fnc and the american bankers association€¦ · • gse loan sellers are required to: •...
TRANSCRIPT
FNC and the American Bankers AssociationCompliance and Workflow in the Age of Collateral
© 2011 FNC, Inc.
2
Conference Web Page
• Today’s PowerPoint
• Audio
• Questions
4
Program Overview
• FNC® and ABA
• Regulatory and investor climate – increased focus on collateral
• Operational and regulatory requirements for compliance
• FNC solutions and Collateral HQ™
• Questions
5
Speakers
• Kagan Coughlin• Product Manager, FNC
• Steve Conlin• Risk Manager, FNC
• Chip Caldwell• Account Executive, FNC
Overview of FNC and ABA
Kagan CoughlinProduct Manager
7
About FNC
• Largest provider of Collateral Management System®
software and tools to:
• Lenders
• AMCs
• Appraisers
• Residential mortgage investors
8
About FNC
• Focused on collateral data and collateral decisioning
• Enterprise platform – Collateral Management System (CMS®)
• Software-as-a-Service – Collateral Headquarters™ (CHQ™)
• AppraisalPort® – Work portal for appraisers & AMCs
• Data-centric transaction processing & workflow
Compliance and Workflow in the Age of Collateral
Steve ConlinRisk Manager
10
Overview: Dodd-Frank
• Dodd-Frank Wall Street Reform and ConsumerProtection Act (“Dodd-Frank”)• The FRB issued the Interim Final Regulations
(Regulations) on Oct. 18, 2010, and published them in the Federal Register on Oct. 28, 2010 (75 FR 66554).
• The Regulations were effective on Dec. 27, 2010.
• Compliance with the Regulations is mandatory on April 1, 2011.
11
Overview: Dodd-Frank
• Major topics of the Act• Applies to consumer credit transactions secured by
the principal dwelling of the consumer (SFR owner-occupied properties)
• Sunset of HVCC• Appraiser independence• Permitted actions (Appraiser Contact & Questions)• Conflict of interest• Customary and reasonable fees• Mandatory reporting to state boards• Creates The Bureau of Consumer Financial
Protection
12
Overview: GSEs
• GSEs• GSE joint effort to collect loan data• The joint program is called the Uniform
Mortgage Data Program (UMDP)
• UMDP has three components:• UCDP (Uniform Collateral Data Portal)• UAD (Uniform Appraisal Dataset)• ULDD (Uniform Loan Delivery Dataset)
13
Overview: GSEs
• GSE loan sellers are required to:• Successfully deliver appraisal reports via UCDP
beginning March 19, 2012• Deliver loan applications on or after Dec. 1, 2011• UCDP portal will be available in June 2011
• GSE loan sellers must require:• Appraisals to be completed using the UAD formatting
beginning Sept. 1, 2011• (It is anticipated the appraisal forms vendors will begin
offering software updates that support UAD standards beginning in the second quarter of 2011)
14
Overview: Interagency Guidelines
• Interagency Appraisal and Evaluation Guidelines• Became effective Dec. 10, 2010
• The following guidance documents have been incorporated into the Guidelines and have been rescinded:• 1994 Interagency Appraisal and Evaluation
Guidelines• 2003 Interagency Statement on Independent
Appraisal and Evaluation Functions• Interagency Statement on the 2006 Revision to
USPAP
15
Overview: Interagency Guidelines
• Guidelines Remaining in Effect:• 2005 Frequently Asked Questions on the
Appraisal Regulations and the Interagency Statement on Independent Appraisal and Evaluation Functions
• 2005 Interagency FAQs on Residential Tract Development Lending
• Unlike Dodd-Frank, the Regulations apply to all property types and ownership
16
Overview: Interagency Guidelines
• The regulated institutions that are governed by the Guidelines include:• National or state-chartered banks and their
subsidiaries• Bank holding companies and their non-bank
subsidiaries• Federal savings associations and their
subsidiaries• Federal savings and loan holding companies
and their subsidiaries• Credit unions
17
Summary - Policy
• Section summary as it relates to Consumer Real Estate transactions:
• Sections I and II – Purpose and Background• Section III – Supervisory Policy
• Emphasis placed on value of the underlying real estate collateral in accordance with the Agencies’ appraisal regulations
• Examiners will review appraisal or evaluation to determine whether methods, assumptions and value conclusions are reasonable
18
Summary – Independence
• Section IV – Appraisal and Evaluation Program should provide the following:
• The institution’s Board or designated committee is responsible for adopting and reviewing policies and procedures to establish an effective appraisal and evaluation program
• Provide for the independence of the persons ordering, performing and reviewing appraisals and evaluations
• Establish selection criteria and procedures to evaluate and monitor the ongoing performance of appraisers and persons who perform valuations
19
Summary – Independence
• Ensure that appraisals and evaluations contain sufficient information to support credit decision
• Provide for receipt and review of the valuations in a timely manner
• Implement internal controls that promote compliance with program standards, including those related to monitoring third-party arrangements
• Establish criteria for monitoring collateral values
20
Summary – Independence
• Section V – Independence of the Appraisal and Evaluation Program• Appraisers must be isolated from influence by the
institution’s loan production staff, including:• Ordering, reviewing, and acceptance of appraisals
and evaluations• Appraisers must be independent of loan
production and collection processes and have no direct, indirect or prospective interest, financial or otherwise in the property or transaction
21
Summary – Independence
• Section VI – Selection of Appraisers or Persons Who Perform Evaluations• Institution’s collateral valuation program should
establish criteria to select, evaluate and monitor the performance of appraisers and persons who perform evaluations and ensure that:
• The person selected possesses the requisite education, expertise, and experience to competently complete the assignment and is capable of rendering an unbiased opinion
• Periodic reviews are conducted on the work performed by appraisers and evaluators
22
Summary – Minimum Standards
• Must conform to Uniform Standards of Professional Appraisal Practice (USPAP)
• May require stricter standards for safety and soundness• Result of AVM by itself or signed by an appraiser is
not an appraisal (must perform an appraisal in conformance with USPAP and Agencies’ minimum appraisal standards)
• Dodd-Frank Act – BPOs may not be used as the primary basis to determine the value in the purchase of a consumer’s principal dwelling for loan origination secured by the principal dwelling
23
Summary – Minimum Standards• The estimate of market value should consider
the real property’s actual:• Physical condition• Use• Zoning as of the effective date of value
opinion• Appraiser selection based upon:
• Competency to perform the appraisal• Knowledge of the property type and market• Competency by virtue of being licensed or
certified
24
Additional Guidelines
• The document contains the following sections:
• IX Appraisal Development• X Appraisal Reports• XI Transactions That Require Evaluations• XII Evaluation Development• XIII Evaluation Content• XIV Validity of Appraisals and Evaluations
25
Summary - Reviewing Appraisal and Evaluations
• Section XV Reviews• Prior to a final credit decision, an institution
should review appraisals and evaluations to ensure that they comply with the Agencies’ appraisal regulations and that they are consistent with supervisory guidance and its own internal policies
• An appraisal should contain sufficient information and analysis to support the decision to engage in the transaction
26
Summary – Reviewing Appraisals and Evaluations
• Policies and procedures should, at minimum:• Address independence; educational and
training qualifications; and role of the reviewer• Reflect a risk-focused approach for
determining the depth of the review• Establish a process for resolving any
deficiencies in appraisals and evaluations• Set forth documentation standards for the
review and resolution of noted deficiencies
27
Summary – Third-Party Arrangements
• Section XVI Third-Party Arrangements• Institution retains responsibility for understanding and managing
the risks associated with third-party arrangements
• Should have internal controls for identifying, monitoring, and managing the risks associated with using a third-party arrangement for valuation services including compliance, legal, reputational, and operational risks
• Should have a written contract that clearly defines the expectations and obligations of both the financial institution and the third party including that the third party will perform its services in compliance with the Agencies’ appraisal regulations and consistent with the supervisory guidance
28
Summary - Referrals
• Section XVIII Referrals• Institution SHOULD file a complaint with appropriate state
appraiser regulatory officials when it suspects a licensed or certified appraiser has failed to comply with USPAP or applicable state laws or has engaged in unethical or unprofessional conduct
• Must file a SAR report if suspects fraud or identifies other transactions meeting the SAR filing requirements
• Note: This is broader than Dodd-Frank Act reporting requirements which reference being of a material impact (likely to significantly affect the value assigned to the consumer’s principal dwelling)
29
Summary – Appendix B, Evaluations based on Analytical Methods and Technological Tools
Policies should:• Ensure staff has requisite expertise and training to
manage the selection, use and validation of an analytical method or technological tool
• Employ outside expertise if absent in-house
• Address the selection, use and validation of the valuation method or tool
• Address standards for the use of multiple methods or tools, if applicable, for valuing the same property or to support a particular lending activity
30
Summary – Appendix B, Evaluations based on Analytical Methods and Technological Tools
• Provide criteria for ensuring that the institution uses a method or tool that produces a reliable estimate of market value that supports the institution’s decision to engage in the transaction
• Address the extent to which:• An inspection or research is necessary to ascertain the
property’s actual physical condition• Supplemental information is needed to assess the
effect of market conditions or other factors on the estimate of market value
• An inspection or research is necessary to ascertain the property’s actual physical condition
31
Automated Valuation Models
• An institution may not rely solely on the results of an AVM to develop an evaluation unless the resulting evaluation is consistent with safe and sound banking practices and the Interagency Guidelines.
• An institution’s P&Ps should require the use of an alternative valuation method or tool when the supplemental information indicates the AVM is not an acceptable valuation tool.
32
Overview: Interagency Guidelines Cont’d.
• Additional sections included are:
• Section XVIIProgram Compliance• Appendix A, Appraisal Exemptions• Appendix C, Deductions and Discounts• Appendix D, Glossary of Terms
Workflow Solutions for the Age of Collateral
Chip CaldwellAccount Executive
34
FNC/ABA Solution for Appraisal Compliance and Operational Efficiency
• FNC’s Collateral Headquarters:• Compliance with all aspects of appraisal
requirements, from the moment an appraisal is required through investor delivery
• Appraisal operational infrastructure – appraiser panel, fees, workflow routing
• Appraisal quality checks – GAAR® and QC Vigilance™
• Transparency – internal and external audits• UCDP portal will be available in June 2011
35
Questions
• Today’s Questions• Chat Function• [email protected]
• www.fncinc.com• [email protected]• [email protected]• [email protected]
36
Thank You
• Questionnaire