COMPANY
CITY
STATE
WEBSITE
American Valuation Management
Little Rock
AR
www.americanvaluationmanagement.com
Appraisal Management Services LLC
Marietta
GA
www.appraisalaudit.com
Landmarx Solutions, LLC
Williamston
MI
www.landmarxsolutions.com
Jeder Valuation Consultants, Inc.
New York
NY
www.jederval.com
Republic Real Estate Solutions, LLC
Springboro
OH
www.republic-title.com
Red Vision
Gainsville
FL
www.redvision.com
Validata Lender Services
Rockville
MD
www.validatals.com
To join TAVMA please visit our website at www.tavma.org.
TABLE OF CONTENTS
Cover Story: FInding the Value in Appraisal Management Companies . . . . .6 Since the implementation of the Home Valuation Code of Conduct, AMCs have endured a heap of criticism. Here, we take a look at the value that AMCs provide to banks and appraisers alike.
Does A Trusted Advisor Bite The Hand That Feeds? . . . . . . . . . .5 The More Marketing Changes, The More Like Sales It Becomes . . . . . . . . . . . . . . . . . . . .10 Industry Consolidation Can Also Spell Opportunity for Local Settlement Services Providers . . . . . . . . . . . . . . . . .12 A Discussion With Michael Ousley of Clear Capital . . . . . . . . .14
About TAVMA Founded in 1998, TAVMA is a non-profit trade association tasked with enhancing public awareness and promoting ethical conduct to settlement services industry vendors and service providers. The Association acts as a forum for the exchange of vital information and presents the positions of its member companies to media, government, user groups and vendors. TAVMA member organizations are committed to promoting excellence and integrity while adding customer and consumer value to the settlement process.
Find this and more at www.tavma.org Spring 2010 — TAVMA 3
IS YOUR SALES STRATEGY LEAVING MONEY ON THE TABLE? Good salespeople close on the prospects you know about. Good marketing closes on the prospects you didn’t.
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Leadership
Does A Trusted Advisor Bite The Hand That Feeds? provider who opposes his client’s call- right from wrong. Using this formula, ing flip this switch and honor said if after giving it deep thought I cons an independent consultant client’s best interests? clude that it’s wrong to take the job in my prior career and on a Still others might counsel me to not then I must decline the offer and exmuch smaller scale today— worry about the moral dilemma. “Give plain why. In so doing, I’ve met my inbusiness development and time and the devil his due,” the Charlie Daniels tegral obligation, as framed by Carter. motion studies mostly—I’ve worked song goes. “Men regard it as their right I have no problem with either venin fields ranging from vendor man- to return evil for evil,” dor or client telling me agement, publishing, and information said Aristotle. Work for we can’t work together technology, to venture capital, land- the jerk and take his fordue to some conflict. scape architecture and disaster tune. Maybe shirk by Nor do I have a problem restoration. So one day, a prospective cutting some corners. turning down work due client comes along seeking expertise Then blame him! The to a trust or Old-Car to help develop his business model. rake deserves it, right? issue. If there is a dealTrouble is I’m philosophically opbreaker conflict then So after much grapposed to the industry he’s in. What pling with conscience I both parties would be ought I to do? far better off for it in the choose to contract to Most I suspect would counsel me to work with this client. end if we simply part decline the engagement. For if I op- Yet I harbor resentment ways. pose my client’s industry how can I be that it’s a Faustian barWhat I can’t accept is a faithful servant? Niccolò Machiavelli gain, a deal with the discerning that it is Jeff Schurman would agree. For it was he, in The devil. But whom do I rewrong to work with this Prince, who observed of secretaries sent? My client for making the offer? or that client on moral grounds and (16th century consultants), “When you Myself for accepting it? The consider- then turning around and agreeing to see a minister thinking more of him- ation? I agreed to it after all, but I the engagement; keeping my resentself than of you… one ment hidden from view. Or worse, acwanted more! so made will never be a What sort of minis- cepting the contract and then good minister; never ter can I be given my slamming my now-client and his inIf I oppose my will you be able to trust distain for what my dustry to anyone who’ll listen; perhaps client's industry him.” And when there client holds dear? How framing myself as a victim! how can I be a is a lack of trust he Faustian or not, in my role as either loyal can I be to his faithful servant? cautioned, “The end is cause? Can I ridicule service provider or client—remember always damaging eihim and remain a val- that we all play both roles pretty much ther for one or the ued advisor? Evil for daily—I am the one who owns the other.” I’d say it damages both. evil, right? Is that what a person of in- choice to work or not to work with Others might counsel me to take tegrity does? another. Should the day ever arrive in the contract and do the work. Love the Stephen L. Carter, writing in In- which I discern that we can no longer sinner but despise the sin, borrowing a tegrity, defined the integrity virtue as a work together, I’ll act on what I’ve biblical refrain. Give him your best three-step process: (1) Discerning discerned, tell you, and tell you why. and the “Old Car” as real estate agents what is right and what is wrong; (2) You will honor me by doing the same. might say: Obedience, Loyalty, full Dis- Acting on that which is discerned to closure, Conf identiality, Accounting and be right; and (3) Saying openly that Jeff Schurman Reasonable Care. But can a service one is acting on their understanding of Executive Director, TAVMA ❍
