First American Panel Appraisers: Valuation Q2 2023 Update

FIRS T A ME R ICA N PANE L APPR AIS E R S

Valuation Q2 2023 Update

Dear First American Panel Appraisers, After what had been a relatively idle beginning to 2023, we are hopeful you’ve found renewed focus and momentum within your business as the year begins to pick up. To ensure you are informed of a few First American and industry ongoings, we are sharing our Valuation Q2 2023 Update.

In our last Valuations Update, we had discussed the importance of timely communication, high appraisal quality, and fast turnaround times. To expand on those items, we wanted to offer some suggestions on how you can excel in each area.

Communication There are four basic areas in the life of an appraisal order where communication is key: order acceptance, scheduling, inspected, and ETA. FAMS has simple and easy ways for you to keep communication flowing throughout the order life cycle.

Order Acceptance Please accept the order as quickly as you can and no later than 4 hours after assignment to avoid reassignment.

Simply click the link in the New Order e-mail and accept the order in the AMP platform.

Scheduling Scheduling attempts can easily be notated within the AMP platform right in each individual order. Note – we expect scheduling attempts to be made every 24 hours.

Inspected Once the property has been inspected, simply click the inspected button within AMP on that order.

ETA When you update AMP that the property is inspected, you will also need to immediately provide an ETA for that report (simply click the calendar and provide your ETA).

Providing this will prevent additional emails, phone calls and text messages from us.

Learn More 866.733.9269 | firstam.com/mortgagesolutions ©2023 First American Financial Corporation and/or its affiliates. All rights reserved. NYSE: FAF

First American Panel Appraisers: Valuation Q2 2023 Update

Note: Completed assignments should be delivered within 24 hours of inspection when at all possible. Detailed notes should be provided regarding any delays.

Our most successful and highest volume appraisers systematically update all orders at the above milestones, providing our Operations team with a clear picture of what is happening with each order. This allows our team to keep clients informed along the way, which is crucial for continued relationships in today’s business environment.

Appraisal Quality Quality in the valuation space can often be subjective.

Additionally, there are various interpretations as to what translates to “good quality, depending upon the audience.

It’s been said that there are no perfect appraisal reports, and that’s probably true. Regardless, there are a variety of things appraisers can focus on to get the report across the finish line without ever receiving a correction or hearing about the report after delivery.

While this is not a comprehensive list, we wanted to offer some focus areas for minimizing revisions and achieving higher quality, those being: Selective Order Acceptance, Reading the Engagement Letter, understanding GSE and Agency Resources, and Pre-Delivery Quality Control.

Selective Order Acceptance A crucial component of appraisal practice that directly correlates to quality is being competent to perform the assignments you agree to take on. While we may not understand every aspect of an assignment and all foreseeable challenges at the time of order acceptance, it is crucial to be selective when agreeing to perform appraisal services. Blindly accepting all assignments without any preliminary research can get appraisers in

over their heads, especially on more complex assignment types and/or with property types that fall out of the appraiser’s regular wheelhouse. In some cases, appraisers simply plow through with the unfamiliar, resulting in significant quality issues.

Please be selective in the assignments you take on. Not only are there USPAP issues related to bighting off more than you can chew, but you’ll be doing the AMC, Lender, and Borrower a disservice by proceeding.

There are certainly situations where unforeseeable complexities are identified well into an assignment. In such cases, the best thing to do is communicate. Simply tell us what is going on and we’ll determine next steps.

Communication in this regard is seen as a win, but plowing through and delivering a defective report will be a loss (potentially in a myriad of ways).

Reading the Engagement Letter Each Client of First American Mortgage Solutions has unique engagement letters, all coming with a variety of special instructions. Instructions vary based on client, assignment type, loan purpose, line of business, property type, etc. The hundreds of engagement letter variations

First American Panel Appraisers: Valuation Q2 2023 Update

and ever-changing client requirements make it impossible to memorize them all, even for familiar clients. With that said, it is crucial to read the engagement letter on every assignment. This is hands down one of the best ways to avoid unnecessary revisions.

In discussions with appraisers who consistently produce high quality reports, a common practice is that they read the engagement letter multiple times throughout the assignment: during initial prep and research, at the inspection, while writing the report, and when performing their pre-delivery quality control. In so doing, the appraiser is constantly aware of the assignment expectations and can tailor the report to the engagement letter, rather than writing a generic appraisal and hoping it does not come back. This active approach to meeting the client’s needs is something we recommend all appraisers employ in their practice. You aren’t just writing an appraisal, you are writing an appraisal to a specific intended user, who has specific needs and expectations.

GSE and Agency Resources Being aware of GSE and Agency expectations is a crucial component to a high-quality rating. While we make every effort to communicate the client specific assignment instructions through our engagement letters, there are almost always GSE and Agency expectations that must be met. To that end, appraisers should be aware and up to date with the following: Fannie Mae Resources • Fannie Mae Selling Guide • Fannie Mae Appraiser Page • Fannie Mae Appraiser Update Archive Freddie Mac Resources • Freddie Mac Single-Family Seller/Servicer Guide • Freddie Mac Collateral Valuation and Appraisal Resources • Freddie Mac Appraiser Capacity/UCDP Appraisal Volume

HUD/FHA Resources • HUD Single Family Housing Policy Handbook 4000.1 • HUD Policy Questions: www.hud.gov/answers, email: answers@hud.gov, or call the FHA Resource Center at (800) CALL-FHA (225-5342).

