PERSON OF THE WEEK: Jim Silva is CEO and president of EMC2Data, a global provider of storage, data protection, security, infrastructure management and workflow solutions to the financial services industry. MortgageOrb recently interviewed Silva to learn more about how regression analysis will improve the mortgage process.
Q: How does regression analysis help in the mortgage process?
Silva: Regression analysis will help mortgage professionals have more accurate home values and, in turn, close more loans. By essentially providing an appraisal pre-approval, originators have a property values upfront and know exactly what to expect regarding values throughout the origination process. In fact, originators have used EMC2Data's valuation software to successfully overturn appraisals that were low because it provides the data, or the mathematics, to back its findings.
Q: Appraisers have had access to technology for years. What makes regression technology so special?
Silva: For years, most appraisers have been using "traditional" appraisal techniques, such as paired sales analysis, which contain a high potential for data bias because some appraisers often engage in the highly questionable practice of data mining by selecting comparable sales to support a preconceived value conclusion, instead of those sales that are most like the property.
In contrast, regression analysis relies on an unbiased random selection of comparable sales. Regression analysis takes sample size and variance in the real estate market into consideration to arrive at a value. Regression analysis goes beyond the standard comparable model, including a larger set of more than 250 comps to determine which features are determining value in a specified area, providing users with adjustments at a 95% confidence level.
Q: I know your platform is offered to real estate professionals, mortgage lenders and appraisers. How does it help all of these parties remain compliant?
Silva: With our automated regression technology, the firewall is still in place, and there is a separation between the appraiser and the lenders, which is required by Dodd Frank. The system does not require anyone to talk to the appraiser, and more importantly, no one is sharing data with the appraiser. This technology allows lenders and real estate professionals to look at the same data as the appraiser, so there is consistency with data adjustments.
Q: What role will regression technology have in changing the financial industry?
Silva: The key to changing the industry is obtaining accurate home values so more solid loans will be originated, which would lead to improved markets. Despite increased regulations, little has been done to prevent another mortgage industry crash. In order to prevent a repeat of past mistakes, the industry needs to use a different approach that will check the math of appraisals. This is why regression analysis is so vital in changing the financial industry.
Q: Why is it important for all of the parties involved in the home buying process to use regression technology?
Silva: Using a standardized technology for valuations such as regression analysis will result in industry-wide consistency.Â Regression analysis offers true property values across the board that everyone involved in the purchase/origination process can consistently use. This means no 11th-hour surprises for anyone. The use of this technology will aid in the industry's recovery with solid housing values, while strengthening the relationships between mortgage, real estate and appraisal professionals.