In previous editions of this paper, we covered the regulatory and market-driven issues behind some lenders moving toward AMCs (see "Preventing the AMC Fee Cut" and "How Big is the Appraisal Pie?". It's clear that no matter how the HVCC plays out, there will be continued pressure to implement some sort of firewall to shield lenders from the liability inherent in loan production staff applying potential coercion to appraisers. In fact, it's been a general requirement for years, most recently dating to the "interagency memo" in 2005 from the OCC, the OTS, the FDIC, and the Fed - the HVCC just imposes it on lenders in a more abrupt and internally meddlesome way, with additional negative consequences. (pq)
Lenders have limited options available: Disrupt their process and outsource to an AMC , hire new staff for an independent compliance department, or use a technology platform to manage their own fee panel of appraisers without allowing loan staff to interfere.
Mercury Network, which we first introduced in 2002, falls into the third category. Instead of the difficulty and cost of the first two options, Mercury Network provides lenders and appraisers with a smooth transition to a coercion-free appraisal process.
Mercury is a Vendor Management Platform, or VMP, with both desktop software (WinTOTAL and its embedded plugins) and web components (Appraiser XSites) at the appraiser's end. At the lender's end, either the web-based Mercury Network interface is used, or the lender can tie the network into their own internal management system screens by hooking directly into our ordering and status servers using web services protocols. Since 2002, more than 235,000 individual accounts have been created on Mercury Network for ordering appraisals - from lenders, mortgage brokers, attorneys, agents, title companies, homeowners, and even AMCs.
Advantages to lenders
Currently, the typical lender allows loan officers to order appraisals, and loan underwriters and loan processors also frequently contact appraisers for status updates and other information. While it's clear that there's no way for an appraisal process to be done in a complete vacuum -the HVCC acknowledges that there must be some level of communication in order for underwriting quality control to exist - there are ways to remove the opportunity for a lender's staff to either intentionally or unintentionally cross the line. Even the best managed lender can't listen in on every phone call and every e-mail sent by their staff. The HVCC provides for a complaint hotline, but any lender would prefer to prevent the complaint rather than investigate it.
Our Mercury Network solution to those problems uses a completely customizable combination of automatic "black box" appraiser selection, optional double-blind "checkbox" interaction, complete communications logging, and quality control rules which pre-review the appraisal (on your desktop) before the lender's underwriting staff ever sees it (to minimize communication in the first place).
Mercury's appraiser selection process, called Intelligent Selection System, or ISS, is a customizable set of criteria that lenders can create to determine in general what's most important to them in ranking appraisers. Variables include average turn times, outstanding workload as a percentage of stated capacity, technology available (such as mobile connectivity to acknowledge orders and provide status while in the field), proximity, and so on. There's no blacklisting ability for not "hitting the number".
Once the ISS rules are set up, the lender can optionally set the system to run in double-blind mode so that the lender's screens provide no information as to the identity of the assigned appraiser. Commissioned loan personnel can't circumvent the system and e-mail or call the appraiser offline. All communications in double-blind mode are by "checkbox interaction", with no free-form text possible. Each side can request or send information, but the messages and replies are built using static text assigned to buttons on screen, so no coercive or inappropriate communications can take place at all.
In cases where the lender doesn't choose double-blind mode and allows internal staff to communicate directly with appraisers (such as where the lender can use staff separated from the loan production process), all free-form communications are also logged and preserved.
Perhaps even more valuable, our integrated Uniform Appraisal Review Rules, or UARR, provide over a thousand quick checks for compliance (across all types of forms) before the report ever leaves the appraiser's desk. Other systems review the report only after it's already been transmitted to the AMC's or portal's servers, which means even the smallest mistakes require another transmission, sometimes repeatedly.
Lenders can customize the UARR using simple check-box style screens, to add review rules going beyond the general, even drilling down into geographically-driven unique conditions, or popping up interactively during the review process to ask custom questions. When the UARR rules set is modified by a lender, the system automatically deploys a custom lender-specific plugin to all appraisers on the Mercury Network. Rules are never out of date, and appraisers never have to worry about angering an underwriter due to not knowing that lender's particular preferences.