Other Resources • USPAP • The Appraisal Foundation Valuation Advisories Pre-Delivery Quality Control: With quality control being a crucial component on the AMC side and on the Lender side, it stands to reason that appraisers should also be performing quality control on every report. What we ask is that all appraisal reports undergo some form of quality control prior to delivery to First American Mortgage Solutions. Best practices are varied, but here are a few to consider: • Use the QC/Review functions in your appraisal software • Re-review the engagement letter and ensure report is in compliance • Actually read your appraisal report prior to submission • Create a QC checklist • Keep templates updated • Avoid cloning reports Some of the above suggestions may seem obvious or basic, but we have found these to be proven methods that minimize QC rejections, thereby enhancing the appraiser quality scores.

Note that First American Mortgage Solutions does leverage ACI Sky Delivery, an appraiser facing quality control tool. While robust and operating off thousands of Business, Compliance, Cross-Check, requirement, and Risk rules, this should not be considered a substitute for pre-delivery quality control.

First American Panel Appraisers: Valuation Q2 2023 Update

QC Metrics To tie into quality, we offer the following metrics regarding Top 5 Revisions at First American Mortgage Solutions, as well as some trends on overall revision rates.

35% Cost to Cure/ Repair Items 23% GridAdjustment 18% Accessory Unit/ 2nd Kitchen

QC Metrics

16% Improvement Section 8% Outbuilding/ Shed

In terms of the overall panel rejection rate, files are being rejected at a greater rate than they were in 2022. On average, the 2022 rejection rate was 11%. On average so far in 2023, the rejection rate has nearly doubled to an average of 20%. We need your help in getting this number back to or below 2022 levels. Operations is looking at quality when assigning work, so the better your quality rating, the more work you’ll see.

Revision Rate 25 20 15 10 5

19%

23%

18%

21%

21%

JAN

FEB

MAR

APR

MAY

0

If you are looking to improve your overall quality with First American Mortgage Solutions, these five areas should be focal points.

Turnaround Times Currently, most First American Mortgage Solutions Panel appraisers have excellent turnaround times (TAT).

On average Panel Appraisers have an order to delivery time of 5 calendar days. Compared to recent years past, this is outstanding. However, in the ever competitive and changing mortgage appraisal environment, any improvement is always welcome.

To improve your standings and rise above your peers, we highly recommend continued focus on improved TAT, regardless of the order due date. For reference, our

top performing appraisers have both low revision rates and fast TAT, often within 24 hours of inspection, and frequently same day delivery.

Recap To recap on ways to excel in the current environment, we are highly focused on the three areas above: timely communication, high appraisal quality, and fast turnaround times. By focusing and showing high aptitude in these areas, you are sure to win the lions share of our business in your local market.

Regulatory Issues As all appraisers should be aware, in August 2022, The Appraisal Foundation’s Appraisal Standards Board (ASB) announced that the 2020-2021 edition USPAP would be extended another year. This is an additional one-year extension, which was added to the previous one-year extension. Ultimately, the 2020-2021 edition of USPAP was extended through December 31, 2023.

On May 5, 2023, ASB voted to adopt 2024 USPAP, effective January 1, 2024. The following links outline adopted changes: • Short Summary of Actions • Detailed Summary of Actions

First American Panel Appraisers: Valuation Q2 2023 Update

We encourage you to review the Summary of Actions links above and also encourage you to be up to speed on 2024 USPAP prior to it becoming effective.

Product Update We are pleased to announce that over the coming months there will be a resurgence of alternative appraisal products/forms made available to FAMS panel appraisers. Most notably is our Collateral Appraisal Report.

The Collateral Appraisal Report is used for appraising single family residences based on exterior inspection only.

This product is predominantly used for valuations related to Home Equity, HELOC, portfolio analysis, and portfolio monitoring. An exterior inspection of the subject is completed, the appraiser provides a Sales Comparison Analysis, brief reconciliation, and an opinion of market value. Inspection is exterior only, there are no adjustments expressed on the form, physical inspection of comps is not in the SOW. Should you receive one of these orders, all relevant information (form type, instructions, examples, etc.) is in the engagement letter. If you have questions, simply post a note to the order and we will get back to you.

First American Panel Appraisers: Valuation Q2 2023 Update

In closing, we hope you find the above information helpful and useful. Please consider this a blueprint for how you can assist in strengthening your panel position, ensuring a successful long-term relationship with First American Mortgage Solutions.

Thank you for your dedication and partnership.

Learn More 866.733.9269 | firstam.com/mortgagesolutions First American Mortgage Solutions, LLC, and its affiliates, make no express or implied warranties respecting the information presented and assume no responsibility for errors or omissions. Title insurance and settlement services are provided by First American Title Insurance Company, an affiliate of First American Mortgage Solutions, LLC. First American and the eagle logo are registered trademarks or trademarks of First American Financial Corporation and/or its affiliates.

FAMS: 07/2023

©2023 First American Financial Corporation and/or its affiliates. All rights reserved. NYSE: FAF