I am afraid this may just signal the death of the subprime market, as we know it.

Wells Fargo & Co., Countrywide Financial Corp., Washington Mutual Inc., First Franklin, and Option One Mortgage will stop originating 2/28 adjustable-rate loans (2/28 ARM). This loan type accounted for 65 percent of all sub-prime mortgages last year. The FEDs have been applying a great deal of pressure on these lenders to underwrite loans at the fully indexed rate.

I hate to be the bearer of bad news, but I would want to know of a change like this as soon as possible.

Close 20% more loans by better utilizing your appraiser.
By Brian Blanchard, Chief Operations Officer, PROvalUSA.com

Part 3: Follow through

What do a scratch golfers and the most successful loan officers have in common??

Good follow through!!

In prior Scotsman Guide articles, we covered two of three key points, which, when properly implemented, may not improve your golf game but will improve your close ratio. This month’s article will focus on the third point, follow through.

If you have already implemented the first two of the three key points previously covered, congratulations. By now, you are using your appraiser and appraisal related technology (AVM’s and Comp & Data Reports) to pre-qualify your borrower’s property collateral (estimated value) and are being alerted of any potential value issues up-front without having to wait for the appraisal to come back. Also, since you are now requesting your appraiser to set the property inspection within 24 hours, your competition is being kept at bay. Your cancellation rate has dramatically decreased and you are closing 20% more loans, right?

Before you buy that new set of “Pings” with some of that extra cash you are earning, let’s make sure the check clears. This can only be accomplished by working on your follow through.

Typically, follow through may be necessary at 3 stages of the appraisal process: 1) immediately after the appraisal has been ordered; 2) when the inspection date is set; and 3) prior to the delivery date. While this can be a very time consuming process, it does not have to be thanks to outsourcing and automation options now available.

I will describe in greater detail, the necessary steps to successful follow-through. Then, I will cover outsourcing and automation options.

It is not enough to simply ask your appraiser to contact your borrower and set the inspection within 24 hours. Nor is just assuming the appraisal will be delivered by the date you requested adequate.

1) Too often appraisers attempt to contact the borrower &/or real estate agent to schedule an inspection date only to find the lender has not notified the borrower of the appraisal being ordered, the cost of the appraisal, and the required method of payment. Simple communication between the lender and borrower up front immediately after the appraisal has been ordered will eliminate any “surprises” and allow a timely inspection. This is especially important when the appraisal fee is “Collect at Door”.

2) To insure the inspection has been set with the borrower, your appraiser should be notifying you, preferably via e-mail, with the specific date of the scheduled inspection. If your appraiser has NOT notified you of inspection, you should assume it has not been set. If the inspection is not set, you are more vulnerable to your competition. At this point, a follow up phone call &/or e-mail to the appraiser is warranted.

3) By this point, the property has been inspected and your requested delivery date is approaching. The day before the appraisal is due, the appraiser should be contacted by phone and e-mail, reminding him of the pending due date and asking for a status update. In our experience, this communication with the appraiser is very powerful. Like loan officers, appraisers, especially the good ones, are very busy. Due dates are sometimes missed. By consistently staying in contact with your appraisers, the old adage of “the squeaky wheel gets the oil” rings true more times than not. If the appraisal still is not delivered by the due date, another follow up with the appraiser must be made and a new completion date should be provided by the appraiser. From this point, follow up efforts should be re-doubled until the order delivers. Finally, the appraiser’s performance should be rated, whether good and bad. Then, the next time an order comes in that area you can remember whether to use the same firm or find another.

In-house, Outsource, or Automate The above steps in this follow through plan can all be successfully completed internally by your processing staff. However, it will likely result in a significant increase in processing man-hours. Before you dedicate your staff to such a procedure change, check out a few Appraisal Management Companies and/or Appraisal Management Software Providers. There are several available to lenders, both large and small.

Appraisal Management Software Providers assist your internal processing staff by automating many of the procedures defined in this article. This approach saves man-hours and keeps you in control of your appraisal process. These systems typically require a higher initial investment of time and capital.

Appraisal Management Companies allow you to outsource the entire appraisal process. This approach virtually eliminates the need for appraisal processing man-hours with little to no initial investment. The downfall of these companies is that the lender typically loses control of their entire appraisal process and is typically not allowed to work directly with the appraiser assigned to do the job.

