Quicken Loans, one of the mortgage industry’s leading lenders, and a pioneer in the use of technology may soon consider the use of electronic property valuations instead of standard manual appraisals. Why?
Last week, a federal district court hit Quicken with a guilty verdict resulting in fines and penalties of almost $11 million in a class action suit brought by customers in West Virginia.
The suit was brought by homeowners claiming that Quicken had appraisers pad home values during the refinance boom years.
No, not Quicken; say it ain’t so. Not the lender who consistently gets top customer satisfaction surveys from J.D. Powers and the creator of the Rocket Mortgage. Couldn’t be, they would never do such a thing.
Yet the courts say they did. The suit found that Quicken led appraisers to provide higher values by providing them with an “owner’s estimate” of the property’s value when making the appraisal request.
This was considered a scheme by Quicken to set the value at a level they needed to make to the loan. Quicken says they did no such thing and will appeal the verdict.
Interestingly, no homeowner complained of the so-called inflated values when they took the money from Quicken.
A byproduct of the case may be that the industry may look to move toward the use of more electronic appraisals, minimizing any potential for human intervention/adjustments in values.
The computer models, using algorithms and stored data on past appraisals, such as the data now being stored by Fannie and Freddie, will determine property values. It is, what it is.
This would severely restrict a lender or LO’s opportunity to influence the value decision, as allegedly was done in the Quicken case.
Two things come from this case:
- Lenders need to be careful on what they provide to the appraiser when ordering a value report; and
- We are one step closer to having appraisal reports prepared electronically to minimize the potential for ‘value fixing” between lenders and appraisers.
This case may also open the doors for other regulators, as well as the agencies, to take a closer look at lender’s appraisal practices to ensure consumers are getting a fair shake.
Are you carefully monitoring your appraisal requests and results?