00:05I'm Alison LaForgia, Managing Editor of HousingWire's Content Studio. And for this episode
00:10of 10 Minute Talks, I'm with Chris Flynn, the COO of Class Valuation.
00:15Thank you for having me.
00:15Thank you for joining me. So Chris, today we are going to talk in this episode about
00:20a topic that everybody's talking about because it's going to change things for appraisers,
00:24lenders, really every part of the mortgage life cycle. And that is UAD 3.6.
00:30Yes.
00:31So while I have you here, talk to me first about what it is and what's changing.
00:37Oh, absolutely. So really what's changing is we're about 15 years since UAD 1. And what that was,
00:44was the first true standardization of data collection and data processing in the appraisal
00:48industry. And so now with UAD 3.6, we're at a point where we're moving away from numerical
00:54forms. So a 1004, 1073, your single family, your condo forms to a point where the output is driven
01:03by the data collected by the appraisers. And so that means a couple of different things. First,
01:08for the appraisers, you're now going to be conducting a much more elaborate and detail oriented data
01:15collection process. We're going to be looking for a lot more information about the residents,
01:20a lot more information about the condition and the quality of certain elements of the homes.
01:25And what that's going to do is create a much more configurable output for the lenders. So if you think
01:32about today, if I'm an underwriter, I know what I'm expecting on a 1004 single family. If you think
01:38about now we're in broad production with 3.6, really my report is going to be driven by the specific
01:45data
01:46that's collected at the property level. You mentioned, you know, some of the timelines that
01:51were coming through. This process kicked off in earnest, Alison, probably better part of five years
01:56ago. And we're now at a point now with the limited production period kicked off in September. We ran
02:03through that through middle or early part of January. And now with broad production, it's a much more broad
02:12opportunity for lenders to participate in the program. We've had an opportunity to put some appraisals
02:18through the process, test the pipes, test the different form softwares. And so now it's a scenario
02:26where we're really making sure that as an industry, we're prepared for the deluge of a volume that will
02:34come in November as this becomes a mandate for lenders to adopt.
02:38So let's talk a little bit about what's changing for appraisers.
02:43Sure. So with the appraiser, for the appraisers, the form software are going to change almost back
02:50to square one. And so it's going to impact how the appraisers are collecting their information.
02:56I mentioned that a little earlier. So appraisers are going to probably move away from things like
03:01clipboards and more manual data collection and have a much greater reliance on technology.
03:08Much greater reliance on the tools that the technology providers are delivering
03:14for the appraisers to more effectively and efficiently collect this increase in data that
03:18they're looking for. What's not going to change, though, is the appraiser's role. The appraiser is still
03:24the analyst. They're still the individual that's collecting all of the information, using their
03:29training, using their expertise to provide a sound opinion of value. And I think that's one thing that
03:35we would want to stress is while the manufacturing process is going to modernize the report and the
03:42delivery that we're relying on the appraisers to deliver is still going to be what they're trained
03:49to do. I appreciate you highlighting that because I feel like sometimes as an industry,
03:54when we talk about modernization efforts, it almost sounds or can sound sometimes in positioning like
04:01roles are changing and the appraiser's role is so critical in the transaction process. And I mean,
04:07whether you're the lender or you're the borrower and you're going through that, you know that that's
04:12a pretty critical piece of the transaction. So it's great to hear you emphasize how important they're
04:18going to continue to be and how their role is not changing. Yeah, no, I would agree. And,
04:23and, you know, modernization, appraisal modernization has been a topic of discussion
04:29again for 20 years. Yeah, at least the better part of a decade. And so both of the the GSEs
04:35have
04:36hybrid programs now where you've got a bifurcated process with an individual collecting property data
04:43information and an appraiser completing an opinion of value based on on that. And with 36, it's really
04:50a continuation of that where there will certainly be scenarios where appraisers will manage the data
04:57collection, manage the the inspection and and want to own or own really everything soup to nuts.
05:03But there are also going to be scenarios like we have today where a certain loan program, a certain
05:08property profile will allow for a bifurcated process where an individual, a trained individual
05:15can go and collect the information. And to your point, the appraiser is then still we're relying on
05:21them to call to synthesize, pull that data together and give us a supported opinion of value.
05:28Now, I want to go back to the lender piece, which you touched on in your initial answer.
05:33What is this change for lenders? Yeah, I'd say the biggest change there's there's two
05:38things. One is going to be around the collateral underwriting. So I mentioned before, the output,
05:44the forms are going to be changing. And where historically, we've had this set report. So you
05:51know, you're going to get a 12 to 14, maybe 18 page report. And if I'm a collateral underwriter,
05:56I know where to jump to to look at certain parts of the information. Now, as I mentioned, it's a
06:02configurable report that's going to be driven by a loan program, a property structure,
06:06and I'm going to need to familiarize myself as an underwriter where I'm looking for that information.
06:13The good news is 3.6 is going to create a much more structured data output. So while we're in
06:21the
06:21report, or let me rephrase, where certain reports might have different elements that other reports
06:27may not, I'm going to be able to consistently find the information that I'm looking for. It's really just
06:33a learning curve. So what I'm hearing, and correct me if I'm wrong, is that ideally, this is putting
06:41together a uniform data set where you're not seeing outlying factors in like an appendices or an
06:46addendum. You're exactly right. So it's going to, while we're still going to rely on the appraisers to
06:50provide commentary and support their values, we're going to reduce the amount of information that
06:55you're seeing at the tail end of that report. And we're relying on some more heavy reading to
07:00understand what you're going through. And then flip through all the pages to find at the end,
07:05just to substantiate wherever you arrive at. Yeah, no, you're exactly right. And just real
07:09quick, I had mentioned two things. The second element is how the information is being delivered.
07:14So today, if I'm a lender, the other piece I want to prepare for is working with my
07:19my LOS software, my appraisal integrated software, and preparing to get a zip file. So now they're going to
07:26get data packages that include still the report output and the images, but how I'm going to consume
07:32that information from a technology standpoint is changing. So they kind of would probably want
07:37to start thinking about and preparing themselves for what that data payload is going to look like
07:41tomorrow versus today. So Chris, as we wrap up today's 10 minute talk, what should the collective
07:49industry keep in mind as we head towards that November deadline? Yeah, I'd say it's a couple of things.
07:55Number one, we're still learning. So while we rolled into broad production in January,
08:00we're still seeing continued adoption and continued volume coming through the pipe. So I would say,
08:07here we are in February, the world is still going to be materially different or potentially different
08:13as we get into the fall. So let's continue to learn. On the appraiser side, it's continue to
08:19familiarize yourself with the technology, continue to do those, either the practice reports or every
08:26opportunity you get to complete a three six to take that because we're going to be learning some new
08:32muscles. And so we're going to want to understand that process. On the lending side, it's continue to
08:38prepare your technology, prepare your underwriters. At CLASS, we continue to survey our customers and
08:46gauge kind of where they are in the process. And a lot of customers are still in that learning phase
08:52where they're understanding how they're going to implement. And so I would just highly encourage
08:56lenders to keep communicating with your appraisal partners, with your technology partners. And
09:02and before November is going to be here before we know it. So that the sooner we can, as I
09:08said, kind
09:08of skin our knees and understand where we need to be, the better. Chris, thank you so much for joining
09:13me. And thank you for letting me pick your brain about U83.6. Like I said, it's at the top
09:18of many
09:19conversations. Yeah, we it's at the top of our minds. I mean, we're living, eating, breathing it. So
09:24appreciate the time and look forward to kind of charting the course with our industry partners. Thank you so much.
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