By Jeff Schurman
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Spring 2010 — TAVMA 5
Cover Story
Finding the Value in Appraisal Management Companies How these companies add value to the mortgage industry. By Jeff Schurman and Rick Grant e same dictionary defines wholesale ational lenders have always number of ways. ey can be compared worked with third party service to a wholesaler selling collateral valuation as “the sale of commodities in quantity providers to complete tasks that products to lenders, they can be com- usually for resale (as by a retail merdepended upon workers or information pared to any other provider offering a chant).” If in the real estate transaction tied to a specific geographic area. Title lender a fee for service or they can be we view the end-user as the mortgage underwriters, which base their policies compared to a marketing contractor lender, who relies upon the appraisal to on public record information, title exam- working for individual real estate ap- assess the risk inherent in a prospective iners and abstractors, and appraisers, who praisers. In all cases, AMCs work to get loan transaction, this model applies well specialize in certain communities or a collateral valuation product from the to the modern AMC. In other words, AMCs do not operate in a reneighborhoods, have long been tail environment but rather as hired through vendor manageAn AMC's core competency is managing a “reseller”of large numbers of ment companies (VMCs). workflow and contracts - with clients appraisals to the end-user. Traditionally, these firms Just like wholesalers in haven’t garnered much attenand appraisers. other industries, the AMC tion from the general public. packages up collateral valuaey work largely behind the scenes to facilitate transactions that appraiser to the lender while keeping the tion reports for the lender, adding value benefit both lenders and home loan appraiser and the lender’s sales organiza- by handling the relationship with the apborrowers. Lately however, in an at- tion at arm’s length from each other, a re- praiser, providing a layer of quality control on the reports and simplifying the tempt to stop some practices that have quirement of HVCC. lender’s transaction coordination and led to mortgage fraud, New York State The AMC as wholesaler billing processes. We would never expect Attorney General Andrew Cuomo adMerriam-Webster’s dictionary defines a grocer to write a check to every brand vanced the Home Valuation Code of Conduct (HVCC), in association with the term “retail” to mean “to sell in small owner that is represented on his shelves. quantities directly to the ultimate con- ey’d much prefer dealing with a disFannie Mae and Freddie Mac. e HVCC has had many conse- sumer.” In the appraisal world, one envi- tributor of many brands. So too a naquences; some positive, and others, not sions an appraiser or appraisal firm tional lender, which could manage so much. One of the consequences of selling appraisals individually or in small relationships with appraisers across the HVCC is that it thrust certain of these quantities directly to end-users. e big country, but if given the option will usuVMCs, specifically appraisal manage- box retail trade, say Home Depot or ally outsource supplier and pipeline manment companies (AMCs), into the spot- Lowes, sells hammers and nails and lum- agement to a third-party whose core light. In the process, some people have ber at or slightly below retail to the do-it- competency is managing supplier conraised questions about why these compa- yourself crowd. In the mortgage banking tracts and workflow. Appraisers often criticize AMCs for nies are even in the process and question industry, lenders charge borrowers retail their value to the transaction. It is rea- fees for various loan products. In each of accruing benefits to only the lender. sonable for us to provide some answers. these examples, the product or service is However, upon closer look, benefits also We can look at the way AMCs serve sold in small quantities directly to the accrue to the appraisal provider. Like mortgage lenders and appraisers in a consumer. the brand owners in the grocery store
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example, or tool and lumber wholesalers in the big box retail trades, appraisers would have a difficult time forging relationships with the nation’s largest lenders and servicers, unless they control companies that provide valuations for a large geographic area. But that would require them to hire and manage large numbers of local appraisers, which is how the nation’s largest and most successful AMCs were formed. Just like the brand owner-wholesaler relationship in other industries, appraisers also get an important risk mitigation benefit by working with an AMC, according to T. Michael Ousley, executive vice president of appraisal services for ClearCapital.com, Inc. “One appraiser told me, he works with AMCs because he always gets paid,” Ousley said. “They may not get the “full fee” on every file, but they get paid on every file.” He pointed out that many appraisers who worked directly with the nation’s largest subprime lenders received a rude shock when the lights suddenly went off in those companies. Some appraisers lost tens of thousands of dollars.at probably would not have happened if they had been working with reputable AMCs. In fact, I recall only two instances of large-volume AMCs that folded in the past 5 years. One was an independent VMC that, in my understanding, went under due to title-side matters; the other was a lender-captive that ceased operations when the parent company failed. us stability and payment of appraisers’ invoices are additional benefits for appraisers working with AMCs. The fee for services model It is perhaps even simpler to think of the relationship between the appraiser, AMC and mortgage lender in terms of the lender trying to minimize its fees for certain products and services Spring 2010 — TAVMA 7
