The MBA Insights Interview: Mark Johnson, chief strategy officer with LRES
By MBA Insights Staff
October 17, 2017
Mark Johnson is chief strategy officer with LRES, Orange, Calif., a national residential and commercial mortgage services company providing valuations, REO asset management and HOA services for the mortgage and real estate industry. With more than 15 years of continued growth, LRES offers managed business processes for the origination and default markets. For more information about LRES, visit its website at www.lres.com.
MBA INSIGHTS: There is a lot of dialogue in the industry right now regarding valuations, evolving strategies and alternative methods. Is this news, or noise?
MARK JOHNSON, LRES: The valuation industry is going through substantial change. There are broad market forces at work that are driving this change. The continuing evolution of data aggregation and applied sciences measured against the ever-evolving compliance and underwriting guidelines is causing industry participants to redress and enhance many aspects of the valuations business.
INSIGHTS: What is the potential impact of the alternative solutions?
JOHNSON: Impact can be measured a few ways. Automated valuations and data analysis have been around for some time but the lending and investment community are quickly getting more comfortable relying primarily and in some cases exclusively on these alternative solutions. For the lending community, the impact is generally viewed as favorable with respect to cost, speed and reliability.
The appraiser community tends to be more apprehensive. Not only do the automated solutions erode market share from appraisers but appraisers don't see the automated solutions as having the capabilities to fully assess the value of the subject collateral. The question for some is - are the AVM derivatives a new and better solution or are they shortcuts similar to those that were exercised prior to and contributing to the mortgage market collapse? If the latter, the argument is that there is direct and significant adverse impact to the mortgage markets once again.
INSIGHTS: So, is there a concern that AVMs will replace appraisers altogether?
JOHNSON: That is a big jump. For some product markets, AVMs have been in use for some time and that use continues to expand. This does not mean that AVMs can solve all value questions. Where automated solutions work the best are where there is an abundance of data, where there is a high-level of homogenous housing and for loans that are deemed less risky. Transactions falling outside of these criteria need additional attention.
The use of appraisers and AVMs should not be considered mutually exclusive. There is meaningful data embedded within the AVM, that if properly leveraged by the appraiser, will expedite the appraisal development process.
INSIGHTS: How specifically will appraisers' roles change?
JOHNSON: Technology has progressed beyond just enhancing what we do--to fundamentally changing how we operate. The appraiser will spend more time focused on analysis, and less time aggregating data. Appraisers will also spend less time traveling to view the collateral and more time reviewing videos and photos to assess quality and condition.
The appraiser profession has already evolved considerably over the years. We have migrated from pencil and paper to sketching applications, from Polaroids to digital photos and from yellow pads to desktop software. Appraisers must carefully read and listen to the market dynamics, keep up with the associated technology advancements and adjust their approach accordingly.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA Insights welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at email@example.com; or Michael Tucker, editorial manager, at firstname.lastname@example.org.)