heard on the street
By Tommy A. Duncan
SEPTEMBER 2009 O
VIRGINIA MORTGAGE PROFESSIONAL MAGAZINE
O www.NationalMortgageProfessional.com
Tommy: When performing reviews on appraisals, do you recommend an automated valuation model (AVM)?
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Lately, there is a lot of press about large mortgage banks that used AVMs to determine property values for reducing Home Equity Lines of Credit (HELOCs) and now these financial institutions are faced with class-action lawsuits based on incorrect values as part of the allegations. One such suit, Michell Kimball v. Washington Mutual Bank alleges that the bank used faulty AVMs to create a pretext for its credit limit reduction and account suspension. After Ms. Kimball learned that her HELOC was frozen, she called customer service and was informed an AVM showed the property value had significantly declined. In disbelief, she challenged the bank. She was required to use the bank’s “preferred” appraiser and a full residential appraisal was performed and the results of the appraisal valued the property was worth 1.5 times the AVM’s estimate. Mark one up for the appraiser and the consumer. There are several other lawsuits in the works with similar type of claims where faulty AVMs were used. The adverse affects of the AVM product and the impact it is having on the consumer is beginning to surface, and I expect there will be more outcry from industry leaders as consumer complaints surface. The Home Valuation Code of Conduct (HVCC) lists the AVM as a form of quality control on appraisals during the 10 percent sampling of Section VI. The AVM is much more affordable than a Field Review Appraisal however, I learned during my year deployment in the Global War on Terrorism that modeled data used in intelligence was often skewed and incorrect. We found ourselves having to use human intelligence to validate information that later discredited the data models. I see the AVM having the same type of effect as I saw during the war. One must know its limitation and for the best results, have a human to verify the information. Yes … an appraiser. Use an appraiser to validate collateral. A Field Review Appraisal or a drive-by is what we use, and yes it costs more than an AVM, but it puts an eye on the target and fills the gaps in performing appraisal audits. I believe there should be a balance in technology and the way it is applied in the mortgage industry. However, the AVM product has its place, but shortcuts may end up being the long way. In the mortgage fraud cases Quality Mortgage Services have performed, AVMs were never used. An appraisal, whether a full appraisal or a field review, was used because the appraiser is the subject matter expert and places more credibility on a licensed professional. An AVM cannot testify in a court of law and will not hold up in court because of problematic flawed information. I believe the AVM is probably a good product during pre-funding and underwriting as something to support a desk review. However, a Field Review Appraisal is my product of choice during post-closing quality control. But, I have also seen where a Field Review Appraisal or another appraisal was ordered during underwriting. It is difficult to say which method, desk review or AVM, was used to provoke the underwriter to order another appraisal or Field Review Appraisal. What I do know if you want stronger supporting evidence, an appraiser is required. Tommy A. Duncan is executive vice president of Quality Mortgage Services LLC. For answers to your QC and FHA questions, please contact Tommy at (615) 5912528, ext. 124 or e-mail taduncan@qcmortgage.com. You may also visit Quality Mortgage Services LLC on the Web at www.qualitymortgageservices.com.
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Lenders One sets production record for first half of 2009 Lenders One Mortgage Cooperative, a national alliance of more than 135 independent mortgage bankers, announced that it has experienced a record level of originations during the first half of 2009. Lenders One member companies originated $21.2 billion in loans during the second quarter, which surpassed first quarter volume of $17.3 billion. Broken down regionally, new and existing members in the western states originated $7.9 billion of the recent quarter’s total volume. Midwest lenders followed with $7.6 billion, and east coast member companies recorded $5.7 billion in production. “Heavy refinance volumes, coupled with low interest rates and the dedication of our members have all contributed to this continued success,” said Scott Stern, chief executive officer of Lenders One. “These factors were complimented by our collective buying power that creates revenue-enhancing, cost-saving and market-share expanding opportunities for all members.” As the secondary market progresses toward recovery and investors begin to revisit mortgages as viable investments, the Federal Housing Administration (FHA) remains a strong part of the industry, accounting for 43 percent, or $9 billion, of Lenders One’s second quarter originations. Conventional products made up 52 percent, or $11 billion, with jumbo loans rounding out the remaining five percent. Stern also attributes some of the production volume to the similar increase seen in Lenders One membership. At mid-year, the cooperative had already attracted 21 new members from all across the country, which is in line to compete with the record 42 total members it on-boarded in 2008. “By staying committed to consumers with products to refinance and purchase homes, our members continue to be leaders in their market,” Stern said. For more information, visit www.lendersone.com.
Two firms join NRMLA’s Wholesale Lender Program The National Reverse Mortgage Lenders Association (NRMLA) has
announced that Live Well Financial Inc. of Richmond, Va., and Generation Mortgage Company of Atlanta as charter members of the association’s new Wholesale Lenders Program. Launched in July, the Wholesale Lenders Program provides information to lenders and brokers on delivering reverse mortgages to reputable investors. Other Wholesale Lender Program participants include Senior Lending Network, Bank of America Home Loans, Metlife Home Loans and Genworth Financial Home Equity Access Inc. “Live Well Financial is pleased to join NRMLA’s Wholesale Lender Program as a charter member,” said Chris Palumbo, senior vice president and COO of Live Well Financial. “We look forward to partnering with NRMLA and all of its members to help the reverse mortgage industry continue its impressive growth.” Sherry Apanay, senior vice president of wholesale lending at Generation Mortgage Company, said, “Generation Mortgage is pleased to support NRMLA and our industry in this new endeavor. Wholesale lenders working together for the good of the reverse mortgage industry should make us all stronger.” For more information, visit www.nrmlaonline.org.
NexBank and The Funding Source create NexBank Mortgage Dallas-based NexBank, a banking and financial services company and commercial mortgage lender, has announced the establishment of NexBank Mortgage through a partnership with The Funding Source, a residential mortgage operation based in Dallas, Texas. NexBank Mortgage, which offers several residential loan programs, from traditional mortgages and Veterans Affairs (VA) loans to reverse mortgages, operates several field offices with seasoned loan counselors. The Funding Source also has a mortgage technology platform that allows consumers to simplify the mortgage application process online, while still receiving service from local experts. This partnership allows NexBank greater gains of scale in originating loans as it joins its current commercial and wholesale mortgage lending activity with the residential mortgage operation. “NexBank is honored to have the opportunity to build a single operating alliance with The Funding Source and the company’s founder, Tish Ashley,” said NexBank President and Chief Executive Officer Davis Deadman. “Together, we have the capability to offer consumers outstanding knowledge of the local market, expertise in crafting custom loan decisions and assurance to provide mortgages of nearly any amount.” continued on page 40