There are so many different types
of lending institutions that offer mortgage financing: banks, credit unions,
finance companies, mortgage investment companies, trust companies, private
lenders and more. While Automated Valuation Models (AVMs) have been a tool that
have been around since the 1990s, technology has made them more accessible and
so AVMs have become common place in many of the different types of lending
institutions mentioned above. Never mind the above mentioned types of mortgage
lenders – AVMs are also being leveraged cross-departmentally and not just in
underwriting. AVMs have been proven to be tools that offer even more value than
just validating property value.
As you may or may not already
know, an AVM is a computer generated analysis of a property value which may
assess data from multiple sources to generate approximate property values. An
AVM should not be confused with an appraisal which will determine a value by
comparable sales and/or by the income it produces and takes into consideration
interior and exterior condition.
Here are some examples of
different departments within lending institutions and how they are using AVMs:
Underwriting
·
Many lenders will
first generate an AVM as an initial measure and then couple it with an official
appraisal if the deal proceeds.
·
An AVM doesn’t just
include information about the value of a property - it can also include information
about who the homeowner is, sales history, mortgages registered and more. AVMs
are most commonly used for different reasons and at different stages in the
lending process.
·
AVMs can reduce your
overall costs and consistency, as an AVM is inexpensive, available immediately
and is completely objective because the program is generating the data.
·
AVMs save significant
time with regard to underwriting because problem deals can be identified
immediately, before significant resources have been expended on underwriting.
·
Makes tools that
larger lenders have available to private lenders who may leverage different
information in different ways.
Special adjudication teams use AVMs to:
·
Validate broker
submitted value.
·
Compare values to
active MLS listings.
Risk management – in risk management many lenders use AVMs
to:
·
Verify
their current portfolio.
·
Determine
price appreciation year over year.
·
Measure
housing prices trends against rates.
·
Mitigate
mortgage fraud - in the case of the AVMs generated by Purview, there is a
section that will flag attributes consistent with fraud. The program will
assess active mortgages, recent sales, prior foreclosures, if the vendor is a
corporation, that there are no concurring mortgages, active judgements, active
cautions, active liens, power of sale, unusual discharges and frequency of
power of sales in the course of performing the fraud check. This can
significantly reduce instances of mortgage fraud.
Collections – collections departments often use
AVMs to:
·
Assess
a property value as a more affordable alternative to or in conjunction with an
appraisal.
·
Evaluate
the overall value of their collection portfolio.
·
Identify
collateral where appreciation has occurred.
·
To locate and not only
validate the value of real property assets but also learn ownership
information, estimate the equity position and more. This enables you to
identify real property assets you can secure/enforce on. You can also identify
new addresses for mailing and serving documents.
An AVM is a very powerful tool in
a lender’s arsenal that offers so much savings that the actual cost becomes
negligible. If your department is not already taking advantage of AVMs and you
see the value you can find out more information at http://purviewforlenders.com/what-is-an-avm-or-automated-valuation-model/ or call 1.855.787.8439.
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