New rules for residential lending require careful compliance adherence
The last few years have seen lots of changes in the rules for residential lending. These changes are significant, and many financial institutions (FIs) are still trying to find the best way to uphold the new regulations while tending to the needs of their customers regarding home valuations and appraisal standards.
Before the changes that resulted from the Home Valuation Code of Conduct in 2009, most credit unions and banks were relatively unconcerned about compliance issues regarding the appraisal process. With the introduction of Appraisal Independence Requirements within the Dodd-Frank legislation, any institution lending on primary residential property is required to comply not only with Dodd-Frank, but also with the much broader scope of Inter-Agency Guidelines. Many of the changes have improved what was a flawed system, but they have increased the complexity of the appraisal process.
For a growing number of FIs, managing this process in-house has led to increased costs as staff time is eaten up in trying to comply with the new regulations. In some cases, appraiser’s fees are slashed to compensate for the additional burden on resources. In turn, lower appraiser fees are directly related to lower quality and slower turn-around times on reports, which also affects the bottom line. Covering these increasing costs with processing or application fees can aggravate customers, making the FIs offerings less competitive. It can also spread costs over the entire membership of credit unions, cutting into dividends for members.
The Dodd-Frank rulings have created tighter regulatory scrutiny, but the regulations are also addressing a long-term quality control issue that existed in the industry.
Institutions can minimize overhead costs by outsourcing the appraisal process to a third-party vendor. These vendors are experts on working with expert appraisers to get the best results at the best costs, and they know how best to comply with the regulatory burdens. A good appraisal management company will encourage reasonable and customary fees, full disclosure and 100 percent transparency.
To learn more about the ways an outside appraisal logistics partner can benefit your FI, please contact Hank Thompson – BSG Financial Group, Executive Vice President, Business Development (866) 274-8900 x230.