Assisted Appraisal Processing, a balanced mixture of appraisal management software and an appraisal management company. This solution offered by firms such as PROvalUSA.com, provides the best of both worlds. You maintain full control of the appraisal process and work directly with the appraiser of your choice. Since the follow through is automated and backed by dedicated human support, your firm’s internal appraisal processing man-hours can actually decline while your close ratio simultaneously increases. If an order is not accepted, an inspection date not scheduled or a delivery date missed, assisted appraisal processing follows up so you don’t have to. You are involved at your discretion and notified when your involvement is necessary. Some providers send status updates electronically through out the process, consistently keeping you on top of your game and in control of your appraisal process.

Remember, each of these types of services are very different as are the companies themselves. Not all of them watch your appraisal process as closely as the plan we have just laid out. If your firm decides to outsource or automate, ask the industry partner of your choice about their support operations before you trust them with your appraisal orders.

A member of PROvalUSA.com will be happy to discuss these options at any time, just visit us online at http://www.provalusa.com/ActiveRain/ or give us a call @ (866)243-7723, ext. 201.

Brian Blanchard is the Chief Operations Officer of PROvalUSA.com, the source for residential appraisals nationwide. The St. Peters, Missouri based company provides appraisal management with a modern twist. Since its creation in 2000, PROvalUSA.com continues to attract lenders to its unique open approach to appraisal management. For more information about PROvalUSA.com, visit http://www.provalusa.com/ActiveRain/ or call (866)243-7723 ext. 201.

The comments in this blog are solely the opinion of Brian Blanchard and are not necessarily representative of PROvalUSA.com's position on any particular topic.

Close 20% more loans by better utilizing your appraiser.
By Brian Blanchard, Chief Operations Officer, PROvalUSA.com

Part 2 Continued:
Lock out your competition by getting your borrower to commit

In the last two articles, we touched on 3 key points to improve your close ratio:

1) Pre-Qualify your borrower’s property collateral (estimated value)
2) Lock out your competition by getting your borrower to commit
3) Follow Through

Today, we will discuss the second point in greater detail.

Industry wide, nearly one out of three loan apps cancel after the appraisal is ordered and after significant time has been invested by you and/or your firm. The first reason for this high rate of cancellation is unrealistic estimated values. A second equally important contributor to this cancellation rate is heightened competition fueled by educated shopping.

Jupiter Research estimates that about $34 billion in mortgages will be originated online this year and over $70 billion/year by 2009. The majority of these online consumers are drawn to lender referral services the likes of LendingTree.com, where they can compare rates, then apply with multiple lenders. These and many other types of websites turn traditional consumers into educated shoppers.

As an educated shopper, many consumers have found multiple lenders offering very similar products. Therefore, competing on rates alone is often a losing battle. Successful lenders must also compete through service; getting their borrower to commit sooner.

In the last 5 years, I have seen several examples of this in which two or more lenders are working the same loan, usually with very similar loan packages. Not surprisingly, the one whose appraiser sets an inspection first is the one who closes the loan.
The reason for this is two-fold:
1. The appraiser is collecting a fee from the borrower locking them in to the lender they represent.
2. In today’s environment of out-of-state lending and internet-based lending, this is often the first face to face contact the borrower receives, personalizing their borrowing experience.

Locking out you competition
It is possible to turn your appraiser into one of your greatest allies. If the appraiser contacts the borrower within 24 hours, your loan is significantly more solidified, virtually locking out your competition. If the appraisal is delivered in 3 to 7 days, this solidification turns into a faster closing and additional referrals.

This level of appraiser performance is easily accomplished if you follow three basic rule sets, each of which is little more than common professional courtesy.
1) Engagement Rule
2) Respect Rule
     a. Preparation
     b. Payment
3) Volume Rule

Engagement Rule…You get what you ask for, most of the time. When ordering an appraisal, the appraiser makes a record of your exact request to be used as a guideline for the appraisal order. Appraisers refer to this as the Engagement. If you ask for the appraisal to be delivered in two weeks, that is what they will shoot for.

If you wish to lock in your borrower, simply ask the appraiser to contact the borrower within 24 hours to set an inspection. Then request that the order be delivered between 3 and 7 days, depending on the local market.

Respect Rule…Most appraisers know that the appraisal industry is understaffed leaving lenders with few options in many parts of the country. Therefore, they have the luxury of servicing their clients in the order of importance. The number one factor involved in an appraiser’s priority list is how greatly a lender respects their company and the work they perform. The following two guidelines will show you how to gain a mutual respect and improve your placement in the appraiser’s priority list.

Preparation…No one likes to waste their time doing work they will never get paid for. Appraisers are no exception. Pre-qualifying your borrower’s property collateral will reduce your cancellation rate as discussed in the previous article. In addition, it will avoid the need for your appraisers to run time consuming comp checks. Lenders who do not regularly request comp checks earn the respect of the appraiser and are shot to the top of the appraiser’s priority list.