Cover Story
without sacrificing quality. Likewise, the counting, public record or other data, fa- but payment is never received. e AMC mitigates this risk for the profesprofessional appraiser is in need of cer- cilities, technology, and billing. Some of those expenses are paid to sional appraiser by agreeing to pay for tain services and is willing to discount their fee to get them. With these facts in administrative staff workers, information every job, whether the lender accepts mind, the fee for services model seems technology professionals, and Web serv- the work, closes the loan or goes out of ice providers, among others. Increasingly, business. Very often, the appraiser is an appropriate consideration as well. When a local lender does business in a appraisers are contracting with AMCs to paid before the AMC is. Fewer acmajor U.S. market, the institution may provide some or many of these services, counts receivable, collections, and have up to 20 licensed or certified ap- reflecting the work of the AMC in their charge-offs add value to the appraisal shop and protects cash flow, the life’s praisers who specialize in that geograph- pricing schedule. I can hear howls that ‘AMCs add no blood of any small business enterprise. ical area to choose from. Of those appraisers, perhaps half have relationships value to the appraiser!’ right now. So let’s The AMC as with local lenders that keep them fully en- talk about a few value-adds for appraismarketing contractor gaged and thus out of relationships with ers who work with AMCs. One area A specialized case of the fee for servAMCs. Left with 10 possible partners where AMCs benefit appraisers is inforand only a few loans to originate in that mation technology and connectivity. ices model as it pertains specifically to particular MSA, even a large lender does- Computer hardware and software are the appraiser is the case where the valun’t have much bargaining power and is left very expensive. Likewise, software devel- ation provider contracts with the AMC paying the fee the appraiser asks, and opment is beyond the reach of many to provide all of the tasks required to get small business owners. AMCs assume new business in the door. passing that on to the borrower. In 2008, a national survey of appraisAn AMC working in the same MSA responsibility for getting appraisal reis likely to have many more loans in ports from the appraiser to the client’s ers discovered that over 60% of residenprocess from the many lenders it serves desktop; the appraiser doesn’t have to. tial appraisers rely on referrals and networking as their primary and can therefore negotiates from means for business development. a better leverage position. Plus One area where AMCs benefit Less than 10% of the respondents they typically have the technolindicated telephone and internet ogy to track and report things like appraisers is information technology marketing are primary sales vehifees, turnaround times and servand connectivity. cles. Although referrals and netice levels, something most local working are terrific ways to lenders cannot do with such premarket to local audiences, the marked incision. An AMC’s core competency is ere’s value in this. Another area relates to the property crease in centralized loan production has managing workflow and contracts – with clients and appraisers. Which presents information locked within databases that made these methods somewhat obsolete appraisers with a choice: compete for say can help appraisers do a better job of in the residential mortgage industry. So 1 in ten full fee appraisal orders from evaluating properties. Data, even when appraisers increasingly rely on AMCs local clients, or offer the best combina- it’s in the public record, can be expensive. that employ national business develoption of quality, service, and price to com- AMCs can help with that. ment and client relations managers, in“We have sources of data that are side and outside salespeople, advertising pete for 3-4 in ten appraisal orders from more affordable for local appraisers,”says and public relations firms, and complex one or more AMC? On the other side of the table, the ClearCapital’s Ousley.“We do aerial im- Web-interfaces to engage and serve the professional appraiser is working hard to agery and historical sales information national sector of the mortgage industry. complete reports and return them to cus- and listing information and even have a Business development, marketing and tomers to collect a fee. ere are many home data index that can help an ap- sales are areas of particular expertise for tasks that must be completed in order to praiser identify where a market is going. the AMC. I can tell you from experience run a successful appraisal business be- We might do 100 files in their zip code fielding calls from AMC business ownyond the development and reporting of over a month or two where they may do ers that highly connected national sales an appraisal. In addition to the appraisal 15, so this is a real benefit to them.” representatives are in great demand. And Another added benefit to appraisers they’re not inexpensive. Companies rely production cost, every entrepreneur, including an appraisal business owner, ex- under this model revolves around risk. on sales and client relations teams to culpects to incur costs for business Every business runs the risk that work tivate and maintain relationships with development, sales and marketing, ac- will be completed, and accounts billed, national lenders.is takes the sales bur8 TAVMA — Spring 2010
