Effective October 3, 2015 under the new TRID (TILA-RESPA Integrated Disclosure) regulations, variances in the cost of appraisals will no longer fall into the 10% tolerance bucket, and only if a valid changed circumstance occurs can the cost of an appraisal to the borrower exceed what was disclosed on the Loan Estimate (LE).
By habit, mortgage professionals discuss with and gather from the prospective borrower all details of the transaction – employment, income, assets, debts, occupancy. The one aspect of the transaction that gets little discussion is the subject property. We have always relied on the appraisers to handle that piece of the puzzle in their appraisal report.
Valuation Management Group believes that adding an appraisal aspect to the application process could become a best practice for lenders. It adds a few minutes to the process but could save lenders the possible expense of incurable Loan Estimate under-disclosures, and the frustrations of re-disclosing and possible appraisal and/or closing delays. Here are a few suggested questions to pose to borrowers during the application process:
- Can you tell me a little about your home or the home you are purchasing? Square footage, site built or manufactured?
- Any recent renovations or additions?
- Any unique or special attributes?
- Is your site/lot over an acre?
- Is your home on a lake or other body of water?
- Is there any deferred maintenance?
- What do you believe to be the estimated value of your home (if a refinance)?
In some instances, your loan amount and/or sales price will indicate that the subject property may be complex. If in doubt, please contact your Valuation Management Group Client Specialist to discuss. Remember, most owners and/or buyers do not view their existing or future home as unique. Your questions should be posed in such a way as to get a clear understanding of the subject property. You may even want to Google the property to make certain you have a good idea of its location and anything that would be considered atypical.
Valuation Management Group currently handles the bid process as an appraisal management service for our clients if it is known at the time of order placement that the property is complex. We will continue to obtain bids for our clients for complex properties to ensure that the fee on the Loan Estimate is accurate. Clients will notate in the special instructions field of the order form the details of the complexity. This will alert us to place the order out to bid to the appropriate appraisers for fee and turn time. By placing the appraisal assignment out for bid, the mortgage lender can obtain competitive pricing for their borrower and properly disclose.
Valuation Management Group will be conducting webinars on September 10, 2015 and September 22, 2015. The webinars will cover the process of requesting bids from Valuation Man for properties that are complex. We will be sending out webinar invitations the week of August 30, 2015.
As a national commercial and residential appraisal management company, Valuation Management Group is able to assist lenders with all of their appraisal management services. Valuation Management Group handles the entire appraisal process for commercial and residential appraisals, from engaging the appraiser to completing robust appraisal reviews. The Valuation Management Group appraisal review ensures an appraisal conforms to appraisal regulations and is acceptable to the lender. Valuation Management Group is proud to be able to assist financial institutions in maintaining appraisal compliance and appraiser independence.
Valuation Management Group is a national, full service appraisal management company that manages the appraisal process for community banks, mortgage bankers and credit unions. We offer the full array of commercial and residential appraisal products and services. We take the appraisal process from ordinary to extraordinary.
This article is being provided as informational purposes only and is not intended to be legal advice. Please consult with your compliance officer or legal counsel for guidance on your company’s policy with regard to what constitutes a valid changed circumstance.