Would it surprise you to learn that the top fraud scheme in 2014 was tied to property appraisals? Say it ain’t so! That’s according to information gleaned by Fannie Mae and Freddie Mac in their loan reviews.
Platinum Data Solutions, “The Appraisal Quality Company”, as they bill themselves, recently reviewed 300,000 new appraisals completed during the third quarter. They found inconsistencies in the reported property quality and condition ratings in 39% of the appraisals reviewed. These ratings did not match those of prior appraisals done on the same properties in Platinum’s database (Platinum)
The causes for these discrepancies aren’t easily identified. But, there is something which creates a difference. That difference may adversely affect the validity of the value provided which helps to determine a loan approval, and a consumer’s equity.
If the value provided isn’t accurate, it could have serious repercussions for a lender and a consumer down the road. Repercussions which could include a loan repurchase with the lender left with a property which will not support the outstanding debt.
It’s important for lenders to do a very careful analysis of the appraisal using all the tools available. These include systems like Platinum’s, as well as, collateral reviews offered by both Fannie and Freddie. These reviews, coupled with an aggressive pre-closing review program, will aid a lender in identifying not only appraisal problems but other loan problems, BEFORE a loan closes, allowing time for correction.
Don’t wait until it’s too late to find out that you have problems with your appraisals and/or your appraisers. Be proactive, underwriters are busy with last minute reviews for approvals and in clearing other conditions. Many times they just don’t have sufficient time (or maybe training) to perform a complete accurate appraisal review.
Don’t get caught with your value down. There are companies out there to help with tools to analyze all loan information, including the appraisal before you close a loan.
Using these companies and their tools will save a lender time and money by avoiding problems, delays, indemnifications and buybacks by identifying and allowing correction of defects prior to a loan closing.
These reviews are not a cost but an investment in quality, and in the lender’s success and survival in the future.
Are you making the investments needed to ensure the quality of your loans?