den off the appraisers who work with AMCs, so they can focus on being in the field and doing appraisals. And there’s value in that too. Meanwhile, the industry downturn has put even more of the nation’s origination volume in the hands of fewer national lenders who cannot maintain relationships with individual appraisers across the country. Just look at the quarterly rankings of mortgage lender size by loan originations and you’ll see that the top 10 retail lenders control over 73 percent of all loan originations. “e number of lenders has decreased from what it was a number of years ago,” said Jeff Dickstein, chief appraiser for Pro-Teck Valuation Services.“ose that are still operating are doing so on a national level. ey need AMCs to outsource that business to so they can get the quality that meets their expectations.” It makes sense for appraisers, too, according to Dickstein. “An appraiser that is a local expert in an area doesn’t always have easy access to a large national lender or servicer. e AMC takes over being their sales department, their account manager, their resolution department, and their billing department. We pay all of our appraisers whether a deal closes or not. ey don’t spend time chasing past due invoices. ey don’t have to deal with the minutia that comes through from the lender.” One of the biggest challenges that the small business owner has is erratic sales performance. It’s often “feast or famine” for these operators, and over the past few years as the real estate market has suffered, appraisers have shared in this unfortunate circumstance. Lenders have a related problem. Financial institutions have learned to resist the urge to staff up when business increases because they know they will only have to lay workers off when the business returns to normal levels. is involves reputational and other risks to the lender. Even as the appraiser wants consistency of work, lenders want consistency of
workflow. National lenders need to know that the appraisal will be delivered within the agreed-upon time, in the proper format to be used by its technology and at the proper quality level. AMCs are in a perfect position to give appraisers and lenders what they both want. The AMC as adversary Regardless of which business model we use to explore the business benefits the AMCs deliver to both appraisers and lenders, there will always be some lenders who do not outsource to AMCs and some appraisers who won’t work for them. at is their choice. e idea that any lender or appraiser is forced to do business with an AMC by HVCC or any other market force is not true. ey enter into contracts with AMCs (or not) at their own volition. Offer, acceptance, and consideration are generally considered the hallmarks of enforceable contracts. An appraiser say, who chooses not to work with an AMC, does not have to; nor must an AMC work with an appraiser if it chooses not to. And that is fine. It is what makes our free enterprise system great. But the majority of residential appraisers do work with AMCs. My concern is that bashing AMCs undermines the appraisal profession. ere are success stories in our industry among both individual appraisers working directly for lenders and those that have made a success out of working with AMCs. Others work with both. I often suggest to appraisers that they compare the net income of a professional appraiser who hires and pays staff to handle all business development, technology-related and accounting duties with what the same appraiser could earn working for one or a few prominent AMCs. A sole proprietor communicating candidly about these costs will tell you that, at the end of the year, they are netting somewhere between 60% and 70% of the retail fees that they earn directly from the lender. Doesn’t that make sense? Aren’t there
marketing costs in securing and serving out-of-area lenders? Technology costs? Accounts receivable and charge-off costs? Administrative costs? While we can argue about “how much” of a gap there is between gross and net income. However, we must agree that a do-it-allyourself appraiser or small shop appraisal firm has some expense that can be avoided working with an AMC. It is true that AMCs work on behalf of the lender and will always work to get the best price for each collateral valuation product they order. In the same way, mortgage lenders will always look for ways to reduce costs associated with loan production and to improve productivity. In the end, characterizing the AMCappraiser relationship as adversarial is unfair both to the parties as well as to the lender and ultimately the consumer. It behooves the industry to determine where AMCs make sense and to make it easy for them to operate there, servicing both lenders and appraisers in the process. But yelling at each other will only push down the perceived value of appraisal in the mind of the client and consumer. Which is counterproductive ❍ to us all.
