So the New Year is quickly approaching. You may have already scribbled down your personal resolutions for 2015 – but have you written down your professional ones?
Underwriters unite! What New Year’s underwriting do you have to share with your fellow financial professionals?
Monday 29 December 2014
Monday 22 December 2014
HPI Monthly Report: Home Prices Down 0.3% in November
In November, the Teranet–National Bank National Composite House Price Index™ was down 0.3% from the previous month. It was the first monthly decline in a year. Moreover, it was very broad-based: prices were down in eight of the 11 metropolitan markets surveyed, flat in two and up in only one. Prices fell 1.6% in Halifax, 1.5% in Quebec City, 1.0% in Montreal, 0.7% in Winnipeg, 0.6 % in Ottawa-Gatineau, 0.3% in Toronto and Victoria and 0.2% in Calgary. Prices were flat from the month before in Vancouver and Hamilton and rose 1.1% in Edmonton. It was the first time in two years that prices were up on the month in only one of the markets surveyed.
For the full report including historical data, please visit: www.housepriceindex.ca
Monday 15 December 2014
Underwriting 2.0 - Using an AVM to Validate Your Appraisals
Many mortgages involve appraisals. When you are considering funding a deal that relies heavily on home equity the appraisal is the one thing that validates that your security is worth what was stated in the mortgage application.
Appraisals can be somewhat subjective because, while there are 2 distinct methodologies (comparable sale method and income method) an appraiser can be swayed by their opinion of property condition. They have the discretion to select which comparable sales are used and sometimes even discretion over what distance and sale time is acceptable in terms of what is used. For example, if you don’t specify distance to the appraiser, your appraisal could include comps outside of the client’s subdivision and variances in value can be vast from one subdivision to another; from one side of a subdivision to another, the quality, types and designs of homes can change, which can impact value.
Many lenders are now adopting AVMs (Automated Valuation Model) into their underwriting process just to double check/validate the value that comes back on an appraisal. Where equity is not as high a concern, many lenders will also couple a drive-by appraisal with their AVM. An AVM, as you may know, is an automated tool that you can use to estimate the value of a property. Different AVM providers obtain their data from different sources and also use different methods in terms of how the value was calculated.
What is true of all AVMs is that they are emotionless. They estimate value based on data and data alone. For this reason often an appraisal coupled with an AVM is your most powerful combination to ensure the value you are lending is certainly within the ballpark of what was initially estimated.
Another way that an AVM can be used with an appraisal to actually reduce the overall cost of appraisal is that you can even look at an AVM before you request the appraisal. This way you can get a ballpark on the value, upsell your deal where there is more value, or go back to the broker or the branch if the value is not there and before you or your client incur the expense of a drive-by or even full blown appraisal.
Once the appraisal is performed you will have the full picture because you will have an automated valuation of the property to compare against the appraisal, thereby giving you more insight into interior/exterior conditioning, home improvements and other things that you would otherwise need to visit the property to learn.
For more about the benefits of coupling an AVM with an appraisal, or to find out more about Automated Valuation Models, please contact Purview For Lenders today by calling 1.855.787.8439.
Thursday 11 December 2014
The True Cost of Mortgage Fraud and How to Mitigate It!
While perpetrators of mortgage fraud may
think it is no big deal because it is somehow a victimless crime, mortgage
fraud costs the mortgage industry as a whole. The cost of mortgage fraud is
more than just the cost of the lost mortgage that may have been advanced –
operational costs associated to collections, default management, power of
sale/foreclosure costs, legal fees, property repair and maintenance costs,
resale costs and more are all resulting costs associated with this crime.
The cost of mortgage fraud to brokers and
the public include: more stringent lending guidelines and verifications by
lenders, and rightfully so.
While as a lender you may rely on the
mortgage broker or real estate lawyer to catch fraud, you have no way to know
what tools they use or what internal procedures they have in place when
performing due diligence. In fact, there have been many proven cases of
mortgage brokers or real estate lawyers who were the perpetrators of the fraud.
In the former mortgage underwriting course
offered at Seneca, the textbook used highlighted a famous example of mortgage
fraud in Canada that involved (surprisingly) a real estate lawyer. In 2006, the
Law Society of BC approved over 30 million dollars in payments in connection
with a multi-million dollar real estate fraud case where a real estate lawyer
received funds to discharge titles on real estate transactions he was
involved in with a developer. The lawyer was subsequently disbarred.
Most financial and legal professionals are
ethical but we can see how a few bad apples can spoil the whole bunch. So what
can you do to protect yourself and reduce the cost of mortgage fraud within
your organization?
The 2 most common forms of mortgage fraud
are:
·
Fraud by shelter - this is when
an application is manipulated so that a potential homeowner who could otherwise
not afford a mortgage is approved – this could be through misstating income,
doctoring documents all the way up to identify fraud.
·
Title fraud - this is when
fraud is undertaken by an individual or group to make a profit and often the
identity of the homeowner is assumed and a new mortgage is taken out.
The most common ways that individuals and
other professionals in the industry commit mortgage fraud as it relates to a
property are:
·
Over-inflating the value of the
property
·
Misrepresenting characteristics
of a property
·
Misrepresenting the use of
property – the intention is for the property to be used for rental
·
Builder bail-out schemes – a
builder presents paid borrowers as new homeowners to secure financing
·
Fraudulent title transfers
·
Property not in the name of the
seller
Many lenders use tools like Fraud Check, an
aspect of the Purview Report, to review active mortgages, recent sales, prior
foreclosures, no conc. management, active judgement, active caution, active
liens, power of sale, unusual discharges, frequency of Powers of Sale in an
area and more…This information can really help to avoid the costs associated
with mortgage fraud because it helps to mitigate risk.
Leveraging tools such as Purview For
Lenders enable you to investigate a property or borrower, identifying potential
fraud quickly so that you can dig that much deeper to ensure that you have a
solid deal. These tools also go a long way towards mitigating fraud (especially
where it relates to a property) and reducing the overall cost of mortgage fraud
in the mortgage industry.
Mortgage fraud costs everyone involved a
great deal of time, money and effort, can lead to the disintegration of
important relationships, can damage reputations and make future success
difficult.
For more about how Purview For Lenders can
help you mitigate risks and identify fraud before it becomes a major wrecking
ball, please contact us today by calling 1.855.787.8439.
Monday 1 December 2014
Happy Holidays from Purview For Lenders
December is here and it is time for the holidays! The entire Purview team at Teranet extends you and your family warm wishes over the holiday season and all the best successes in the New Year.
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