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Special Reports
Appraisals & AVMs
New Option Eliminates Need to Obtain Appraisal
By Amilda Dymi
MOUNTLAKE TERRACE, WA -- Mortgage Investment Lending Associates Inc. here is offering
brokers a new loan fulfillment option that eliminates the need to separately obtain a standard appraisal through
a near-instantaneous, low-cost automated valuation model report.
"We are trying to give the broker control over the lending process,"
said Layne Sapp, MILA founder and CEO. "We are trying to take those pieces of the lending process that create
inconsistencies between them (brokers) and their customers, the borrower, and this is another step towards that
vision, towards getting the broker to the four-hour loan."
And the next step in that process, he added, is that "we are making our systems
go out and gather all the loan conditions on the file, which will take us next year to do. Then, the technology
will get all the income docs - appraisal, title and everything else, so the broker won't even have to fill out
a loan condition, and they will go to close loan documents on the same business day."
But that convenience is still in the future. As of now, MILA is launching its
"Appraisal Not Required" mortgage-fulfillment option, combined with its online AVM purchase tool.
"We took the valuation piece that would require a broker to go get an appraisal
and build it into an automated underwriting so that we can automate the point-of-sale piece process for the broker,"
Mr. Sapp said. "Primarily it is a purchase money product, but we can take the purchase money transaction without
the broker having to get an appraisal."
According to MILA, the product responds to what is a basic problem for brokers
- it eliminates appraisal discrepancies so common in the mortgage process.
"Today a broker has to get an appraisal, submit it, and then wait for the
lender to review it and see whether the value is there based on their own people. So it becomes a very subjective
valuation," he explained, since lenders may not agree with the appraisal value presented by the broker.
"We do not care so much about the subjectivity issue that do not cause a
lot of time delays. What we really care about is the value and the property, so we have created an automated integrated
AVM process that integrates with our technology and allows us to get inside the process," he said. "We
take the AVM model, we model that against their request and if it is a purchase money loan and the value is within
10% to 15% of what they are buying the house for, then there is no appraisal necessary."
Instead of going through the whole report, brokers base their valuation on that
indicator thus saving the time they would traditionally have to spend to go and get the report, "for which
the customer has to pay for," before closing a home loan, the executive noted. It applies to purchase-only
loans to borrowers with a minimum of 600 FICO score.
"We also may save possible arguments between a broker and lender about who
is right about value, and you get it done in a one-step process that can be done in five seconds," Mr. Sapp
said.
MILA believes in a much easier process for everyone, which is why the executive
added it has been modeling the product for the past two years. Currently, about 80% of MILA's purchase loans are
processed through the new AVM operations, which shows that the new product has already caught up with and has become
quite popular with MILA's network of brokers.
"I think we are the only lender offering this, just pure AVM, no appraisal,"
Mr. Sapp said. "Fannie and Freddie may do it for loan-to-values of under 80%, but we are doing this product
for up to 100% LTVs."
The product will be officially released and made available to brokers outside
of the MILA in-house broker network in November 2005.
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