Spring 2010 — TAVMA 9
Marketing
The More Marketing Changes, The More Like Sales It Becomes… Latest marketing techniques finding new similarities with consultative sales approach. ing, and quite a bit of expense for a marginal return. e bottom line is nce upon a time, there was that, when it comes to traditional, sales, and there was marketing. “broadcast-style” marketing, it takes The differences were obvious, more these days to get less. The good news, however, is that and the gap between was large. If you marketing tools are bewere delivering the mescoming more sophistisage from afar, be it cated. We are now able through advertising, a to customize our mespostcard or even a good, sage more and more. old-fashioned news reWhether using e-mail lease, it was marketing. marketing or social The basic message was media, businesses are usually little more than now able to tailor a mar“Here is what my prodketing message to uct can do for anyone smaller and smaller segwho happens upon my ments of prospects. So, message.” Marketing where marketing was was a glossy “leave-beonce just the standard hind” flyer or a large diBrian Rieger feature/benefit flyer a rect mail campaign. And there was absolutely nothing salesperson handed to his prospect, it is now morphing into an early start to personal about it. Sales, however, was more cus- a real conversation. tomized. It had to be. It was a handshake at a trade conference, a Conversation, not broadcasting We don’t have time to read much adface-to-face conversation. First names were used in the course of the conver- vertising any more. It’s just that simple. sation, and the “pitch” (a good one, A challenging market and industry conanyways) was tailored to the needs of solidation mean that we’re being asked to do more in less time. If we have time the prospect or customer. to read a trade publication, or check our e-mail, we’re not reading every word Marketing? Not so much. at’s all starting to change, however. carefully. If we didn’t ask for the mesIn today’s settlement services industry, sage, and it’s not from a prospect, we’re the prospect is bombarded on a daily probably not bothering to read it at all. It is also resoundingly clear that we basis by old-fashioned marketing. And its effectiveness is questionable. Some recognize an advertisement—and research suggests that the average peremptorily disregard it—when we see prospect must see a marketing message it. Some studies suggest that we subNINE times before the message begins consciously avoid looking at the top and to register. at’s quite a bit of market- right hand margins when we look at a
By Brian Rieger
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Web site. Why? Well, that’s the traditional home for Web site advertising. We’re in a hurry, and we’ve come to the Web site in our limited time to read the content, not the ads. After all, it is so easy these days to get information about a product or service we need that we can seek the information we need on our terms. In other words, we’ll listen when we’re ready to make a purchase. Don’t call me—I’ll call you. Ergo, the transformation (return?) to conversational marketing. Relationships still rule this industry. A sales person I don’t know who is approaching me at a conference, barking out the features of his new product, is probably one I’m running away from. But if he or she starts the conversation with a comment about the key note speaker, a question about my product or even an observation about the weather, well, now we’re in a conversation. Somewhere down the road, this may turn into a sale. The parallels of content marketing and consultative sales e focus of marketing is changing. e new question in this dizzying era of information is “what does your message do for me?” In other words, “why should I bother to read your marketing message?” If it’s just a statement about the virtues of your service, the prospect can find that (theoretically) when he or she is ready. So what can you do for me, even if I don’t use your product? Sound familiar? It should. In this industry, the consultative approach
has always been favored. The desired position for the best salespeople is that of the “trusted advisor.” Not only does the trusted advisor make the sale, he or she maintains an ongoing conversation with the client. He clears service hurdles when necessary. She forwards articles of particular relevance to the customer. He can refer the customer to new prospects (within the bounds of RESPA, of course) or make a call when needed—even if the action, in and of itself, doesn’t directly lead to a sale. In the past, marketing didn’t do this. Marketing was just a product brochure or a postcard. It was something we held onto until we were ready to make a purchase. It was nothing that could help us, unless we wanted to know what the product claimed to do for us. The real benefits of content marketing e new rule of marketing is simple. Provide value. And no, it’s not enough to assume that telling someone about your product provides a solution anymore. at’s part of the deal, but increasingly, it’s being consigned to the collateral marketing and sales elements. Instead, if you want to engage the prospect before you get to the face-toface meeting (assuming you can get to that point) your marketing needs to provide value. It needs to provide something the prospect can use, even if he or she never uses your product. Is that fair? Maybe not. But it’s effective. And it’s becoming the only way to really engage future customers with your marketing. is is not an industry easily able to provide value by offering coupons or discounts in advance (a la any number of retail businesses able to draw traffic by offering coupons or special deals on a Facebook page or fan Web site). So what is of “value” to your customer? Needless to say, in a market like this, information is valuable. Hence, e-
newsletters or blogs are springing up across the industry. But the successful newsletters and blogs are not just glorified advertisements. Instead, they offer information useful to the prospects: legislative/regulatory updates (fertile ground for discussion today); state-specific news…things the typical lender, underwriter or agency needs to do its job well. In the old days, the solid salesperson would forward a news article when she thought it would help the customer. Today, we do this in any number of ways, via content marketing. And the benefits are the same. Conversational marketing helps build the relationship and facilitates trust in you or your brand. It focuses the conversation on the prospect instead of you (playing on the tried-and-true features of human nature). And it maintains top-of-mind awareness, a critical element for most sales. Indeed, marketing is much more psychology than trigonometry, and the success of content marketing only confirms this.
