To Convert or Not to Convert? Is the New Standard the Same as the Old Standard?
Appraisal Scoop reported previously (click here) on the May 22, 2008 Virginia State Board for Real Estate Appraiser's (VREAB) meeting to discuss among other things, a petition submitted by George Dodd, SRA. Click Here to: Download Virginia_Appraisal_Board_Petition_052208.pdf
The petition was written to prevent online sites, or web-portals from changing or otherwise altering reports that appraisers prepare. Web-portals would include such companies as: AppraisalPort, RELS, and other AI ready required companies. It also seeks to limit the illegal PDF stripping down, and programs that erroneously copy information from reports such as Lighthouse. Click here for Part 1.
Virginia Real Estate Appraisers Board July 23 2008 Special Meeting Regarding Web Portals
Moving on into this second part of three, we are going to look at Rob Fraiser’s presentation on MISMO. First, I am sure many of you have no idea what MISMO is. The Mortgage Industry Standards Maintenance Organization (MISMO), a not-for-profit subsidiary of the Mortgage Bankers Association (MBA).
Their mission statement is as follows:
Mission Statement - MISMO was created to promote and support the common business interests of the Commercial and Residential Mortgage Markets. Its mission is to benefit industry participants and consumers of mortgage and investment products and services by:
- Fostering an open process to develop, promote, and maintain voluntary electronic commerce procedures and standards for the mortgage industry, and
- Enabling mortgage lenders, investors, servicers, vendors, borrowers, and other parties to exchange real estate finance-related information and eMortgages more securely, efficiently and economically.
So what does all that have to do with appraising you may be wondering? Quite simply, it is an endeavor amongst software companies, and the mortgage industry to develop a standardized format that will include appraisal delivery. The real reason that file versions such as PDF, ENV, DOC, ETC are all an issue has led to the development of MISMO.
You see when an appraiser reports a file in PDF to a client; the client must access the file the old fashioned way, by having a human being read it. The mortgage industry has in mind that using a format that allows the information in the report, the data, to be placed within automated processing to expedite the loan process. They are able to run this data through established rule sets and various quality control processes. PDF versions, while capable of being converted, are not the friendliest of formats for them to work with.
Rob Fraiser, SRA is the chair for the Property and Valuation Services Workgroup. The workgroup’s mission statement is:
Mission The mission of the MISMO Property and Valuation Services Workgroup is to ensure that data elements related to property identification and valuation services are identified and logically arranged within the Schema. P&VS workgroup is building the communication bridge between valuation professionals and the end users of their services.
Now we have an idea of what they are doing, let’s take a look at Mr. Fraiser’s presentation. Within it he showed us several slides from a MBA technology conference in March of this year. Mr. Fraiser did provide me a copy of the total power point that was used at that conference, which is much more detailed than the one he showed us, due to time constraints. This is publicly available from their website, but I have supplied a copy Appraisal Scoop to allow you to read through if you like. Download MBA_TechConf_03_2008_Public.ppt
Essentially what Mr. Faiser is brought together in these points:
Benefits MISMO Appraisal XML
- Improves Report Quality
- Reduces Costs
- Reduces Turn-Times
- Original Appraisal PDF and Data Maintained
- Opens Market to all Qualified Appraisers
Benefits of MISMO “Best Practices” Security
- Two Factor Authentication
- Data Matrix – Industry Standard Encryption
- On Document Verification of Data & Identity
- Tamper Evident
- Document Integrity Maintained (secure audit trail
What these points show from the Appraisal XML bullets is that the quality of the reports will be maintained as the original appraiser prepared the file. I gather from Bradford and A la mode’s participation with MISMO that the MISMO XML will work seamlessly with software vendors. This will help the appraisers know that the presentation stays the same. Turn times will not be as long with there being no need to go through a long conversion process. Hopefully, this also means that change scan be made by the appraiser on the fly, in real time. Meaning there will be no need to stop the conversion, go back to the software that created the report, and then convert it all over again.
With all the companies on board that produce forms ware, it will allow any appraiser that is qualified to work for the lender. The last and most important point: the PDF as produced by the appraiser is there, and so are the components of data that need to be reviewed.
Before I get into the security points, I wanted to touch on the current security as it stands right now in the portals. The claim that is being made or actually the loudest benefit of the portals as they currently stand is security. There has been this stigma that has been given to the industry that portals prevent files from being tampered with, and somehow PDF allows this.
The only security the portals provide is delivery related. It is obvious that if an appraiser logs in with a password, and uploads a file that the file goes from the appraiser to the lender/lender’s agent. How does that prevent someone from with the lender’s side or the lender’s agent from tampering with the file? I think most of us understand that the illegal tampering that has occurred was done for the benefit of the commissioned side, or for the homeowner’s benefit.
PDF can be set up through various means to include a true digital signature, or encoding that will track and invalidate the file if tampered with. Appraisers can actually buy software that will lock the file shut for non-payment. While that is not recommended, the level of security sophistication that PDF can work is high. PDF can and does work if used properly; it is not the cause of the problem. It looks almost as if the responsibility of protecting appraisal files really lies within the appraiser taking the extra care to stay updated, that the software companies keep their PDF writers up to the highest level of present technology, and that the lenders keep up their readers and converters up to current technology.
The last set of points that deal with security are important to both sides of the appraisal, us and the lenders. MISMO is set to utilize data matrix 2D barcodes to help identify and insure the report is prepared by the stated appraiser in the report, and that the report is un-tampered with. This is done by placing information in the bar code that could include the appraisal amount, effective date, appraiser’s name, or anything else deemed needed for the reader to properly identify what the basic essentials of the report are. If there are differences between the embedded data and what is in the report, the reader knows the report is not a true copy, and can take steps to obtain a real copy.
The last part of MISMO utilizes a much repeated concept amongst many of our peers, regulators and even the headlines grabbing Government officials of the past year. It will allow for, and recommends, the optional step of archiving the reports on secure servers. The appraisers could do so with the respective software companies as a “vaulting” service, or back up to their own choice of private server (either theirs or a third party). Lenders would be wise to vault their appraisal files, and with the validation inside the embedded bar codes, the individual people who try and tamper with files can’t.
I have to admit that the MISMO standards sound like a solution to meet the appraisers concerns, and those of the lenders. It will allow the appraiser to make the decisions we need to make, while allowing the data within the reports to be separated into efficient review processes. I think that perhaps they have done something that few have done in the process, and that is to try and put appraiser sin control of their respective ends of the process.
If the platform stays as it has been shown through the presentation that Mr. Fraiser has made, and does not try and influence the appraiser’s ability to make their own scope of work and reporting decisions, I would have to say I am impressed.
While this does look like the best of all worlds, there are a couple of things that the Mortgage Brokers Association could do to strengthen the MISMO standards for appraisers:
- Require that any lender or AMC that uses this standard to also require the order form for the appraisal, and any correspondence between the appraiser and the lender to be in email format that is saved as part of the data.
- Insure that there is adequate education available for appraisers, and the lenders/AMC staff to understand and use the system.
Thanks so much for taking the time to read through this. I am in hopes that the final part will be ready for you shortly. I look forward to all of your comments and questions regarding this article. Thanks for the time and see you next time. Woody Fincham
Author: Woody Fincham - http://www.fmava.com/ - Woody is one of the founders and managing appraiser for FM & Associates. He has recently become an instructor with a local real estate school, teaching broker pre-licensing and real estate agent pre-licensing. Woody is a Certified Residential Appraiser in Virginia, as well as North Carolina. Woody is also a Member of the a la mode labs project
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