Payment…A common issue for appraisers is delayed payments or lenders who do not pay their appraisers at all. This issue has become so prevalent that there are now more than 20 different websites dedicated to the purpose of keeping track of lenders who do not pay their appraisers. If you wish to be treated as a priority lender by any appraiser, be sure to disclose your pay out schedule to the appraiser during engagement. Then stick to it.

Volume Rule …The more orders you place with an appraisal firm, the higher you place on their priority list. This is the central philosophy to appraiser recruitment at PROvalUSA.com. This rule is why we only add appraisers when there is sufficient business to foster a mutually beneficial relationship in a particular market. Distributing more orders to a smaller base of appraisers will allow you to gain priority through repeat volume.

We have also seen that there truly is strength in numbers. An additional way to receive priority through volume is by placing your appraisal orders through a community of lenders like PROvalUSA.com or any of our competitors. When you use a shared web-based ordering platform, your appraisal is treated as an order from the larger community, thus giving you priority, regardless of your individual volume in a given market.

In closing…Significant increases to your loan volume can be had by making 4 simple modifications to your appraisal processing guidelines. First, Pre-Qualify your borrower’s property collateral. Second, gain and maintain the respect of your appraiser. Third, ask for prompt action on your appraisal orders. Last but not least, increase the volume of appraisal orders sent to each appraiser by; shrinking your base of appraisal firms or order through one of several one-line communities.

These simple actions can equate to a 10% to 15% increase in closed loans.

In our next article, we will discuss mechanisms available for seeing that each of these steps is performed consistently. We will also provide a listing of vendors who can assist you in accomplishing this increase in closed loans with little to no changes in your appraisal processing procedures.


Brian Blanchard is the Chief Operations Officer of PROvalUSA.com, the source for residential appraisals nationwide. The St. Peters, Missouri based company provides appraisal management with a modern twist. Since its creation in 2000, PROvalUSA.com continues to attract lenders to its unique open approach to appraisal management. For more information about PROvalUSA.com, visit http://www.provalusa.com/ActiveRain/ or call (866)243-7723 ext. 201.

The comments in this blog are solely the opinion of Brian Blanchard and are not necessarily representative of PROvalUSA.com's position on any particular topic.

Close 20% more loans by better utilizing your appraiser.
By Brian Blanchard, Chief Operations Officer, PROvalUSA.com

Part 2:
Pre-Qualify your borrower’s estimated value on the front end and improve your close ratio on the back end!

In a previous article, we touched on 3 key points to improve your close ratio:

1) Pre-Qualify your borrower’s property collateral (estimated value)
2) Lock out your competition by getting your borrower to commit
3) Follow Through

Today, we will discuss in greater detail the first of these three key points.

Industry wide, nearly one out of three loan apps cancel after the appraisal is ordered and after significant time has been invested by you and/or your firm. A primary reason for this high rate of cancellation is directly related to an unrealistic value estimate of the borrower’s property collateral. This unrealistic value estimate is either from your borrower (high) or from the appraiser (low).

While every lender in the industry pre-qualifies the borrower by running their credit history, this is only Part 1 of what should be a two part qualification process. When comparing lenders that qualify their borrower’s property collateral, in addition to their credit, cancellation rates are nearly cut in half!

How to pre-qualify? Historically, lenders would ask the appraiser to run comp checks in advance of doing the property inspection and ask to be notified of “any potential value issues”. Not only is this a manually intensive and time consuming process for the appraiser…it is also illegal and the feds are starting to come down hard on this issue.

Thanks to the advances in appraisal related technology, lenders can pre-qualify the borrower’s property collateral from a variety of sources online in seconds before placing the appraisal order and without picking up the phone or sending a fax.

Specifically, AVMs (Automated Valuation Modules) are now widely available online and cover some 80% of the country’s population. Long used by wholesalers for risk management purposes at the portfolio level, AVMs are now main-stream.

Bottom line conscience retail brokers and lenders routinely utilize AVMs, as well as Automated Comp Checks and Data Reports not only to detect potential valuation issues up front prior to placement of the appraisal order, but also on the back end, after the appraisal comes in.

Up front…When the AVM indicates that the borrower’s estimated value is unrealistically high, the lender is given more time to structure an alternate loan package and prepare the borrower for the worst, thus gaining their respect, locking in the sale, and avoiding the wasted efforts of a cancelled loan.

