By James Baumberger, CEO at First Choice and Certified Residential Appraiser
The Appraisers Conference and Trade Show, cohosted by the National Association of Appraisers (NAA) and Appraiser eLearning, in Salt Lake City on April 10-12, 2019 was very successful, if a bit shocking. I had the privilege last Friday of delivering the final 90-minute presentation of the conference on The Future of Appraisal.
I began by asking the audience two questions, so I’ll pose those same questions to you. You can answer them yourself or wait for me to answer them in a few minutes:
What is the only constant?
What is the most effective way to forecast the future?
Speakers from Fannie Mae, Freddie Mac, The Appraisal Foundation, the Appraisal Institute, First Choice Appraisal Management and other organizations discussed the disruption, or disintermediation, rocking the appraisal profession. Advanced computer analytics, big data, regulatory changes, smart phone technology and the “moon-race of our time,” the rush to a digital mortgage experience, have changed the appraisal industry forever. If you’re paying close attention, I did say “have changed,” not are changing.
Senate Bill S.2155 (Effective: May 24, 2018), Executive Presidential Order 13772 (July 2018), and the Federal proposed Rulemaking (December 2018) to increase the residential De Minimis – the threshold that triggers the appraisal requirement of FIRREA (Title XI) – from $250,000 to $400,000 combine to render most mortgage loan transactions in America exempt from the FIRREA appraisal requirements. Fortunately, Fannie Mae and Freddie Mac (the GSE’s) and many financial institutions still place value on Appraisers and appraisals.
Appraisers are recognized as helping to ensure “a safe and sound real estate lending process.” Appraisers can provide consumer protection by ensuring the estimated property value supports the mortgage loan amount. But we can’t rest on our laurels, because the regulatory changes also cite that the cost and time necessary to obtain traditional appraisals is incompatible with a digital mortgage experience that emphasizes speed, ease, and technology.
The Federal Housing Finance Agency (FHFA), which oversees Fannie Mae, Freddie Mac and HUD, has directed the GSE’s to act on “appraisal modernization.” If you haven’t read the Fannie Mae Update of March 2019, you owe it to yourself to read it now:
Click on “Appraiser Update March 2019” in the middle of the webpage to download a copy. The collateral risk management process, in The Future of Appraisal, begins with a Property Data Collection that is processed in a Collateral Risk Analysis. It is the risk analysis that will determine the level of valuation service that is commensurate with the credit risk of the transaction – not the mandatory appraisal requirements of FIRREA.
For those of you awaiting the answers to the two questions posed in the beginning, here they are:
What is the only constant? CHANGE
What is the most effective way to forecast the future? EXAMINE THE PAST
The Future of Appraisal has changed from a regulatory environment where Clients are forced to hire us into an Amazon World where Clients will need to want to hire Appraisers. Let that fact percolate into your consciousness for a moment. Clients will want to hire Appraisers because:
- APPRAISERS are the only independent, objective professionals in the entire transaction;
- APPRAISERS protect the public trust;
- APPRAISERS safeguard the credit-financial system of America;
- APPRAISERS are uniquely qualified to drive computerized value-related analytical tools; and most importantly,
- APPRAISERS will adapt to provide valuation services with the advanced technology, bifurcated processes, and speed required to deliver the digital mortgage experience.
The Future of Appraisal is just as attractive and rewarding as we have the endurance and will to create for ourselves. So, my recommendation is that we begin thinking of ourselves and our peers as customer service professionals, who provide a full suite of valuation services, and are hired by Clients who realize our value. In a world where Clients must want to hire us, a higher level of customer service from Appraisers will be the price of admission into The Future of Appraisal. Thank-you for reading!