PERSON OF THE WEEK: John Walsh is president of San Diego-based property data and analytics company DataQuick. MortgageOrb recently interviewed Walsh to learn more about the recent changes in the valuations space, including the impact new regulations will have on the use of automated valuation models (AVMs).
Q: What are some of the more compelling new solutions you've seen for managing collateral risk?
Walsh: Technological innovations are constantly aiming to help lenders and investors find new ways to minimize risk, but some of the more compelling new solutions center on automated appraisal management and review. Property valuation has become key to risk management, especially with added regulatory requirements. To offset some of the risks and difficulties that come with reviewing and analyzing an appraisal, there are now advanced solutions that go beyond a simple manual check on appraisal completeness by conducting an automated review that is comprehensive and defensible.
These appraisal quality management solutions provide a consistent interrogation of a property valuation based on an organization's specific business rules. They leverage automation technology to access advanced intelligence that helps efficiently determine the best allocation of valuable review resources and improve decisioning accuracy and productivity.
Q: What would you say to a mortgage professional who is hesitant to use automated systems for appraisal review?
Walsh: You'll never replace the human element when it comes to property valuation and review, but a manual process simply cannot account for every element required for an acceptable, comprehensive evaluation of an appraisal. Instead, manual reviews should be focused on where they're most needed – reviewing problematic and high-risk valuations. Automated review systems excel at identifying the high-risk valuations, which allows you to allocate your review team's time to tackle the biggest problems. They also ensure a comprehensive, consistent review across all appraisals – something that's become much more important given increased regulatory pressures.
Q: How do AVMs fit into the mix given recent regulatory changes?
Walsh: We have seen some pullback in the use of AVMs based on recent regulatory changes, specifically with Regulation B taking effect earlier this year. However, these regulations shouldn't keep mortgage professionals from accessing the business-critical intelligence found in AVMs. There are many solid options available that deliver highly accurate valuations at a very low cost that can also be customized to co-exist in our more regulated environment.
Also, many AVMs now feature advanced quality assurance metrics such as a forecast standard deviation that lets users literally dialup and down the level of confidence they'll accept for different valuation applications. This added intelligence is one of the reasons we are still seeing strong use of AVMs in equity lending and portfolio management.
Q: Doesn't all of this new technology mean additional cost? Why should valuation professionals invest in using advanced intelligence solutions when evaluating a property? Â
Walsh: We actually view this as an enormous costs savings opportunity. Right now, firms are spending an ever-increasing amount of money on manual reviews. The right automated tools will not only reduce review time and cost, but also allow you to deploy more human resources on the higher risk valuations. Ultimately, by deploying a more comprehensive review across all appraisals or loans in a portfolio, mortgage professionals significantly reduce buyback and default risk.