eyeballs on the content. Spend the time necessary to grow the base—it’s basically a marketing list for you. Talk with your prospects, not “at” them. One-way conversations are rarely effective in any medium. Put yourself in your prospect’s shoes. Why are they looking at your material? What value are they hoping to derive from it? What is of interest to them, beyond purchasing your product? It’s pretty simple in concept. A best-practices approach to marketing is rapidly converging with the established best-practices approach to sales. e communication should approach a conversation, a give-and-take exchange. It’s not enough to broadcast your value proposition anymore. Save the majority of that for the closing of the deal, or, for marketers, the collateral. Marketing has a more significant role than ever before in building relationships, and there are numerous cost-effective ways to do it. It just takes a little time, and a lot of common sense. ❍
Make content marketing work for you by making it work for your prospect Whether you’re doing a newsletter, a blog or a podcast, you need to keep the following things in mind when producing content marketing. Be consistent. If your prospects come to expect a regular newsletter or blog, they’ll be disappointed when you don’t have new content available regularly. They’ll abandon the site or blog, and it will be twice as hard to win them back. Build traffic. If you’re using social media or sending a newsletter, you need
About the Author: Brian Rieger is the principal ofTrue Impact Communications (www.trueimpactcommunications.com), a full-service marketing and public relations agency serving the mortgage and settlement services industry. He has served as a trusted advisor to large and small firms in the industry for seven years. Brian was also the Vice President of Seminars and Studies at publisher October Research Corporation for five years. You can contact Brian at (330) 348-1678, or at brian@trueimpactcommunications.com, and you can see his weekly blog (on similar topics) at www.trueimpactcommunications.com/blog. Spring 2010 — TAVMA 11
Industry Issues
Industry Consolidation Can Also Spell Opportunity for Local Settlement Services Providers Instead of being all things to all customers, remember that real estate remains a local endeavor. By Jim Hollerbach he bigger the current market slump gets, the smaller the field of participants and businesses. Or so it seems, sometimes. ere is no doubt that the settlement services industry is not quite as big in 2010 as it was in 2005. Consolidation is the name of the game, and has been for a few years now. With firms competing for market share as originations decline, acquisition has been a major strategy for several of the larger companies. Additionally, many small to mid-sized settlement services providers, faced with a dramatic drop-off in home equity and purchase transactions, have been forced to become “one-stop shopping” providers, often branching into lines of business that include real estate-owned (REO), short sale and foreclosure-based services. In short, there are today fewer providers competing for even less business. One of the results of this new mix is a forced growth in geographic coverage for many local and regional firms. It’s just not enough anymore for a title company or settlement services provider to stake its claim in a single state. Lenders, originators and brokers want partners which can handle multiple kinds of transactions in a wide range of jurisdictions.
