18 THE NAFCU JOURNAL MAY–JUNE 2022 “The test of alternatives sparked increased adoption and development of innovative technologies in the industry, including virtual inspections enabling homeowners and other third parties to use a smart device to obtain interior photos or video augmenting the property data already collected by the appraiser,” said Williamson. “Building on lessons learned during the pandemic, we introduced a refined desktop appraisal option in March 2022, broadly available to lenders for certain transactions that meet the following criteria: one-unit property, principal residence, purchase transaction (including new construction), loan-to-value ratio less than or equal to 90% and Desktop Underwriter® loan casefile that receives an approve/ eligible recommendation,” said Williamson. Desktop appraisals do not require an appraiser to perform a physical inspection of the property, which removes an opportunity for conscious or unconscious bias, he explained. “Instead, the appraiser relies on third-party data sources to understand the characteristics and details of the subject property. In addition, appraisers may rely on floor plans or imagery generated by third-party applications (commonly known as 3D scans) and information obtained by remote viewing through virtual inspection technologies.” In situations where the property is more complex or the appraiser doesn’t have all the necessary information from thirdparty data sources, a physical inspection could be required, which is when a hybrid appraisal can be conducted, said Williamson. “Hybrid appraisals require a physical Index to Advertisers AI Oasis Website: ai-oasis.com......................................... C2 Allied Solutions Website: alliedsolutions.net................................ 7 DefenseStorm Website: defensestorm.com............................... 17 FIS Website: fisglobal.com.........................................19 Franklin Madison Website: franklin-madison.com........................ 27 Gallagher Website: nafcu.org/gallagher........................... 37 SRM Website: srmcorp.com.......................................... 15 SageNet Website: sagenet.com/engaged..................... C4 Securian Financial Website: securian.com........................................ 25 TruStage Website: cunamutual.com/auto......................... 9 Upstart Website: upstart.com/credit-unions................. 4 inspection by a vetted third-party data collector, who then passes the data and information digitally to the appraiser to complete the valuation assessment portion of the appraisal,” he said. “We believe the home valuation process should include a spectrum of options to establish a property’s market value, with the option matching the risk of the collateral and loan transaction. Desktop and hybrid appraisals are two options in that spectrum that range from appraisal waivers to traditional appraisals," he added. “To identify potential issues with appraisals—which could include situations of misvaluation—we provided CU to support our quality control processes and resources, as well as serve as a tool to lenders for their quality control and collateral underwriting processes,” said Williamson. “Created in 2011 for internal quality control purposes and then brought to market in January 2015, CU has a robust set of risk flags and messages, including triggers for potential overvaluation risk, appraisal quality risk and property eligibility risk.” As the use of innovative technology grows, so does Fannie Mae’s commitment to ensure an unbiased appraisal. “To control for risk, we created an additional line of quality control measures to monitor the quality of the appraisal flexibilities,” said Williamson. Although close to 3.5 times the number of appraisal flexibilities were reviewed as traditional appraisals, a similar quality and a similar distribution of risk scores in CU was found, he said. “Feedback from the market on the appraisal flexibilities was generally positive, and the experience was helpful to inform potential enhancements to our standard practices.” Resources • “Appraising the Appraisal” working paper includes results of Fannie Mae evaluation of 1.8 million appraisals. Go to https://bit.ly/ 35oTcb2. • June 2021 Appraiser Update includes tips to avoid the perception of bias. Go to https://singlefamily.fanniemae.com/media/ document/pdf/appraiser-update-june-2021. The traditional appraisal process relies heavily on human observations that can be subject to conscious or unconscious bias. Although humans, and specifically appraisers, are still a vital part of the mortgage origination process, modern appraisal methodology involves significant reliance on objective data and can further assist appraisers in producing a more reliable and reproduceable appraisal.
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