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Special Reports
Appraisals & AVMs
TransUnion Modifies AVM For FEMA Disaster Areas
By Brad Finkelstein
CHICAGO -- TransUnion Settlement Services, the real estate subsidiary of TransUnion
here, has modified its proprietary automated valuation model, called Collateral Market Value, to assist lenders
in the areas affected by Hurricanes Katrina and Rita, as well as dealing with any areas in the future declared
by the Federal Emergency Management Agency to be disaster areas.
FEMA gives two different types of disaster declarations, individual assistance
and public assistance. In the individual assistance area is where the sustained damage is, said Bruce Schulkins
of TransUnion Settlement Services. In public assistance areas, the damage is very spotty.
TransUnion Settlement Services is treating those designations differently.
CVM will return what had been the previous valuation of the property as if it
had not been in a disaster area, but there will be a message attached to the report and the confidence score will
be adjusted to account for the uncertainty.
Mr. Schulkins said the reason for keeping the previous valuation is because "some
lenders are trying to understand what is the loss impact to their portfolios, some people are looking at it for
insurance purposes, and we have some lenders, especially the lenders that are based in those areas, that are acting
out of good faith and are trying to continue to loan to those people to help rebuild."
Based on what type of FEMA declaration has been made, lenders are deciding to
either not use an AVM in the area, or "what is surprising us and we're seeing quite a bit, is their continuing
use of the AVM but supplementing it with a photo of the property and/or a condition report," he said.
Some of the lenders are also using the AVM value and asking the consumer to come
in with the repair estimate from their insurance company. The lender is deducting the repair value from the AVM
value to determine what is the current value of the property.
In the past, TransUnion Settlement Services had looked at natural disasters when
they had occurred and advised customers about their risk and concerns. When Katrina came, "this was the first
time we had seen a hurricane with such magnitude," he said. Even with the four hurricanes that struck Florida
during 2004, the damage typically had been sustained for two to three months, then the curve starts to go back
to a more normal marketplace for home values.
"With Katrina, obviously that is not going to be the case. So we sat down
with a roundtable of appraisers. We asked the appraisers, 'Quite frankly, how would you value these properties?'
And the appraisers were struggling for an answer. There is still a lot of doubt and uncertainty in the marketplace
and that is what really led us to make the decision to implement this," Mr. Schulkins said.
The modifications work in conjunction with the company's ePolicy, an automated
product decisioning tool which allows lenders to make a risk-based product selection.
TransUnion Settlement Services will monitor the FEMA website on a daily basis
for future disaster declarations and make the modifications into CVM accordingly.
Another action that parent company TransUnion has taken because of Katrina and
Rita is to offer its authentication service free of charge for the rest of the year to FEMA as well as state government
agencies in Alabama, Louisiana, Mississippi and Texas. The process allows for the verification of a person's identity
without the use of traditional paper documents that might have been lost or destroyed during the disaster.
As a result, government-issued monetary aid will flow to the proper person in
their time of need. The process, TransUnion said, is consistent with guidance provided by the Office of the Comptroller
of the Currency, the Federal Deposit Insurance Corp. and the Office of Thrift Supervision.
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