Appraisal Institute, with a stake in acceptance of AVMs, promotes their use

An alliance of the Appraisal Institute, the International Association of Assessing Officers (subject to its board’s approval) and a Collateral Risk Assessment Consortium representing mortgage lenders has been formed to “enable mortgage and other industry players to apply automated valuation models [AVMs] to the mortgage origination process with greater confidence,” according to a press release.

“As a task force of representative organizations, the group seeks to unite the industry in acceptance of a set of common principles, standards and requirements regarding the use of AVMs,” John Ross, executive vice president of the Appraisal Institute, was quoted as saying. “If we can join together in a group that includes all interested parties, we’re confident we can reach a successful consensus, something that has eluded all of the different individual organizations so far.  It’s a case of ‘united we stand, divided we fall.'”

In an attempt to determine who will “fall” if the Appraisal Institute does not “unite” with county assessors and mortgage lenders interested in expanding use of AVMs in mortgage transactions at the expense of appraisers, we researched the Appraisal Institute news area on the group’s website, but were unable to find any reference to the initiative there.

But DataQuick, a reseller of AVMs and recently producer of its own, has begun offering AI Residential Database data, culled from public records and appraisals uploaded by appraisers into the AIRD, as part of its suite of automated valuation services.  Last year, the Appraisal Institute and FNC, Inc.  teamed up with ACI to provide a way for ACI software users to import their appraisal data directly into the AIRD for later re-use by companies like DataQuick.

It seems the Appraisal Institute has a vested interest in promoting the legitimacy and use of the data it helps provide DataQuick and other AVM providers which may use AIRD data.

“To date, AVMs have received limited acceptance within the mortgage community, especially as the basis for making first mortgage loans, though they have achieved relative acceptance within the real estate assessment community.  Both communities see a lack of standards as a major hurdle to the continuing use of AVMs and the expansion of their influence,” the press release said.

“By assuring greater consistency in the understanding, testing, management and usage of AVMs, the Joint Industry Task Force hopes to achieve greater acceptance and adoption among all industries and purposes.”

Nobody asked us, because we don’t have a stake in the acceptance of AVMs by mortgage originators, but if asked we would suggest that AVMs continue to be honed and perfected for use in the valuation of aggregations of properties, such as in the mortgage backed securities (MBS) arena, where the number of properties and time between offer and sale make it impossible to obtain professional appraisals.  But for too many reasons to name, among them the absence of reliable data in 80 percent of the country, the impossibility of verifying physical characteristics of the subject and the age of data AVMs use, they should not be relied upon by responsible mortgage underwriters on first liens.  And no new “standards,” endorsed by the Appraisal Institute or otherwise, can possibly change that.