Whether or not the HVCC takes root in the appraisal industry, and whether or not the AMC-dominated world it envisions comes to pass, a few things are certain: The mortgage meltdown is causing lenders and Wall Street to be more cautious, more worried about litigation, and more concerned about the collateral value of their portfolios.
In the very short run, that's creating a boon for many of you (Click here to read "Flight to Safety") as lenders seek out the best valuations by the most experienced and critical appraisers, and don't care if it costs more than an AVM or a BPO. They're in a crisis.
But as things return to normal over the course of the next year, those same lenders and investors will demand more structure and more rules. The HVCC is just the opening salvo in what will surely be a long list of regulations, red tape, processes, procedures, and lists of double and triple checks to make everyone feel more safe. For lenders, "safe" is really "safe from lawsuits" stemming from their in-house management of appraiser fee panels and all the pressuring and blacklisting that went along with it. (pq)
Even a completely ethical and honest lender would have had no idea what an individual staff member said or did to an appraiser, so extra firewalls shielding the appraiser from the loan production staff makes some sense, unfortunately.
A tempting solution right now for a lender is to hand off everything to AMCs. We already know from the lawsuit filed by the New York Attorney General's office (in which Washington Mutual and eAppraiseIT were accused of putting pressure on appraisers to inflate numbers or be pulled off the WaMu approved list) that involving an AMC does nothing to reduce pressure in and of itself, but it affords the lender some measure of protection from legal liability.
That's what this HVCC scramble is all about: liability. If the HVCC is enacted as written, the firewalls in it remove substantial liability from lenders. Even if the HVCC is not enacted, lenders will still try to establish multiple virtual and physical firewalls between themselves (and specifically, their commissioned loan origination staffs) and the appraisers who work for them. It's the smart legal thing to do.
But that "smart move" resulting from the scrutiny on lender pressure could result in a massive siphoning off of 30%, 40%, or 50% or more of your fees, going to traditional AMCs instead of your own bank accounts. It's a quandary, and brings to mind the old saying, "Be careful what you wish for..."
Luckily, we have a solution, and we intend to roll it out soon. In fact, we're really just re-releasing slightly modified versions of an incredible product line from our past, which I worked on from my first days here at a la mode.
Many of you remember the Mercury Network and its companion product, Mercury Desktop. Rolled out in 2002, Mercury Network picked up where our earlier Project 2000 system left off. It took the wildly successful architecture of Project 2000, which delivered tens of millions of appraisal reports a year (more than any other system by far), and added a web-based transaction management system to the front end. Lenders, management companies, mortgage brokers, homeowners, and anyone else could create an account on the Mercury Network web portal and find appraisers and manage the ordering and delivery process.
The phrase "wildly successful" took on new meaning with Mercury. More than 95,000 individual mortgage brokers logged on and created management accounts. More than 84,000 lender employees and loan officers signed on. More than 34,000 individual homeowners created accounts. 12,000 agents signed up. The list goes on and on, with thousands more spread across appraisal management companies, closing and title providers, attorneys, flood companies, and more. All told, over 235,000 accounts were created by people ordering and receiving appraisals. And they generated literally millions of appraisal orders. We're pretty confident that those numbers dwarf anything else ever created in the appraisal portal business.
So, you might wonder why we would abandon Mercury Network if it was that popular. Well, we really didn't.
Put the time in context - we rolled this out six years ago, in 2002, and it's evolved and grown substantially (as opposed to other directories that are just now being rolled out by other software vendors as "version 1.0"). A year later, in 2003, we rolled out our Appraiser XSites. As XSites became so popular, we removed ourselves from the middle of your business and simply embedded Mercury Network right inside your own private XSites.
Mercury Network never disappeared at all. The Mercury Network simply became the XSites Network in 2005. And when all those homeowners, agents, lenders, and mortgage brokers search for you and place orders on what used to be Mercury Network, they now see your XSite and your brand identity, not ours (along with the XSites of over 30,000 real estate agents and another 30,000 lenders). Go try it at www.xsitesnetwork.com.
Hiding the Mercury Network made perfect sense. We'd proven that web ordering worked and that we could funnel millions of appraisal orders to you. We solved the "chicken and the egg" scenario and showed the feasibility of XSites. But in order for appraisers to branch out and build stronger businesses, we had to pull our Mercury brand to the back of the store, so to speak.
Now, under HVCC, you once again need both methods pushing you orders.
Some lenders will keep the in-house staff and protocols in place to work directly with you through your XSite, e-mail, fax, and phone as always. Your XSite is also essential when dealing with the general public, such as homeowners or attorneys. And as we saw, that's not an inconsequential number of orders.
Many lenders however, will need what Mercury Network has always offered: A single centrally managed system, with a superb audit trail and the nation's largest panel of independent fee appraisers behind it. We'll add new HVCC-specific features, such as a "double blind firewall" mode that prohibits influence by loan officers and processors. And of course there's a lot more that we'll tweak and add to fit the new environment. Lenders will gravitate toward the new Mercury Network as they always have, because of its advantages over the alternatives.
But what we won't add is the burden of handing over potentially the majority of your fee to an AMC. To the contrary - we want you to pay us for software and service, not ransom.
Stay tuned. This is going to be fun. Again.