00:00Live from Las Vegas, I'm Diego Sanchez, president of Howtis Housing Wire, and I'm joined today by
00:14Paul Doman, president and CEO of the Accurate Group. Thanks so much for joining us today,
00:18Paul. It's great to be here with you, Diego. I love it. So tell us more about the Accurate Group
00:24and how you interact with lenders. Yeah, so the Accurate Group is one of the industry's largest
00:30valuation businesses. We have one of the largest appraisal management companies in the U.S.
00:35We also manage a large technology business in the valuation space. In addition, we have a title
00:41data business and services businesses that supports lenders on the servicing side. So we're kind of a
00:47vital asset to the lending community, connecting them to evaluating the collateral, which is such
00:52an important part of real estate lending. And we connect them through their origination platforms
00:57to us, to their vendors, and we manage that entire process for them. So how is the valuation space
01:03evolving right now for mortgage lenders? What's your role in that evolution? So it's amazing how
01:10much change is going on right now in the valuation space in the mortgage world. Regulatory change,
01:16technology change, credit risk compliance change, and really change in product mix driven also by the
01:24GSEs who are trying to modernize the whole valuation process as well. We're going to certainly talk about
01:30UAD 3.6, which is a dramatic change going on right now. And not all lenders realize the magnitude of that
01:37change as it relates to their loan process, their loan origination systems. We essentially are an
01:44integrated provider into their loan origination systems. So we're a key gateway to help them
01:49achieve compliance with UAD 3.6, and really to manage the valuation process efficiently for them.
01:55What is UAD 3.6?
01:57So essentially, the old fashioned appraisal business, if you think about it, appraisers have always worked
02:03with fairly antiquated technology. Many of them still work with a clipboard and a pencil in the property
02:09when they're evaluating the collateral. But many of them also work on form software. And traditionally,
02:14for the last 30 years, that form software has been basically filling out a static PDF form and
02:20creating a PDF of an appraisal and delivering it to the bank or the mortgage lender. Now we've evolved
02:27somewhat that PDF can be converted into an XML file and they can adjust data into their platforms. But
02:33there's never been a true uniform appraisal data set similar to what we have in the credit space,
02:39or even now where we're evolving to in the title space. And UAD is moving to a standardized discrete
02:45data set for an appraisal away from that old fashioned form process that we've had for many years.
02:52And surprisingly, that is a significant change. If you think about all the piping that is between
02:58us and the lenders and all the piping that is the appraiser software that is used by the appraisers
03:03as well. So it requires everybody to level up in terms of their comfort with data and moving digital.
03:09It is a total transformation from the appraiser's desktop through the appraisal management company
03:16or direct to a lender. The lender's integrations are completely different. What the lender's underwriting
03:22and collateral risk teams are looking at is going to be completely different. And it's a seismic shift.
03:27Well, with change can come risk. And so you've got to manage that risk
03:35for your lender clients. How are you doing that at the Acura Group?
03:38So the first thing we're doing is getting the Acura Group prepared to manage the UAD 3.6 process
03:45for our customers and also manage our suppliers, our appraisers networks, making sure they're ready to
03:52connect with us and being ahead of the curve and being prepared. So we're prepared.
03:57We can help our lenders prepare. We can help our appraisers prepare. We were really clear in
04:02talking to the GSEs, even at this meeting, that we're prepared for UAD 3.6. They've told us they're
04:09not moving the dates and people need to be prepared. And so we're completely on board and helping our
04:14lender customers. One of the great things our chief appraiser has done is survey our vendor base, our
04:21appraisers in the marketplace. And we've learned from the appraisers that they want to stick through
04:26with this change. We were concerned initially that a lot of appraisers would simply opt out there.
