Justin Vedder is Vice President with Altisource Origination Solutions. He joined Altisource in July 2015 through the acquisition of CastleLine, where he served as EVP of CastleLine Risk and Insurance Services. Vedder recently spoke with MReport about the rise of property valuation in the financing space, with a look ahead to next year.
Why is property valuation rising to the list of top priorities in the mortgage financing space?
This is the byproduct of several forces driving the market. Valuations was identified as one source of much of the fraud and collusion that led to the default crisis in 2008. Subsequent legislation and enforcement have put valuations under scrutiny and, consequently, much of the subsequent risk and liability for mortgage finance is placed at the doorstep of valuations, citing issues with how they were done. That has resulted in today’s environment where credit is tight and real estate sales depend even more heavily on the valuation. With valuations being scrutinized, many appraisers and collateral underwriters take extremely conservative positions on property values, further restricting housing activity.
How is the current state of the market impacting this trend looking ahead to 2017?
The current state of the market is like the shifting of the earth—two tectonic plates are pushing against each other. The immovable aversion to credit and collateral risk are being pushed by the lackluster economic rebound, slow housing sales (particularly in upper-value properties) and major population sectors being once again shut out of the market and homeownership due to the credit and price demands. The country needs homeownership rates to increase. That will not happen unless credit and collateral risk tolerance increases. Which force wins? Let’s hope it is not another catastrophe like an earthquake.
How should the industry address the shortage of appraisers?
Either the industry needs to alleviate the high appraisal entry barriers (college degree, years of experience, high-lingering-long-term risk, intense follow-up demands, disincentive to use interns, etc.), or it needs to find a more economical, predictable, risk measurement tool for collateral risk than appraisals. The second option is what we’re seeing today, and the appraisal industry as we know it will not remain the standard valuation meter for real estate finance in the long term.
What will be some other priorities for the mortgage financing space next year?
Many of the trends happening now in the mortgage industry will continue into 2017, including a heightened focus on efficiency while market participants maintain a consistent awareness about regulatory changes and compliance factors. The mortgage process is becoming increasingly streamlined due to technology integration, and industry professionals are working to better communicate with customers, providing them with information on evolving regulation and access to information by way of tech-based resources. The mortgage industry continues to become more integrated, which presents its own set of challenges but also provides opportunity to ensure consumers are more educated and mortgage originators can perform more effectively and efficiently.
Some analysts are predicting this year will be the best year for home sales in a decade. What is your forecast for origination volume for the rest of 2016?
Mortgage lenders are focused on improving the time from origination to closing and consider it to still be a top priority in order to be competitive in the current market. With lenders streamlining processes, they are increasing efficiency and originating more loans. Based on current rates and the state of the market, we can likely expect sales in Q4 2016 to be similar to those in Q3.