Valuation innovation in mortgage lending: Accurate Group’s Paul Doman on what lenders need to know

HousingWire

How can lenders harness the latest valuation technology without falling behind? In this HousingWire exclusive, Paul Doman outlines how Accurate Group is helping the mortgage industry adapt to changes in valuations, including advances in AVMs, risk management tools and compliance requirements. Doman also discusses the strategic role Accurate Group plays in helping partners navigate these shifts effectively.   This conversation provides actionable guidance on preparing for the Universal Appraisal Dataset redesign, testing AVMs effectively, and structuring valuation cascades to ensure compliance and efficiency. Doman also offers forward-looking insight into how lenders can stay ahead of the curve over the next 12-18 months.

Transcript

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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