FHFA’s Move to Desktop Appraisals is Significant, But Don’t Forget About Fraud Prevention
One year ago I had the opportunity to respond to the Federal Housing Finance Agency’s (FHFA) Request for Information (RFI) on how to modernize the appraisal process. I urged that the FHFA consider how new technology, particularly authenticated imagery, can help power desktop appraisals and remote inspections. On October 18, 2021 I was encouraged to see that the FHFA will permanently allow Fannie Mae and Freddie Mac to accept desktop appraisals for new purchase loans starting in early 2022. I believe this is a significant step forward that is the culmination of a variety of innovative initiatives taken by the industry in response to the COVID-19 pandemic. This shift in process is bound to have down-stream implications for insurers and other financial services organizations because it dynamically changes consumer preferences. We too, at Truepic, saw the digitization of inspections taking place at a rapid pace even before the global pandemic hit in early 2020 across all financial services sectors.
The acceptance and demand of these virtual inspections are tremendously valuable, and the FHFA’s recent move to embrace and encourage this innovative technology will help not only drive change within their industry, but sub industries and related markets too. However, it is important to point out that one key component is necessary to successfully implement desktop appraisals and no-touch inspections — fraud prevention. According to Corelogic’s 2021 Mortgage Fraud Report, there has been a 37.2% increase in fraud risk. The report, widely considered the industry standard for nationwide fraud monitoring and analysis, helps highlight the growing problem of mortgage fraud. Similarly, the FBI estimates non-healthcare insurance fraud accounts for more than $40 billion annually highlighting how other financial service industries are facing similar challenges. As the mortgage, lending, and insurance industries move to digitize their appraisals and inspection processes, it is important that strong fraud prevention mechanisms are built into the digitized process. Today, apps, websites, and even synthetic media are readily and easily available to defraud lenders, mortgage companies, banks, property insurers, and government agencies into deceptive properties, loans or claims.
Truepic has built fraud prevention tests to help insurers or lenders at the front-end of underwriting and prior to loan execution to stop fraud from happening. Any image or video captured by an interested party is tested for authenticity and its associated data such as time, date, location, and orientation are all verified and instantly sent back to the appraisers for informed judgements on loans, mortgages, and appraisals. Our partners understand this helps prevent fraud from ever happening because bad actors will either stop communicating or submit fraudulent information and be flagged by Truepic’s technology.
Truepic’s solution was not built exclusively for mortgage inspections, but over the past few years we have learned just how useful it is for the home financing and insurance industries. Its utility is beneficial far beyond just fraud prevention. In fact, digitized trusted inspections represent significant operational efficiencies that can transform industry.
In 2021 alone, Truepic’s Vision platform was used to perform over 18,000 audits for mortgages, loan inspections, and appraisals, totaling in over 400,000 authenticated images and videos delivered to appraisers to make informed judgements in a matter of seconds. These inspections took place in 44 states, Puerto Rico, Canada, Costa Rica, and Brazil. In addition to extending trust for remote appraisals there are notable time, cost, and Co2 reductions for our many clients and partners adopting our authenticating technology for desktop appraisals. Conservatively, we estimate that our partners reduced costs by more than 70%, and wait times by more than 35,000 days annually. “Following the [Texas] disaster declaration [2021], we were able to get our loans moving within hours with Truepic Vision. Normally we would have to wait 2–4 weeks for inspections to take place following a disaster declaration,” Jay Parrott, Royal United Mortgage. Further, by replacing human centric and thereby offsetting their associated transportation emissions, our partners prevented the emissions of over 510,000 pounds of Co2 — the equivalent of over 10,000 trees’ absorption of carbon dioxide.
We know that remote appraisals will help FHFA and mortgage lenders increase the velocity and reduce the wait times of home loans, while also reducing costs. We are also proud that our image authentication technology can extend trust to both parties and root out fraud, which will become the basis of scaling desktop appraisals across not just this industry, but all related ones too. We expect 2022 to be the first year in which desktop appraisals become a true staple in the mortgage industry and we are excited to play a part.
