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Appraisers & Big Data; AMC rule proposed by 6 federal agencies

March 25th, 2014 by Bill Collins Leave a reply »

News Release Yesterday From Six Federal Agencies on Minimum Requirements for AMCs

In a joint release yesterday, the FHFA, CFPB, FDIC, OCC, NCUA and Federal Reserve Board of Governors issued a proposed rule which “would implement minimum requirements for state registration and supervision of appraisal management companies (AMCs)”.  Some of the requirements for AMCs in participating states under this rule include:

~A requirement that AMCs “register in the state and be subject to its supervision”.
~AMCs are to use “only state-certified or licensed appraisers for federally related transactions”.
~An AMC must “ensure selection of a competent and independent appraiser”.

This proposed rule would allow participating states 36 months to implement the minimum requirements from the effective date.  Assuming passage of this rule (not a certainty), it would not likely have an impact on AMCs and appraisers until late in 2017.  Currently 37 states have registration requirements for AMCs.

A link to this joint release (which includes the full name of the five agencies identified by acronyms above) is found here: Agencies Issue Proposed Rule on Minimum Requirements For Appraisal Management Companies (Opens a .pdf file)

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What is Meant By "Big Data?"

We have seen “Big Data” used in a variety of contexts including:

IBM and Data Clarity Corp. website: “Big data is more than simply a matter of size; it is an opportunity to find insights in new and emerging types of data and content, to make your business more agile, and to answer questions that were previously considered beyond your reach. Until now, there was no practical way to harvest this opportunity. Today, IBM’s platform for big data uses state of the art technologies including patented advanced analytics to open the door to a world of possibilities.  Big data spans four dimensions: Volume, Velocity, Variety, and Veracity.”

The Social Media Association announcing an upcoming meeting: “If you have heard of the term “Big Data” you might think of it as one of those new scary buzzwords. Fear not, because the Social Media Association has brought in Tyler Roye of egifter.com to decipher Big Data for you so that it may be used for you and your company. Use Big Data to help build your brand and use all the information you gain from Big Data to propel your company forward”.

Forbes/Century Link (1/7/14 posting by Natasha Baker from interview with John Lucker (Deloitte Analytics Global Advanced Analytics & Modeling):
“Big data pundits have long been touting the technology as the Holy Grail companies need to more effectively manage their supply chains, understand their customers and control their resources. Yet, this year the hype began to wear off as companies struggled to derive value from their strategies, Lucker said.

‘2012 was the start of big data as a paradigm’ he said. ‘But, in 2013, the discussion around value had an important resonance with people. People started asking, ‘What is this beyond the hyperbole of the term?’

Lucker said companies will re-focus strategies and processes and hit their stride due to greater maturity of technology tools and skills. He predicts that companies will ramp up their investment in big data, begin hiring chief analytics officers to lead the way, and invest in visualization tools…

In 2014, more companies will implement machine learning technologies, including semi-automated development of predictive and prescriptive models to increase productivity. Lucker said executives will forge ahead with greater awareness that algorithms have their limitations and need to be balanced with human rationale”.

‘A machine can detect certain things based on algorithms, but a human brain can sort out any inconsistencies in a way an algorithm can’t,’ he said”.

Appraiser and software developer Mark R. Linné, MAI, SRA, chief analytics officer of ValueScape Analytics, in a January posting on the Appraisal Institute’s website: “Big data refers to massive volumes of data … so large that it’s difficult to process using traditional database and software techniques. We have more data on virtually everything than ever before. The prospect will provide valuation professionals with more information to determine a property’s value”.

In a posting one year earlier on ValueScape’s blog, Mr. Linne noted that: “What will the future bring? Will it bring a pool of ever-increasing data, a plethora of tools and new ways of analyzing data? Futurists are already talking about Big Data-data about data. Appraisers have always been at the forefront of using multiple data sources to explain other data about property. That process is about to go into high gear with the greater availability of data, UAD and the transference of analytic techniques from other financial services sectors”.

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Why Appraisers Should Concern Themselves With "Big Data" and "Data Mining"

The Mortgage Bankers Association News Link posted an article at the end of last year looking towards 2014 by Lisa Binkley of Platinum Data Solutions titled “Beware the Second Phase of UCDP”.  Ms. Binkley wrote:

“Lenders, look out. Thanks to the Uniform Collateral Data Portal, the world of appraisal quality control is changing again.

This time, there will be no formal warnings, no new regulations, and no new mandates. Appraisal scrutiny is simply going to get exponentially more rigorous and appraisal-based buyback risk is going to skyrocket. The reason? The GSEs’ appraisal evaluation processes have just been infused with big data analytics. That’s right–buyback risk has gone high-tech…

The UCDP is now raising red flags on appraisal-related issues that cause headaches at best, and buybacks at worst. Contrary to what some lenders mistakenly assume, the UCDP isn’t just another hoop or hurdle in the loan origination obstacle course. It’s no longer the new and unfamiliar tool that the GSEs are learning to use. The GSEs have put their people and processes in place. They have access billions of pieces of appraisal data and they’re not afraid to use them.