Advantages for appraisers
The Mercury Network has handled millions of appraisals since 2002 and has grown to form the ordering and status management backbone of the entire XSites Network, so it's obvious that it's mature enough to handle just about anything an appraiser throws at it. But, it does have some new tricks up its sleeve which will benefit appraisers immediately.
The first of course is the aforementioned Intelligent Selection System, or ISS, insulating the appraisers from direct selection by a loan officer. By eliminating preferential treatment completely - which was the "velvet hammer" in virtually every act of coercion in the past - the appraiser can focus on doing the job properly instead of wondering whether a loan officer will reduce future assignments if a low or disclosure-heavy appraisal "kills the deal".
The second feature, the checkbox-driven double-blind communications system, allows appraisers to be insulated from pressure in conjunction with ISS, while also rapidly allowing feedback from the field. We'll be implementing SMS (Short Message Service) gateways, commonly known as cell phone text messaging, so that appraisers can respond to any text message from Mercury Network with a single digit, and yet it sends a nicely formatted e-mail to the client. Everything from accepting orders, to negotiating fees, to providing status updates on existing assignments can be done in seconds from any cell phone that supports text messaging. The constant nagging phone calls, faxes, and e-mails often associated with AMC and lender work will be greatly reduced. And of course, the communications that do occur, whether structured or free-form, will all be logged and preserved for anyone to inspect in the event of any attempted pressuring.
The UARR quality control system will also provide extensive benefits to appraisers. Many times, appraisers are penalized by other systems and by manual reviewers if even an inconsequential field in a report is overlooked. With UARR, the report is checked against even a lender's custom rules before the report ever leaves the appraiser's desktop, and the appraiser only transmits the report after the rules are successfully passed. No record of the process, other than the final completion, is passed on to the lender, and the appraiser isn't faced with potentially several re-transmissions of a report.
Mercury Network will of course transmit standard PDFs of the report to the client, so appraisers can rest assured that the product delivered is an unmolested version of what is in the appraiser's workfile. Also, the PDF can optionally be stored as a fully escrowed document with credentials proving what it looked like at the time of transmission, in case there's ever a dispute regarding a PDF being potentially modified after leaving the system. SureDocs identity technology will also be incorporated into digitally signed PDFs so that identity theft, authentication, and security are all tightly interwoven into the system.
What will it cost?
We can't go advertise to lenders and provide a sophisticated service like this for free, of course, so there will be a small charge when an order is received from Mercury Network directly. In our discussions with appraisers around the country, we've found that between $10 and $15 actually generates applause - so we think it's quite fair. The alternative, of course, is that the lender moves to an AMC, and then the full 30%, 40%, 50%, or more of the fee is lost.
Appraisers do not have to utilize a particular appraisal formfilling program, as long as the appraiser has an XSite (either Standard or Enterprise, click here to learn more about Appraiser XSites.). The XSite is used at the appraiser's end to manage orders and status updates, as well as to manage the plugin process. In addition, our new XSites Desktop system is used to proactively notify appraisers of pending action items.
And of course, an appraiser's XSite still is used for ad hoc orders placed by consumers, divorce and estate lawyers, and so on. Mercury Network is designed for those who order 10 or more appraisals a month. If someone needs fewer than that, it directs them to the XSites Network for direct engagement with appraisers as always, with no fee to us.
Lenders will also pay a small fee, depending on the volume of orders they transmit through the system. Exact pricing hasn't been set yet, but it will be in the range of a few hundred dollars a month for a basic low volume account, up to thousands as volume scales up and services are expanded.
How to move forward
As long as the HVCC is not in effect, appraisers are still allowed to contact loan officers and staff at lenders nationwide. Before that gets cut off, you should contact them and begin to let them know that there is an alternative to full-fledged AMCs, and that trying to build something on their own is an expensive option. Mercury Network is the best solution for lenders and appraisers who want to preserve as much as possible of an existing set of relationships without allowing the influence of the past to continue.
Starting in early July, appraisers nationwide will be sent an e-mail describing exactly where to direct lenders to sign up. That e-mail will also contain instructions for updating appraiser profiles on Mercury and getting started with the improved system.
Until then, use your existing XSites profitably, and let us know if there's anything else we can do.