On the back end…If the appraisal comes in below both the AVM and the estimated value, the deal may not be dead. In fact, the AVM may contain information not known by the original appraiser. The appraiser may be pointed to an alternate comparable sale or other overlooked points which would change the appraiser’s opinion of the value. If the appraiser’s opinion of value remains unchanged, the AVM may be sufficient to warrant a second opinion from another qualified appraiser in the local area.

One point to remember, there is a fine line between discussing what you consider to be a deflated value and coercion. The latter of the two is illegal and will be discussed in a future article.

At the end of the day, “an ounce of prevention is worth a pound of cure” at least that’s what Grandma used to say. In our case, a pound of cure equates to 10% to 15% more closed loans. Next month’s article will talk to closing even more.

Brian Blanchard is the Chief Operations Officer of PROvalUSA.com, the source for residential appraisals nationwide. The St. Peters, Missouri based company provides appraisal management with a modern twist. Since its creation in 2000, PROvalUSA.com continues to attract lenders to its unique open approach to appraisal management. For more information about PROvalUSA.com, visit http://www.provalusa.com/ActiveRain/ or call (866)243-7723 ext. 201.

The comments in this blog are solely the opinion of Brian Blanchard and are not necessarily representative of PROvalUSA.com's position on any particular topic.

Close 20% more loans by better utilizing your appraiser.
By Brian Blanchard, Chief Operations Officer, PROvalUSA.com

Over the last 5 years, I have met with thousands of lenders and mortgage brokers at various tradeshows and educational forums. Almost every one of them recalls numerous horror stories in which appraisers have "cost them loans".

Occasionally, I run into lenders who have discovered how to turn appraisers into their greatest allies. You see, what these lenders have figured out, that the others have not, is that appraisers are not just evaluators of real estate. In fact, when managed properly, appraisers and appraisal related technology become extremely useful business partners that can: eliminate time wasted on deals that won't close, solidify marginal deals, and expedite solid deals.

On average, nearly 30% of "qualified" leads back out after credit is run, disclosures are signed, and the appraisal is ordered. Frequently, the cause of these cancellations can be traced back not only to value issues, but time delays associated with the appraisal process. In many instances, I have seen this cancellation rate reduced to as low as 10% resulting in a 20% net increase to throughput.

By implementing 3 key points, you can be on your way to a better close ratio:
1) Pre-Qualify your borrower's property collateral (estimated value)
2) Lock out your competition by getting your borrower to commit
3) Follow Through

Pre-Qualify Property Collateral
Every lender in the industry pre-qualifies the borrower by running their credit history. However, relatively few currently pre-qualify the property collateral. When the borrower's estimate of value turns out to be different from reality, you lose. By finding this out at the beginning of the game rather than at the end, you have time to restructure the loan package (you win).

Thanks to today's appraisal related technology (AVM's, Automated Comp Checks, and Data Reports), lenders can pre-qualify the borrower's property collateral in seconds. This frees appraisers of the manually intensive and time consuming process of checking comps &/or any legal issues of doing so. An added benefit of pre-qualifying the borrower's property collateral is an increase in responsiveness from the appraiser.
Lock Out Your Competition
Today's borrowers are more aware of the loan options available to them. Many have found multiple lenders offering very similar products. Therefore, competing on rates alone is often a losing battle. Successful lenders must get their borrower to commit. This can be accomplished if the lender's appraiser contacts the borrower within 24 hours or less from the time the appraisal is ordered. This task is more easily accomplished than you might think if the appraiser is approached and engaged properly. When lenders get the borrower to pay for the appraisal at the door, combined with a quick inspection by the appraiser, competition lock out is almost assured.

Follow through
Like most lenders I have met, appraisers are human, and while they usually have the best of intentions, today's fast paced environment sometimes causes things to slip through the cracks. In this regard, it is not enough to ask the appraiser to set an inspection appointment with the borrower within 24 hours of ordering the appraisal. It is possible to maintain, or even outsource, a structured follow-through plan to consistently achieve the desired results.

In future blogs for this series, we will explore in greater detail each of the key points touched on above with the intent of helping to improve your close ratio.

Brian Blanchard is the Chief Operations Officer of PROvalUSA.com, the source for residential appraisals nationwide. The St. Peters, Missouri based company provides appraisal management with a modern twist. Since its creation in 2000, PROvalUSA.com continues to attract lenders to its unique open approach to appraisal management. For more information about PROvalUSA.com, visit http://www.provalusa.com/ActiveRain/ or call (866)243-7723 ext. 201.

The comments in this blog are solely the opinion of Brian Blanchard and are not necessarily representative of PROvalUSA.com's position on any particular topic.