Lenders spend a large amount of operation budget on their underwriting teams working deals that won’t happen. Generally speaking, most major FIs, through the use of due diligence tools, have gotten really good at identifying deals that have issues such as discrepancies in value at the application stage – saving time and resources.
Catching a deal where there is a discrepancy in value at the preliminary application review stage still means operation cost has been expended. From what lenders tell us, once an application is received in Expert it will first receive a preliminary review.
Step one is checking the app for missing information, reviewing the credit report, employment, income and debt service ratios. Generally speaking, these will be summarized at the top of the application. If these check out, the next thing you will likely look at is value. Most major FIs at this point will run an AVM to validate the claimed home value.
It makes perfect sense to assess value after the credit application components because they too are factors that, if an issue is present, could stop a deal in its tracks. When the AVM is secondary in the preliminary application review process (which makes perfect sense), options to achieve cost savings in the regard are 2:
- Run the AVM before the preliminary application review (makes less sense)
- Ask your brokers to obtain an AVM and submit it with their deal
The latter works because some of the most popular AVM tools, Purview being a great example, are available to both lenders and brokers. Mandating that a broker provide an AVM using the same tool you do aligns information and ensures that deals with problems with value are flagged at the broker level. This means that the application will never be received resulting in any operation cost, until the broker has addressed any discrepancies.
Ironically, many super brokers – one of the Mississauga divisions of The Mortgage Centre is one great example – have begun to push their agents to submit an AVM with their application before their administrator will send it out via Expert for approval. Other brokerages have made the use of AVMs mandatory in their brokerages.
You can see why it makes sense. Low closure rates mean better relationships and broker relationships that represent less cost to you. It really is a no-brainer!
Stop wasting time and money on deals that won’t close. Talk to your brokers and make the use of an AVM universal.
For more about Purview For Lender’s tools, including an AVM, please visit https://lenders.purview.ca/ today.