As seen in Valuation Review:  XML explained:  The new file format and UCDP compliance

By Jason Morgan
Reprinted with permission from the July 4, 2011 edition of Valuation Review

PDF of the original article as it appeared in Valuation Review

The government-sponsored entities, Fannie Mae and Freddie Mac, are requiring lenders to submit information electronically via the UCDP. But what does all this mean for appraisers? Read on for the impact on the industry and an explanation of the XML file format.

In June, both CoreLogic and LPS announced they were partnering with a la mode’s Mercury Network to meet Uniform Mortgage Data Program (UMDP) requirements. If you’ve been following Valuation Review’s coverage of the upcoming switch to the Uniform Appraisal Dataset (UAD) forms, you’d know that the government-sponsored entities (GSEs), Fannie Mae and Freddie Mac, are requiring lenders to submit information electronically via the UCDP.

But what does all this mean for appraisers? Darius Bozorgi, president and chief executive officer of Veros Real Estate Solutions, shared his view of the impact on the industry and gave an explanation of the XML file format the GSEs are requiring.

“In a perfect world, a lender will submit the appraisal in a MISMO XML format,” Bozorgi explained. The MISMO XML is a data form that allows information to be extracted easier and more accurately than a PDF, for example. “MISMO, in my opinion, is the way the industry needs to move because it’s the only true open-source format; that is why it is the format of choice for UCDP. I think that’s where the mortgage industry will gravitate. It should have happened a while ago. This is long overdue. I think it’s programs like the [Uniform Collateral Data Portal] that are accepting the adoption and much-needed evolution to this truly electronic, data-centric approach to appraisals.”

It’s important to note that submitting the appraisal and loan information in the correct format to the GSEs is the lender’s responsibility — not the appraiser’s. That said, it’s not hard to imagine lenders requiring appraisers to submit their data in XML format to make their lives easier. If the lenders receive the information in a PDF format, they would have to send the appraisal report through a PDF information extraction process.

PDF extraction is a process in which the information is pulled from a PDF file and put into an XML file, but PDF extraction is not 100 percent.

“If a PDF doesn’t extract on a level one fully-automated process, the submitter has the option to engage two other levels of services that would allow Veros to pull the data from the appraisal,” Bozorgi said, explaining the PDF extraction service that Veros offers. “Ultimately, the most intensive and hands-on approach is rekeying the appraisal into data format. It’s a manual process.”

Bozorgi said most PDF extractions are completed successfully on a fully automated level. Veros — the technology provider for UCDP that will maintain and manage the data portal for the GSEs — offers PDF extraction at the portal for a fee. But Bozorgi said while PDF extraction is a service that Veros offers and charges the lender/submitter for, he hopes the industry will move toward the XML format.

“That’s what I hope to see,” Bozorgi said. “In my perfect world, a forms vendor — a la mode, ACI and Bradford — would allow the appraiser to generate an XML file just like they would a PDF.”

And that’s what the Mercury Network plug-in for CoreLogic and LPS offers its customers.

XML has higher data integrity, and it’s easier to extract the data and analyze the different data elements, Bozorgi explained. “Verifying an appraiser’s license, analyzing the adjustments that the appraiser made, validating the subject property or comp as an actual address or looking at the conclusions of the estimate of value are things we can do now if we can get access to the data,” he said.

Though this responsibility falls onto lenders’ shoulders, what impacts one segment of the industry is often felt throughout the other parts of the whole. Bozorgi said that from his point of view, this is a positive move for the appraisers.

“You talk to appraisers and, historically, one of their biggest complaints is that they were relegated to this role as a form-filler,” he said. “I think that’s true to some extent because we have been much more reform-centric in our approach to appraisals. There hasn’t been a focus on the actual analysis and conclusions undertaken by the local real estate expert. At the end of the day, that’s what I think an appraiser is. They’re the ones that understand home prices within their local market. They’ve been trained, licensed or certified for that jurisdiction.

“We’re moving, as an industry, to a more data-centric view of valuations,” he continued. “As an industry, we’re saying, ‘Let’s look at the data and what that professional did and analyze their work, not only from their conclusions, but the data used to support the conclusion.’ That’s a welcome change, at least with the appraisers I’ve talked to, because you’re taking that appraiser and saying you want to evaluate them from their work and expertise — not if they checked the right box.”

The UCDP portal is in effect and appraisers will have to start using UAD forms come Sept. 1. Surely there are going to be a few complications as the new technology is adopted, but hopefully this will be a move that finds favor with appraisers.

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