04:31We've thrown a lot of change of appraisers recently and we were concerned they might opt out. Thankfully,
04:3690% plus of our appraisers are on board. We're also concerned that it's going to take them longer
04:42to produce an appraisal report and also maybe have that appraisal transaction cost more because of
04:48the additional work. Thankfully, what we're learning is with the right training of those
04:52appraisers, making them feel comfortable, those things may not be an issue. But the big issue is
04:57getting everybody to standardize their data set and be able to deliver it into complex systems
05:02within large banks and large mortgage lenders. So another acronym that people are throwing around
05:07in the valuation space is AVMs or Automated Valuation Models. How do you interact with AVMs
05:13at the Accurate Group and how do you help lenders test and utilize them? Yeah, we have so many acronyms
05:19in this business it is remarkable. So we have certainly UAD 3.6, we have uniform collateral data
05:28collection that we do with the GSEs, and we have AVMs, Automated Valuation Models. And we
05:34really are a leader in the Automated Valuation Model space primarily because of our independence. And
05:41again, very similar to the role that we play as a data transmission intermediary to the lenders,
05:47we play a neutral role on the AVM front as well. We help lenders validate how to use AVMs. And AVMs can
05:56be used a variety of ways, whether it's at point of sale for qualifying borrowers, whether it's for
06:03origination of portfolio and non-QM loans, and also in some cases for servicing and defaults in the
06:11capital markets. Our job is to help them set up the right risk-based analysis of their AVM usage.
06:18And we maintain our objectivity and work with companies that help us validate the hit rate
06:23of those AVMs, also the quality of those values that are being delivered by the AVM by market. And then
06:30we subsequently, on an ongoing basis, evaluate that for them as to how their AVMs are performing over
06:36time. And we really pride ourselves on our neutrality. We support all the AVM companies,
06:41we're a value-added reseller to them, but we really focus on delivering a true unique dataset and combined
06:49group of AVMs that is right for the application that the lender or the servicer is using for them.
06:54So if lenders set up their valuation cascade appropriately, they can be faster,
07:00they can be more cost-effective, they can be more efficient. Do you work with lenders to set up those
07:04valuation cascades? We do. And that's our primary job as not only a consultant, but a compliance
07:11consultant, making sure that they're setting up a cascade that not only is going to make them more
07:16efficient faster, but also that they're evaluating the collateral property and they're managing risk
07:21appropriately. And then lastly, the regulators are extremely focused on AVM cascades and AVM usage.
07:28So we make sure that they're establishing compliant AVM cascades and they won't have challenges with
07:34their regulators in an audit environment or just for any types of risk purposes.
07:39All right. A lot going on in the valuation space, a lot of innovation, UAD on the way very soon.
07:46How are you helping your lenders stay ahead of all this change? And what other changes do you see
07:54coming in the next 12 to 18 months? So I think the primary thing we're focused on is being ahead
08:00of the change. So being proactive in embracing the change, helping our lenders bring them along,
08:08helping our vendors bring them along and being a true value-added partner. But where we also see some
08:14significance change is in the area of AI. AI and process automation in the valuation space
08:22is changing the game for us, changing the game for appraisers and lenders as well. So when you look at
08:29what AI is going to bring to the table and already has brought to the table, I mean, there's a myriad of
08:33solutions. Just the fact that we're going to have a discrete data set now with UAD, with that discrete data
08:40set, we can make a lot of decisions using automation. Obviously, quality control comes to mind. One of
08:47the reasons why UAD is an asset for lenders, it's going to eliminate a lot of the rework we do in the
08:52appraisal process, which takes time and money. And we're going to bring that rework down. Already,
08:58we've built AI driven quality control processes in the appraisal world. And we've partnered with
09:03folks who are building those to help us produce higher quality appraisal reports. In addition,
09:10if you think about AI, it's going to enhance the process of making decisions. So if we need to
09:17deliver a specific appraisal assignment to a specific appraiser in a specific market, normally a person can
09:25help us make that decision. But ultimately, AI can make that decision today for us and make that happen
09:30faster, more accurately without errors. AI in our business is not going to completely replace
09:37humans in any way. But it will help us streamline processes, create efficiencies. And with the right
09:43people supervising and helping the AI learn, we think we're going to be very well positioned. So
09:49our goal is to stay out front of all that. Yeah, it sounds like it doesn't replace humans,
09:53it just makes them better at valuing properties. It does. And I think that's the key. You know,
10:00having some human oversight into what is one of the most fundamentally important things that we do,
10:05which is make sure that the collateral is worth what it is valued at, is fundamental to the future
10:11of we think the lending environment. And, you know, we all saw in the mortgage crisis many years ago,
10:17that the collateral process wasn't always the best. We've learned from that. And we don't want to just
10:22let AI run the process. We think we can deploy humans in a meaningful way alongside AI. Paul,
10:28what an interesting conversation. Thank you so much for joining me today.
10:32You're welcome. Great to be with you, Diego. Yeah. Enjoyed it.
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