Blog post by Reggora
The market has shifted and achieving growth has become much more difficult, but not if you offer what borrowers expect. That includes a number of things, but high on the list is a fast close on a new home loan. Speed requires efficiency and many of the lender’s current processes simply are not efficient enough. One, in particular, is costing lenders, on average, 19 days to complete. That’s far too long, and as research shows, is costing both time and money.
While borrowers also want a seamless experience that doesn’t send them away from the lender’s platform to a number of partner solutions, speed to close allows lenders to hit closing dates, removing stress from home buyers and saving deals for real estate agent business referral partners. This results in satisfied business referral partners who send more business. A better experience also drives more referral business from satisfied borrowers.
And let’s not forget the potentially huge impact a more efficient process has to the lender’s bottom line. A more efficient loan origination process will save the lender money. But where can lenders look now to streamline loan production and achieve these goals?
Reggora recently collaborated with industry research leader STRATMOR Group to explore mortgage lenders’ greatest pain points in the appraisal operations process. The data show that from the moment the lender realizes they need an appraisal to the moment they receive a complete report is nearly 20 days! Every day the loan is in process costs the lender more money, annoys loan officers and makes it less likely that borrowers will refer new business.
A faster, more efficient appraisal process is the key to reducing lender costs, retaining the best loan officers, and growing the lender’s business. This result paints a vivid picture explaining why appraisal optimization should be a top lender priority now.
Below, we’ll show how this process, once thought to be broken beyond repair, is actually a huge opportunity for lenders, a lighter lift than they think and the subject of a number of existing success stories.
Where lenders are feeling the pain now
Appraisal operations are considered the slowest part of the overall loan production process. In fact, the chokepoints common to appraisal operations often negate many of the gains won by optimizing other phases of the process. In our survey of the industry, 36% of respondents advised us that the appraisal report is actually late more than 20% of the time.
The result: 1 in 8 closings are delayed because of the appraisal. When closings are delayed, lenders can lose business. When you consider that two-thirds of the lenders who participated in the study were ordering more than 100 appraisals per month, that’s a lot of potential lost business.
This is bad in a refinance market as the word will surely spread that lenders take too long to close, but in a purchase money market, it’s deadly. If the lender misses a closing date, that agent will not send more business her way.
Lenders know this is a serious problem and they know what it will take to fix it. A Fannie Mae study released in the first quarter of 2022 showed that 94% of lenders surveyed believed “appraisal modernization is valuable, and 61% think it’s very valuable.”
But fixing the problem requires us to fully understand it.
Why the appraisal process takes so long
The data revealed through our study with STRATMOR showed that handling appraisal-related functions manually was taking lenders too much time. Survey respondents told us that 52% of appraisal-related lender time is spent on scheduling and follow-up. That’s not efficient.
Even worse, respondents to the survey said it takes an average of 7 days to find an appraiser and get the appraiser’s visit scheduled with the borrower. And that’s for a routine appraisal. Complex properties take even longer to place with the right appraiser.
Study participants who responded to our survey told us that they have two top appraisal priorities:
- Achieving on-time report delivery (38%)
- Improving report quality (35%)
This is a challenge for them because 1 in 4 appraisals triggers a revision request and 1 in 5 is delivered late. When the department does request a revision, it takes at least 4 days to complete.
All of this is costing the lender too much money. How much? STRATMOR provided the benchmarks and when Reggora pulled data from existing customers and analyzed the results, we found that by optimizing the appraisal process, lenders could reduce their cost to originate by up to $258 per loan!