high AVM hit rates."
Luke Ziegenmeyer, Director of Product Management at Veros, said, "The good news for PACE lenders who are struggling with this new compliance requirement is that VeroPACE handles the entire process for them. And, if need be, we have an optional add-on for VeroPACE users that can facilitate the request and delivery of appraisals as well."
When VeroPACE is ordered through the VeroSELECT platform, a single data call is made, which generates a "cascade" through which up to 10 AVMs may be run to increase the likelihood of getting a hit. The VeroSELECT system stops requesting AVMs once it has received three valid hits. VeroPACE then determines the AVM with the highest confidence score, calculates the average of its high and low values, and returns it to the lender in a standardized data format. VeroPACE also generates a coversheet with all the data elements that can be put in a file of supplemental information.
