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R3 AMC’s Val-Insure™ Insured Appraisal Solutions With Brent Jones Of R3 AMC
I'm excited to have Brent Jones joining us on the show. We're going to be talking about appraisal and some changes that are going on in the appraisal world. We all work with appraisals. It's been something that's been around for a long time. Brent is approaching the appraisal process or aspects of the appraisal a bit differently. I wanted to give him some airtime on our show and make you, our audience, aware of it. Now he is not in all states yet but we're going to get into that a little bit. Brent, thank you so much for joining us. David, thanks for having me. I'm going over your background here. You've been a licensed appraiser since 1992. You live in Las Vegas and operate out of Las Vegas. You were with Fannie Mae from 2009 to 2014 and you were a senior analyst for the West United States. In 2015, you started R3 appraisal companies. That gives our audience a little bit of an introduction, but tell us some more about yourself. I'd love to hear the story of why you launched R3. Some of my peers would argue I've been doing this a little too long. I get that a lot too. It's 72 years old and 50 years in the industry. Many years ago, they were like, “What is this guy still doing in business here?” It's funny because I started in the industry working for free for one of my friends that I grew up with in Northern California. His parents were appraisers and he interned. Interning had just started and I said, “This looks great. I'll come to work for free.” Years later, here we are. I'm not working for free anymore. At least it didn't feel that way in a couple of years. Let's put it that way. We're happy to break even those days. I started this Appraisal Management Company in 2015. I'd left Fannie Mae. I had some grand ideas about creating some software that would take what I learned in working with the collateral underwriter model. What I figured out very quickly is that I'm going to go back to being a practicing appraiser and the best way for me to do that is I'm going to create an AMC that'll give me work. That’s what handles the supply side. Here we are. It's been a hobby. We were in one state, and then we kept growing. Now we're in ten. We have some national clients. Why we're talking now is when I started with Fannie Mae. On my first day, I worked with a woman named Rachel Beam-Jares, who's now the head of diversity at Fannie Mae, the ADI Project. She and I remained fast friends and we talked a lot about bias and diversity. I said, “I'm going to go out, try and find, and create a product that ensures our lenders and our appraisers for number one repurchase risk from the agencies.” That's a trend that nobody sees is going away, especially with the cost of scratch and dent market now and getting loans repurchased. The other side is we've got an insurance policy where appraisers are being accused of being racially biased. This insured appraisal product is called Val-Insure™. We just launched it. We're getting some great responses on it and that's why I'm here to chitchat about it. It's very exciting. Explain a little bit more when you say it's insurance. Expand on that and give us a little more insight into what's unique about it. There are three different components to it. We have an insured appraisal product and the cost of this is for a lender, it's born out by the AMC. There's no additional cost to the lender, which is important. The second part of it is that the insurance carrier is a national carrier hallmark. They wanted me to create a bias training program that we would have the appraisers go through. We started getting the appraisers on board the response to that bias training. It's a seventeen-minute concise, to-the-point, practical application of how to stay out of the hot water when you're at the property and when you've delivered the report. I'm chuckling when you see a seventeen-minute training session. That's amazing. That would leave it all my intention. I have a shortened tension span. It’s an eight-hour seat time for continuing education. An appraiser needs to know what the practical reasons are these days’ problems. The third part of it is that we've got a QC project after that. When the report is delivered, we have automated underwriting as everybody does, but we also have the reports hand-read, and then we get that QC feedback loop as well. We're trying to stop this at the butt, if you would, to make sure that these problems don't escalate. If you talk to anybody, Peter Christensen is one of our legal counselors and did the legal review and opinion for us. As he says, “The whole thing can be stopped right at the time of the borrower complaint. That's all how that reconsideration is handled. It's all how that communication is handled.” We want to make everybody aware, loan officers as well, that we have training for them. We've got the recognition of the problem that could happen if this isn't handled correctly at the beginning before they get involved. [bctt tweet="A borrower complaint is easily handled through the right communication of their reconsideration." username=""] Every appraiser has E&O insurance but I have a feeling that this is different. Could you explain the difference? That was one of the first things that made me come up with this. I called my insurance carrier, both as an AMC and appraiser, and said, “Am I covered?” If you read the E&O, it's all an exclusionary part of the policy. If you're proven guilty, whether it's an AMC or an appraiser, the E&O cannot cover it. What we wanted to do is create an insured product, number one, for myself as an AMC, but also for the appraisers that do work for me. We got a bonus where we're able to indemnify the lender against any overvaluation risk where the agencies are saying that the appraiser missed it on the high side. Explain how that works when you say they miss it and not side. How does it work in a practical transaction? What could a lender expect? Everybody goes off of the Fannie Mae scoring system, which is called the SSRs, Submission Summary Reports. You get a Fannie Mae and Freddie Mac score. If you have a high score, 9 times out of 10 are going to be sent to some triage at the agencies to be further reviewed. If it has an overvaluation flag, then that file will get reviewed. If it's found to be, I believe, the tolerance and it was back then 10% higher than what they think it is, they can send the loan back to the lender for repurchase. They've got to take the loan back and figure out what to do with it, whether they're going to hold it or sell it in the scratch and dent market. They go back and forth. In that scenario, if that should happen with your appraisers as a part of your AMC or anyone working with you, then what happens? How do you step in? Do they contact you or the AMC? We would handle all the rebuttals. As it relates to the appraisal only. It's compared against a retrospective appraisal. There are caps on the insurance up to $100,000 on each side. The bottom line is we fully support the lender when that happens. We'll try and get it reversed. If not, then we indemnify them for that loss. This has got to be at an additional cost to the appraisal. Yet, you say you're covering all that. Does that mean you've increased your fees to cover all of this? How are you staying competitive? The cost of the insurance is high, but we are anticipating that as the risk experience for the insurance company, it's going to go down. We're eating it now. We've also had appraisers who are willing because of the insurance are willing to reduce their fees to be a part of the program. Right now, appraisers are hungry. They're looking for anything that gives me an advantage to be able to get them to work. I was terrified about this video. It’s putting yourself out there to a group of 70,000 appraisers. You never knew what the response was. I'm so thrilled with the way that everybody has responded to it, supported it, and the way they want to be a part of it. Even now as we send over these QC feedbacks, there's, “I missed that. I thought I'd taken that out.” I’m super pleased with the way all of this has transpired.
Important Links
- R3 AMC
- R3 AMC Agent University - YouTube