What is an AVM and When is it Used in the Mortgage Underwriting Process?

AVM is the acronym for Automated Valuation Model and you may notice you are hearing this acronym more and more often. AVMs have become very common in the underwriting departments of Canadian lending institutions, and for good reason.

An AVM is an automated tool that can instantly generate a statistically derived value of a property based on an analysis of data. Different AVM providers obtain their data from different sources so it is important when integrating the use of AVMs into your workflow that you seek out an AVM provider who obtains their data from sources that are most relevant to you. Most AVMs calculate the value of the property at a specific point in time.

Check out this example: http://lenders.purview.ca/downloads/sample-real-estate-valuation-report.pdf

For more about the benefits of an AVM and how to use one to supplement your underwriting process, please contact Purview For Lenders today by calling 1.855.787.8439.

8 Red Flags to Help You Uncover Mortgage Fraud

Mortgage fraud touches even the most seasoned underwriter and is something that lenders have to remain vigilant to mitigate. This blog will provide you some red flags to uncover mortgage fraud.

1. Employment/income verification is difficult to verify. It is always prudent when underwriting to validate the income source. This may include Googling the individual/company or calling to verify income and other measures. If the business has no online presence or is not listed in the telephone directory this can be a sign that fraud is present.

• On this note pay attention to employment letters – are they on letterhead? Are there spelling errors? Does the income on the job letter match the paystub and Notice of Assessment?
• Are the numbers on the paystub or tax assessments rounded off? That is a big flag, but not so much in the case of job letters.
• On bank statements, you can double check deposits and match the amounts indicated on the clients paystubs.

2. Down payments. Where is the money coming from? If from several sources or in cash this is a flag.

3. Void cheques – verify them. You wouldn’t believe how often fraud deals are discovered when a lender goes to debit a payment from the client’s account after closing and then they discover the account doesn’t exist. It’s as a simple as a phone call to the bank to double check the information stated on the cheque.

• Is the void cheque a counter cheque and not personalized?

4. Identification. The applicant doesn’t produce significant ID - or any at all!

5. Meetings. One or more borrowers have not been available for in-person meetings to sign up and have insisted on conducting the signing of different documents by fax or email.

6. Value. Sale prices are significantly higher/lower than stated on the application. This can be quickly checked through an AVM.

7. Title: Who owns the house?  

8. Mortgage balance: You want to make sure that there are no encumbrances or liens so:

• Ensure that the broker has had the applicant sign 3rd party consent form – this will be very important if you need to verify balances.
• Request that the applicant provide a mortgage statement.
• Run a search to validate that there are no undisclosed mortgages or liens.
• If something comes up – request the current balance directly from the lender.

What is important is that you are using the right tools and resources to quickly underwrite your deals. For example – numbers 6-8 can be accomplished by using a tool like Purview which is multi-functional and can do more than one thing.

For more about how to use Purview For Lenders to help identify and avoid mortgage fraud please contact us today by calling 1.855.787.8439. 

Ways to Ramp up Your Closure Rates

Ramping up your closure rates is as simple as tightening your internal procedures and the way you put your deals together. Ramping up your closure rates means being able to quickly identify not only opportunities but also problem deals so as to maximize the use of your time.

So why don’t deals close?

The client backs out. Well, there is not much that you can do here other than try to learn why the broker is losing the deal and looking for ways to compete.

The property is not worth what was submitted on the application. The high ratio insured deal is particularly challenging because if you don’t identify discrepancies in value before the deal gets to the insurer and you have a high volume of submissions to the insurer where their internal AVM disagrees with your values, this can strain the relationship between you and your insurer. When a property fails to come in on value, your broker may get upset and disagree - not to mention the costs incurred if you were trying to land the deal and have paid for a drive-by appraisal, only to find out the value wasn’t there. Running AVMs on your deals at the point of application is one of the most inexpensive ways to validate a value before you submit a deal. You can even ask that your brokers use the same AVM tool as you so that they can validate this information before the deal even gets to you.

Discrepancies in home ownership. People often forget that they have other family members on title while others are straight out deceptive. Verifying home ownership information at the application stage goes an incredibly long way in preventing fraud, mitigating risks associated with deals that fail to close once with the lawyer, and finally enabling you to go back to the broker or branch who submitted the deal and ask the client to clarify discrepancies.

Encumbrances – this is a big one. Undischarged mortgages, undisclosed mortgages and liens come up all the time. More than discrepancies in homeowner information and just less than discrepancies in value – encumbrances can kill a deal fast because they can either signify that the borrower is higher risk than you initially thought or that there is not enough equity to make the deal happen. It is more than advantageous to identify this early on. This is especially a challenge for credit unions, trust and finance companies who write a lot of B business or second mortgages. It should be noted that a B lender or secondary lender should have a tool to check encumbrances on all deals.

Deploying tools and technology to close more deals will not only make you more competitive long term, it will also strengthen your relationships because you will be positioned to respond definitively to applications quickly.

For more about how Purview For Lenders can give you an advantage when it comes to identifying problem deals, please call us today at 1.855.787.8439.

What Do You Value in a Good Mortgage Broker?

If you are a lender who works closely with mortgage brokers then you know that lender/broker alignment and a strong relationship can make or break the mutual success of both.

The best way for brokers to know what lenders value in brokers and vice versa is for both sides to gain a better understanding of expectations.

What are your expectations?

·         Do you prefer that you brokers take increased measures to perform due diligence?

·         Do you prefer that your brokers take particular steps when packaging a deal for submission?

·         Are there documents that they can gather upfront that aren’t mandatory but if gathered would make the closing process a smoother one?

·         Do you prefer that brokers you deal with use the same tools that you do, with the same data sources, so that you are dealing with the same information?

The broker’s relationship with their lenders is as important as that of their borrowers. No customer = no deals and no lender = no $$. That said, what a lender values in a broker is different from consumer expectations. Brokers are charged with the delicate task of building policy and procedure that leaves both groups happy.

Communication. Communication. Communication. This is crucial.

If you don’t share with your broker partners what you value, then, when underwriting, they may not be not be proving documentation that is up to your standards. What do you expect of your brokers? Maybe they would present more value to you performing more searches when underwriting a deal to submit to you. The key to getting the most from these relationships is being able to express your expectations to your partner.

Many lenders now mandate that brokers meet minimum closure rates as a result of brokers who submitted too many deals that failed to close. Showing your brokers how to present an extremely strong deal makes them more effective when qualifying and structuring a deal for you.

Likely your company has BDMs out on the road visiting brokers and emailing out rate sheets to keep the applications rolling in. Here is an idea: how about making the most of your visit and spending some time educating your brokers about the tools that you use when underwriting deals and what they can do to present even stronger deals?

Broker/lender alignment is critical for mutual success and your relationship with your broker will be as strong as you want it to be.

For more about the tools that make broker/lender alignment strongest, please contact Purview For Lenders by calling 1.855.787.8439.