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Or do they? While the above assertion is true to a 12 TAVMA — Spring 2010
degree, it competes with a second and, sive regulatory and compliance climate often, overlooked mandate. Quality con- in which the industry finds itself today. But wait—there’s more. Even the trol is once again moving up on the priorcompliance-savvy national ity list for all parties and providers in the most mortgage transaction. “Faster” is still in- provider is not always a match for the credibly important, but not the only re- colorful patchwork of local county recorders, county clerks quirement for lender or city personnel charged business—not in a comwith the keys to the real pliance-driven climate of estate data kingdom on a risk aversion and litigation. daily basis. It’s one thing Today, even the largest to understand the subtle mortgage lenders rely to a nuances of a tax lien and significant degree on the the way it is recorded in knowledge and local expeNew York. It’s another to rience of each and every know the difference in partner or vendor. the way those liens are So while title comparecorded from county to nies and settlement servcounty. And while most ices providers may now professional firms are need to offer more than Jim Hollerbach able to overcome the injust refinance transacevitable eccentricities tion-based services in a single metropolitan area, it still remains that tend to pop up from one courtthe unquestioned truth that real estate house to another, only those who know is, indeed, a local business. Why? First their way around can do so quickly. Acand foremost, whether your geographic curacy may have growing importance in footprint covers Pittsburgh or Pen- the mortgage transaction, but fast accusacola (or both), your services will be racy is irreplaceable. governed by the laws, ordinances and So how does this regulations of that state, county and apply to your business? city. Moreover, the regulation or ordiWhat’s the lesson here? nance governing your foreclosure services or REO package today may easily First, it’s ok to branch out into new change again tomorrow. It’s a real chal- lines of business, if you are ready to do lenge for even the biggest national them well. ere’s almost no home equity providers to stay on top of the convul- business to be had right now, so if yours is
a firm that once made much of its revenue servicing HELOC transactions, it is not only reasonable to expand your service offering, it’s probably necessary. But as you roll out your new service offerings, it’s not acceptable to hide your local understanding and experience. Lenders and title insurers are increasingly looking for just that. “One-stop shopping” is not as positive a statement as it once was—not when it can mean “we’ll do anything for a buck,but can’t promise it will be done well.” If you understand Bexar County in Texas, that’s a good thing. Secondly, if yours is a business that is newer to the industry or the area you are serving, get to know your jurisdiction. Do it now, and do it well because your customers won’t wait for you to navigate the daily, routine hurdles awaiting settlement services providers unfamiliar with the dozens of small delays awaiting them from jurisdiction to jurisdiction.
Similarly, you don’t need to be an attorney to understand the niceties of your local compliance climate. Stay in touch with your local bulletins, your local news and knowledgeable local professionals about the ever-changing rules governing property data, foreclosure or REO. Make the time to understand what the latest city ordinance really means to your national clients. Is it being enforced? What are the red flags for the regulators? What does the rule mean for your clients? How are others staying in compliance at the lowest cost and with minimum impact upon workflow? Large national lenders and underwriters will probably be aware of new rules and regulations at all levels. But they’ll look to you for guidance on what the letter of the law really means for them. And if you can’t help them, they’ll go to someone who can. It is a tough market, and the only people who claim to be sure of exactly when
it will improve are likely trying to sell books they’ve authored. at doesn’t mean, however, that you can’t succeed. Consolidation is actually a way for you to make your local business knowledge and experience work. Relationships still rule the mortgage industry, and your “mom and pop”background may actually be something the big boys are looking for. Make your strength a part of your marketing package, and help your national customers to navigate the intricacies of your local market. ❍ About the Author: Jim Hollerbach is the owner and president of Hollerbach & Associates, a Texas-based title research and abstracting company based in San Antonio, e firm has served the mortgage, title and vendor management industry nationwide for 25 years. For more information, go to www.Hollerbach.com.
Spring 2010 — TAVMA 13
Q & A
About Mike Ousley Mike Ousley is Executive Vice President of Appraisal Services for Clear Capital™. He oversees the direction and growth of the Clear Capital team responsible for providing reliable Appraisal products nationwide to mortgage servicers, mortgage originators, mortgage insurers and government sponsored enterprises. Ousley’s professional background spans more than 30 years of real estate collateral assessment, mortgage banking, and private and public business. He was Vice President at California Federal Savings Bank, instrumental in setting service and quality standards throughout Northern California and Nevada. He also founded Foster Ousley Conley and led it through its growth from a small twoperson operation to a nationwide company employing more than 400 people, thousands of contractors and managing multiple offices in dozens of states. After Foster Ousley Conley, he founded a multi-office national firm, Appraisal Enhancement Services (AES). Utilizing web-based technology and proprietary analytics, AES assisted mortgage originators and the investment banking community in managing thousands of real estate transactions daily. AES also provided collateral risk audit tools and scoring models, appraisal review and real estate valuation services. Clients consisted of the largest real estate lending, mortgage insurance companies, rating agencies and investment banking firms in the United States. His company was recognized as the seventh fastest growing private firm in the San Francisco Bay Area in terms of revenue by the SF Business Times, growing in excess of 400 percent annually. In 2003, AES was acquired by a fortune 500 company. Ousley has served as the Chairman of the Chief Appraiser’s Council and the President of the California Association of Residential Lenders.
