PERSON OF THE WEEK: Phil Huff is CEO of Platinum Data Solutions, a provider of valuations technology and services to the real estate industry. MortgageOrb recently interviewed Huff to learn more about the challenges facing the valuations industry today, including the recent revisions to the Equal Credit Opportunity Act (ECOA) rules regarding valuations and how information is disclosed to borrowers.
Q: What are the top challenges currently facing the valuations industry, and how are they being addressed?
Huff: Probably the most daunting challenge is conducting business efficiently with the dwindling number of qualified appraisers. With the decreasing number of appraisers, many lenders are having difficulty finding qualified appraisers and still coming up with quality appraisal products. The industry is addressing these issues by developing technologies that can empirically score appraiser performance and by creating highly accurate alternative valuation products.Â
Q: What has the impact been from the recent revisions to the ECOA rules regarding valuations and how information is disclosed to borrowers? Has this resulted in a drop in automated valuation model (AVM) usage as some predicted?
Huff: Yes, I think AVM usage has dropped. Ultimately, disclosure should result in more educated homeowners and home buyers, but the new regulations are requiring lenders to dedicate more time to support each borrower. They have to make sure they're communicating the information not only correctly, but also in context, which ultimately costs more money. This, of course, creates opportunities for companies, like Platinum, to provide lenders with work-arounds or new technologies that enable them to handle these processes more economically and efficiently.Â Â Â
Q: There has been an explosion of ‘general data’ (beyond property data) in recent years that appraisal management companies (AMCs) can use to arrive at more accurate valuations – whether for appraisals, broker price opinions (BPOs) or AVMs. Can you give some examples of these new data sources and how they are being used?
Huff: Sales and listing data is probably the biggest example of "alternative" data, but there are also other sources that can help boost accuracy in collateral valuations, such as general lien information and data from past appraisals. There isn't one data source that will boost accuracy the most. It's really about aggregating data, and using analytical technologies that help determine which data sources are best used in which specific situations. For example, in certain counties like Marin and Orange County, Calif., sellers are listing properties below their target sales price as a technique for starting a bidding war and moving a property quickly. In those cases, an analytical technology would be able to indicate that MLS listing information isn't a suitable data source. As the industry matures, we'll see more and more technologies, like Platinum's OptiVal, that will auto-select which data sources should be used in which situations.
Q: In your opinion, are new state and federal regulations stifling innovation in the valuations industry or, in fact, driving it?
Huff: I think they're driving innovation. Regulations create new business channels as lenders seek ways to economically and efficiently comply with regulations.Â
Q: How much is technology combined with new sources of data improving the accuracy of appraisals, BPOs and AVMs? Will we one day reach an age where subjectivity is no longer an element in the appraisal process?
Huff: The combination of business intelligence and broad data sources is significantly improving the accuracy of a variety of collateral valuations. Today's technologies are getting more information from more sources and analyzing the information on appraisal reports and the information used in BPOs and AVMs on a much deeper level. That said, subjectivity will always play a role in the appraisal process because there will always be change and the need for someone to assess the impact of that change on the subject property.
Q: If the economic crisis of 2008 happened all over again today, do you think real estate appraisers and the valuations industry at large would face the same criticisms today as they did then? What's changed in valuations since then that would cause things to play out differently?
Huff: Knowing what we know now, I think we'd realize that there were numerous entities involved in the issues that led to the mortgage meltdown. It wasn't limited to appraisers. We've also got a lot of legislation in place to protect against collusion, like the appraiser independence requirements. On the other hand, lenders, appraisers and AMCs still have a ways to go, in terms of the way they handle valuations. There are a lot of technologies that can help protect our industry from the types of issues that led to the economic crisis, but they aren't as widely adopted as they should be if we really want to reduce risk and prevent loss. We need to remember that there will always be avarice, and systems and legislation can only go so far.