Let me give you an idea of what I’m talking about. It used to be that repurchase requests were limited to nonperforming loans. Not anymore. They’re now being issued on performing loans as well. As far as appraisal-based buybacks are concerned, lenders are being mandated to repurchase loans because of issues like inappropriate comps, unsuitable adjustments, misrepresentation of physical characteristics and more. These are all issues that the UCDP has made easy to catch. It does not matter whether an appraisal was intentionally compromised. The GSEs don’t make concessions for errors versus intentional fraud…  

The UCDP makes it simple for the GSEs to scan any appraisal for issues like completeness, compliance and consistency, but it goes much deeper than that. The UCDP and its mandated data format have also given the GSEs access to a massive data warehouse, one that is filled with billions of pieces of data that have been collected since the UCDP was implemented in 2012. The GSEs can sort and analyze that appraisal data, and leverage it to detect questionable activity, not only for individual appraisals, but also for lenders’, appraisers’ and originators’ bodies of work. And they can probably do it in minutes…

So what’s a lender to do? Screen appraisals as though their lives depended on it”.

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Newly Released!

Appraiser Help has Released its 2014 Directory of AMC’s and National Appraisal Companies. Click the link above to learn more and to download your copy today!



Does "Big Data" Offer Any Opportunities For Appraisers?


Mr. Linne, a supporter of the expanded use of statistics and new data analytics for more than two decades wrote in the aforementioned earlier report that:

“For residential and commercial appraisers-there simply has been no process improvement in workflow or analysis in a decade or more. I eliminate from this statement the continuing fine-tuning of appraisal software, which is nothing more than figuring out how to fill out a form more efficiently.  Filling out a form faster is NOT what this industry needs. What it needed simply stated-is more standardized data and the ability to analyze that data…

Appraisers are the local market experts. Data is ever more readily available. Tools are being developed and will continue to be exposed to the market over the next several years.

What should appraisers do? They should be open to the tools; they need to be open to new ways of thinking about values. They must step out of the form prison that they have been inhabiting for the last decade, and think about the value first-the form second”.

In my early days as a real estate appraiser, gathering data on comparable sales involved hours of scanning printed books of sale data (most without photos of the properties), viewing thousands of lines of data seeking to find a handful of transactions most comparable to the subject property.  The stunning technological advances made during the past several decades have given appraisers the opportunity to spend more time on analysis than on data gathering.  It is likely that future advances will be game-changing or “disruptive” as the techies like to say. 

As Mr. Lucker noted earlier “…a human brain can sort out any inconsistencies in a way an algorithm can’t”.  Appraisers will need to do a lot of “sorting” in the future.  This sorting will not only involve the gigabytes of data encountered in the course of each new appraisal assignment but will require business decisions involving the proliferation of new technologies and platforms offered as a means to the end, a completed appraisal report. 

A 1004 with three comparable sales has become a distant memory in the same way older appraisers remember Polaroid cameras.  Making the right choices from the plethora of new technologies, platforms and data assemblers in the future will be difficult but critical to the future of an appraisal practice.

Links to some of the aforementioned articles are found here:
How Data is Changing the Appraisal Profession

Top Four Big Data Trends For Business in 2014

Beware the Second Phase of UCDP

Valuescape Blog

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AppraiserNews is a FREE publication, supported by advertising and sales of products designed to help appraisers support and grow their businesses. Please consider supporting us today by seeing what we and our sponsors have to offer.

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Appraiser Help’s 2014 Directory of AMCs and National Appraisal Companies is Now Available!

To help appraisers evaluate how AMCs will work for their appraisal practices, we have compiled this expanded directory of AMCs and National Appraisal Companies, listing complete, contact information and other details for each listing.

If you’re looking to maintain or expand your mortgage appraisal practice, our Directory of Appraisal Management and National Appraisal Companies is a great place to start. Order it today for $69.99 and download it immediately!

Please visit our website now to make your purchase securely or contact us at (877) 434-2825 for more information on this comprehensive directory!

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Some (Mostly Critical) Reader Comments From Our Last Newsletter

An Austin, Texas appraiser writes:

“So, let me see if I understand you, correctly. Work is going away and isn’t coming back. Lenders will voluntarily act in their own best interest and hire real appraisers………someday, even though nobody is going to make them do it. But in the meantime you’ll just have to survive on the rarest property types in existence. I know, because I saw it on a reality show while you were staying up until 3 am doing superfluous revision requests.

How about something a little less naïve: The ship is sinking. Get off while you still can”. 

A Wellington, Florida appraiser writes:

“Your article on appraisers increasing their skills makes lots of sense.  However, what isn’t addressed is that lenders etc. won’t pay more for appraisers with more experience and better quality reports.  Since HVCC appraisers are no longer hired based on who is most qualified, most familiar with the area or who has specialized expertise.  Appraisers are hired on a rotational basis with "cheapest and fastest" as the primary qualifications.

