Phillip King offers his take on desktop appraisals and more
Phillip King is the vice president and principal product manager of EXOS® Valuations at ServiceLink. EXOS Valuations is ServiceLink’s valuation platform, and Phil's role at ServiceLink is to work with our operational teams, our sales teams, our appraisers and our clients to build out a roadmap and strategy for innovations in valuations. His primary focus is on the continuous improvement of our valuations technology to provide a faster, more digital and more transparent mortgage experience. He recently offered his viewpoint on appraisal modernization – and specifically, desktop appraisals.
Q: How do you ensure ServiceLink’s valuations technology meets market needs?
A: While I’m focused on technology, at ServiceLink, we never forget that we’re in the service industry. We serve our clients and we help them serve their borrowers. We’re always focused on the borrower experience. We have to make sure all of our solutions are developed to meet and exceed borrower expectations, so that our lenders can be industry leaders as well.
We have top-notch technologists and data scientists that continually look at how we can accelerate the valuation process and continue to serve our lenders.
Q: Where do you see the industry going in the next five years?
A: In the next five years, valuations will get even more exciting. There will be a lot of innovation and a lot of technological advancements coming into play – primarily based on using data and data collection technology to create valuation decisions. The government-sponsored enterprises (GSEs) have already signaled their support for this direction, with the roll out of desktop appraisals in March. They’ve made clear that they’re committed to emphasizing data and uniformity, so that everyone in the industry can use home data quickly for different processes.
Q: Why is ServiceLink committed to modernizing appraisals?
A: We know that time is of the essence throughout the origination process. According to the ServiceLink State of Homebuying Report, 50% of borrowers said speed was a critical factor in the refinance process. The same report said 57% of consumers are either unsure or will definitely switch lenders for their refinance. Getting their borrowers to closing faster is one way lenders can retain their borrowers, so we want to help them do that.
For example, several years ago we saw that scheduling could be a bottleneck in the appraisal process. In reaction to that, we implemented instant digital appraisal scheduling – with which the borrower can schedule their appraisal appointment for the exact date and time of their choice, based on qualified appraiser availability. The borrower then instantly receives their appraiser’s name, contact information, photo and the make and model of their vehicle. This cuts days off appraisal timelines and provides borrowers with an experience they’re familiar with from ride-sharing apps.
Q: How has ServiceLink prepared for appraisal modernization?
A: We’ve known that the industry would go in the direction of a virtual or hybrid process. We meet with lenders, we meet with the GSEs and we meet with our peers in the industry. We stay connected to all of the players to understand what the latest requirements are and how we’re not only going to meet them in the near term, but also prepare for what’s next.
We were among the industry’s first providers of bifurcated appraisals more than 10 years ago, so we’re quite experienced in this space. We already have staff appraisers ready to complete these appraisals and the infrastructure to guide our lenders through the implementation process.
ServiceLink is prepared to help lenders adapt to the new normal, as we’ve been focused on finding ways to streamline the appraisal process for years.
Desktop appraisals and beyond: the future of appraisal modernization
Q: Can you describe the changes to the GSEs’ requirements taking place in March – specifically around desktop appraisals?
A: The GSEs made permanent some of the flexibilities that they implemented as a result of the pandemic. In the near term, that means in limited cases, appraisers can perform desktop appraisals and submit their opinion of value without personally inspecting the property. Instead, they use MLS photos, online data, available floor plans, or other data sources, which they submit on the Fannie Mae 1004 Desktop form or the Freddie Mac 70D form.
According to a desktop appraisals fact sheet provided by Fannie Mae, they’re making this change in order to promote efficiencies and mitigate appraiser capacity constraints, among other reasons. It’s worth noting that these changes currently only apply to purchase loans that meet specific criteria. For example, the loan-to-value (LTV) ratio must be less than or equal to 90%.
In order for a desktop appraisal to be completed, there must also be a floor plan of the subject property provided to the appraiser and included in the desktop appraisal. These can be produced by the borrower, the real estate agent, or by utilizing a third-party tool. If it’s not available and obtaining one isn’t the preferred approach, the lender can simply transition to a full appraisal.
Q: What’s next for appraisal modernization?
A: We anticipate that late this year or early next year, the GSEs will make hybrid appraisals permissible. Hybrid appraisals will require that specified data points are captured during inspection. These will be completed on the Fannie Mae 1004 Hybrid and Freddie Mac 70H forms.
In the not-too distant future, we expect wider acceptance of “data and done” models. While the exact details are not yet clear, these models would – in some cases – allow lenders to waive the appraisal entirely and allow for loan approval based on property data or property condition reports.
Q: What do desktop appraisals mean for appraisers?
A: There will always be a need for local appraisers to provide supported opinions of value. In fact, we’re constantly recruiting appraisers and looking to grow our panel, and hope that opportunities to complete desktop appraisals allow appraisers to focus their expertise on providing valuations, rather than on the logistics of scheduling and traveling back-and-forth between far-flung subject properties. Appraisers approaching retirement who still want to work but find it too physically demanding to inspect properties may benefit from these newer approaches. Additionally, we hope that they also spark interest in the industry among a younger demographic focused on utilizing different technologies.
ServiceLink is prepared to help you navigate a changing industry
As the GSEs look for further opportunities to modernize the origination process, ServiceLink stands ready to help its clients make the most of regulatory changes. Fill out the form below to learn more about how we can help you prepare for what’s next.