Lykken on Lending

[Alice] Hello, everyone. Today we have a very exciting topic on the interagency guidance on a request for Reconsideration Of Value. So you may have heard last week that we have an extension until October 31st to get this done. You have two main things you must get done by October 31st. The first thing I’m going to tell you is you’ve got to make sure you’ve got your policy and your procedure all written. Start with your policy. Get your high level requirements done. Make sure everybody at senior management agrees on several key points and the number one thing is going to be, how are we going to keep consumers advised of the process? and then what kind of notification are we going to give a consumer? and what’s our policies when there is a reconsideration of value. Then you’ve got to go through and really look at your procedures to say, how am I going to implement this? This is not easy. Do not think, Oh, I’ve got that already. Because most companies that I’ve audited in the past and looked at their P and P’s related to appraiser independence and consumer complaints, there’s a gap you’re going to have to fill here for how, like I said, how do I keep consumers informed and then how do I make sure my groups from A to Z, anybody involved with appraisals, anybody involved in underwriting is all informed on how to make sure we get this communication buttoned up correctly. So that first thing is get your PNPs written in that order, policies, then procedures. And then the second thing is you really should make sure you’ve got training set up. Since this is new guidance, the agencies are going to be looking for how did you kick this off? Did you just throw it out there and go, okay, maybe three months from now, we’ll get everybody trained that we’ll roll it in after the summer busy months. You better get this done so it’s ready to go on October 31st. They’re going to be looking for that in an audit and anytime they come up with a new policy like this, you can bet there’s going to be somebody who comes in and does your audit and is running through a checklist and this is going to be top of mind so you want to make sure too, this is a good check of your change management process overall that, when a new memo comes out,  do I have a process by saying, who owns this, and that’s only one name. That’s not the name of a department. That’s the name of a person of who owns this to make sure we are ready to go in all areas so there may be a project, and there probably could be multiple people involved in actually executing it, but it’s a good opportunity to test, is my change management process working? Because this could be straightforward for many of you if you have good systems in place already for responding to appraisal deficiencies. So it’s really trying to I’ve heard several areas of processes that existed at some larger companies already where you already have a process to order a second appraisal. So alright, have I checked that process to make sure it’s looking even for biases? and if I checked that process that even for appraisal issues, it’s rolling properly to my complaint area. Do I have a good process for capturing when the consumer isn’t happy about the appraisal itself? very often, that’s not coming up in a consumer survey post application. Post application, we’re asking about processes and, were you happy with the timing? I don’t know if I’ve seen a lot of companies in the past who had a question about the appraiser and the appraisal. Lots of things to think about. The good news is that in this, it’s inter agency guidance, by the way, it is not just for banks, It is not just for lenders, credit unions, smaller community banks, everybody is listed in this. No one is off the hook so the good news is when you get to the back end of this 35 page regulation, there’s a nice little checklist that says, okay, I’ve got to do this, and this. So look for, I don’t know, like page 27 is about where it all starts. It’s all summed up in a couple of pages for you to be able to implement. Make sure you get your PMPs written and you go ahead and you get that training scheduled in September. One of the things I like about the policy that they kept, and a lot of compliance people don’t like this, compliance people like, tell me exactly what I have to do. They like, no, I want an actual tolerance, and I want dates and timelines. I want the regulation to tell me all of That’s not good for something like this where it has to apply to so many different size shops and so many different entities that have other regulators to answer to. So it does leave open that the policy and the policy itself and the procedure you ultimately settle on can match with the size of the company and essentially your historical data on what type of challenges you already have with appraisals and appraiser bias. The comment section has a few good things in it that offer some reiterations that this is not, it’s not guidance that has the full force and effect of law or regulation, and it technically isn’t imposing any new requirements. They look at this as clarifying that appraisal and appraisal responsibilities and making sure that appraisals are meeting those minimum standards for quality to keep financial institutions safe are being met. they totally get, and there was a lot of comments about balancing with appraiser independence, which I firmly believe you can do. Appraisal independence doesn’t mean appraisers are absolved of any scrutiny.  We as lenders still have a right to go in and say, What we have information we have that we believe the appraisal is meeting our standards or not. So lots of good stuff in here. It’s, by regulation standards, it’s a short read of 35 pages. Anyway, you have an extension until October 31st and you’ve got two things you got to make sure you get done by September. So that’s my report for today, folks. Back to Dave.

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Alice Alvey, Master CMB
Vice President Partner Education and Training at Union Home Mortgage
8241 Dow Circle
Strongsville, OH 44136
D: 440.420.4294
C: 248.941.1939

She handles development of their World Class Training program designed to support UHM partners and organizational effectiveness.

Prior to UHM, Alice served as Senior Vice President at Indecomm leading the Indecomm-Mortgage U division, Internal QA and Compliance and SaaS technologies. Indecomm acquired Mortgage U in 2013, where Alice was President/Co-founder, providing training and consulting since 1996. Prior to MU she served as SVP of Operations at a national bank overseeing operations for wholesale, retail and correspondent from underwriting through servicing, and compliance.

She has been in the trenches of mortgage lending operations from application through servicing for over 30 years. Her authoring work in training content, policies and procedures and the FHA/VA Practical guides illustrates her ability to bridge regulatory requirements with day-to-day operations.

Alice has been a weekly contributor to the Lykken on Lending show since its beginning in April 2009 and has made her weekly contributions to 450+ episodes!