14 TAVMA — Spring 2010
A Discussion With Q: What are the most important questions facing your industry today?
A: Mostly, we’re facing a lot of questions about where we fit in the industry, what we do and the value that we offer. The truth is that appraisal management companies can offer a lot of value to both appraisers and lenders. But there is a certain faction at work out there in the industry that would like to believe that we exist to put appraisers out of business or treat them poorly or to seek out the least experienced appraisers. That’s just not true. Quality is not something you can negotiate on, not in our business. Our customers depend upon us—now more than ever—to give them a collateral value answer that is reliable and that they can make a solid lending decision on. That means we need to work with the very best appraisers we can find. And we don’t work with them for just one deal. We’re out there establishing relationships with these professionals, so we can work with them again and again. That’s what provides the most benefit to both their company and ours. Our challenge is to overcome those perceptions by answering those questions. It’s a challenge because we’re fighting against a bad first impression that hinders our business but that was perpetrated by people who use anecdotes instead of evidence.
Q:
How important is technology in your business and are you worried that technology will ever replace the VMC?
A: Technology is a very important tool and we certainly embrace it to help us be more accurate and consistent in what we do. We use technology to help us find the most proximate appraiser, with the idea that the closest appraisers will be the most knowledgeable and will give us the highest quality product. We also use technology to find new ways to help appraisers do their jobs more efficiently, to help them interface with us more easily so they can be more productive in their day and work smarter instead of harder for their money. I remember when I was appraising real estate full time, back 30 years ago now, when everything we used to rely on to come up with a value came out of books that were dated. Today we have aerial imagery so appraisers know what they are facing
Michael Ousley of Clear Capital before they even get out into the field. It’s wonderful. Technology can make people more efficient and more successful, but it can’t replace them, not in our business. It will never take the place of a professional fee appraiser and it will never replace the AMC that works hand-in-hand with that appraiser to serve the lender.
A: I’m really excited about the opportunity to bring change to our industry. If you look at the Broker Price Opinion and the real estate appraisal, those are just two products that make up a small segment of the marketplace. Lenders are embracing new tools which brings with it new opportunities for both real estate brokers and real estate appraisers.
The firms that are trying to sell technology as a replacement for an AMC are really selling the concept of a bank-owned AMC, because they’re still going to need a staff to run it.
I’m excited about helping appraisers look at their workday differently. Instead of just focusing on how many appraisal assignments they can complete, they can profit from spending time on these other new products. is expands their horizons, makes them more money and gives them a heightened sense of satisfaction.
Q:
What do you think it takes for a VMC to be successful in today’s environment? A: We have a very hard time differentiating between our customers, our lender clients and our vendors. We’re always working to make that relationship smooth across the various boundaries so you can’t really tell where one ends and the other begins. That’s certainly true when it comes to success, because everyone’s success depends upon the others in this relationship. For us, it comes down to building partnerships that will last. ose relationships are built on mutual respect, which reminds me of a pet peeve I have. Sometimes, when we win a new account, a lender will smile and tell me that his company is going to use us. I always smile back and tell him that I certainly hope not. Work with us, let us serve you, build a great relationship with us, but don’t use us. at just doesn’t sound right. Of course, they never mean it like that, but I think it’s important that we take care in how we talk to and about our partners. We don’t use appraisers and we don’t like anyone else to use us or our appraisers. We want a relationship and that’s how we measure success.
Q:
Looking back over your career, what are you most proud of today?
Measuring their performance by the appraisal is a one-dimensional measure that doesn’t fully capitalize on their skill set. We’re helping appraisers go beyond the appraisal report to become valuation professionals. Our brokers have the same opportunities. We want to help them do and profit from all of the things they are capable of doing.
Q:
Are you seeing any trends today that you think will impact our industry in the near future?
A: We are seeing some stability in a variety of markets, more markets then not. But there are many factors that make predicting the future difficult. ere are always the questions of the shadow inventory, the new programs the government might implement to keep people in their homes, as well as other forms of government stimulus. I’m hopeful that we’re finding a bottom and seeing stability and jobs return to the market. We’re certainly not out of the woods and there are plenty of questions to be answered. If we go about it in a measured way and don’t panic, we should get back to more of what we would term a normal, rational market in about 18 months. ❍ Spring 2010 — TAVMA 15