I am one of the leading experts on equestrian properties in the country.  Over a period of 30 years I built a clientele of lenders because of my specialized knowledge.  All that went away with the AMCs”.

A Pennsylvania appraiser writes:

“I ask you this: What is the point of remaining in appraising, if the orders come in with greater demands than ever, and the fees are so low you can’t pay your bills and earn a living? If we cannot get this AMC leech off our backs, we are never going to make money as appraisers; I don’t care how many reports per week we do…If we do not change this broken structure, there will not be a future worth having in the field of appraising. You can have all the bells & whistles and the-next-best-thing in software, apps and marketing that you want, but if you can’t earn more than a few hundred dollars an appraisal, you can’t possibly earn a decent living, so why remain or train an apprentice.

Forget about ‘learning to swim with the sharks’, as a former scuba diver I can tell you, you don’t swim with the sharks, you stay away from the sharks before you get devoured. Separating ourselves from the AMCs as soon as possible is the only way to a financially secure future in appraising and achieving at long last true ‘appraiser independence”.

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Upcoming Real Estate Reports

This will be a busy week starting with the Case-Shiller Home Index scheduled to be released later this morning, continuing with several other reports today (Commerce Department report on new-home sales, FHFA report on single-family home prices) and ending with the pending home sales report from the National Association of Realtors. 

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Rates & Dates

Freddie Mac, the Mortgage Brokers Association (MBA) and HSH Market Trends reported mixed results regarding mortgage interest rates in their most recent surveys. 

On March 20th, Freddie Mac reported that 30-year fixed-rate mortgages fell to 4.32% from 4.37%. They also noted that last year at this time the 30-year rate was at 3.54%. 

Frank Nothaft (vice president and chief economist of Freddie Mac) noted that:

"Mortgage rates eased this week as housing starts declined 0.2 percent in February to a seasonally adjusted annual rate of 907,000, below consensus forecast. The rate on the 10-year treasury note rose following the Fed’s announcement Wednesday afternoon and, if this holds, interest rates may begin to trend higher going into next week."

The Mortgage Bankers Association (MBA) reported on March 19th (for the week ending March 14th) that 30-year rates with conforming loan balances ($417,500 or less) declined to 4.50% from 4.52% the previous week.   The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) dropped to 4.39% from the previous week’s rate of 4.41%.  Rates for FHA backed mortgages also fell, to 4.13% from 4.18% the previous week.  Mortgage applications were down by 1.2% from the prior week’s figure.  The share of refinance applications as a percentage of all applications dropped for the sixth straight week to 56.5%.

On March 21st, HSH Market Trends reported that 30-year mortgage rates rose to 4.44% from 4.39% the previous week. Rates for FHA-backed mortgages also increased, from 4.01% to 4.07%.

Additional information from Freddie Mac can be found by going to: Primary Mortgage Market Survey PMMS – Freddie Mac

Additional information from the Mortgage Bankers Association can be found by going to their site at: Research and Forecasts – Mortgage Bankers Association

Additional information from HSH can be found by going to: HSH.Com

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Ask Angie

We would first like to congratulate our most recent winner: Janet Duy of Fred A. Duy & Associates, Inc. of Oswego, Illinois (the second straight winner from the Prairie State).  Fred A. Duy & Associates appraises property in the northeast Illinois counties of DuPage, Kane, Kendall and Will.  Jan was the first to answer correctly that Benjamin Franklin was the author of the first two quotes ("By failing to prepare you are preparing to fail"; "It takes many good deeds to build a good reputation, and only one bad one to lose it") and Ralph Waldo Emerson wrote "I hate quotation. Tell me what you know." Today’s Questions:

1. Who said: “Act as if what you do makes a difference. It does."

a) Mother Teresa
b) Yoko Ono
c) William James
d) Bono
e) None of the above

2. Who said: "A writer is someone who has taught his mind to misbehave."

a) Norma Maier
b) Chelsea Handler
c) Oscar Wilde
d) E.L. James
e) None of the above

3. Who said: "We are all born ignorant, but one must work hard to remain stupid."

a) Benjamin Franklin
b) Lindsay Lohan
c) Miley Cyrus
d) Sarah Palin
e) None of the above

The first person to respond with the correct answers wins a choice of one of the following:

One Free Regular Listing on AppraiserHelp.com

A Free Copy of the Newly Released 2014 Directory of Appraisal Management Companies (Available to Members of AppraiserHelp.com and FHAAppraisers.com FREE!)

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Tell us what you think!

We invite your responses to any of the issues raised in this newsletter. Please e-mail us at: bill@appraiserhelp.com with your thoughts!

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We really hope you find our newsletter to be informative!  If you have any input on future topics for discussion, please email me your questions and I will do my best to address them in the next issue.  If you want to look back at past issues you can see our archive at www.appraisernews.com

Regards,

Bill Collins, Appraiser Help Inc.

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