How Lenders Can Reduce Risk and Costs with Automated Appraisal Quality Control

At Reggora, our mission is to make fast, high-quality appraisals the norm for mortgage lenders. Along the way, we’re able to solve problems that lenders often don’t realize they can fix. In part two of our value series, we'll show how traditional appraisal review costs lenders upwards of $81 per loan file and how Reggora eliminates those losses via automated appraisal quality control.

The process of conducting a traditional appraisal review includes many repetitive, labor-intensive tasks that don’t particularly require a high level of expertise. Having experienced underwriters spend time manually locating and importing files from multiple sources does not necessarily add value to the process, but it does increase costs given that underwriters are among a lender’s highest-paid salaried employees. 

Technology can automate the labor-intensive parts of the appraisal quality control workflow, while machine learning can be utilized to identify and flag potential risk areas that require deeper evaluation by the underwriter. In this article, we’ll examine the ways in which technology can streamline the appraisal auditing process and how Reggora and ClearCollateral Review^® helps lenders reduce review times, costs, and errors.

When appraisal review or quality control is mentioned throughout this article, we are specifically referring to the appraisal analysis process that enables risk assessment.

Inefficiencies in the Manual Appraisal Review Process

There are two core labor-intensive steps in the appraisal quality control workflow. One is information gathering and the other is the actual review. Once an appraisal report is received, the underwriter can’t jump right in. 

First, they must import files, like MLS photos, and gather additional data points, like loan details. Although simple tasks, they are time-consuming and there is no added benefit of doing it manually.

Next is the actual review. With all the necessary documentation included, the average appraisal comes to be more than 30 pages long, containing hundreds of data points, dozens of photographs, and addenda. Depending on the appraisal’s length and complexity, it could take an underwriter anywhere from 20 minutes to upwards of two hours to manually audit the documentation for accuracy. Clear Capital found that, on average, a traditional appraisal review takes 45 minutes to complete.

What does 45 minutes cost the average lender? The fully-loaded hourly cost of personnel associated with processing and underwriting is $132, according to Freddie Mac’s 2022 Cost to Originate Survey. That means the appraisal quality control process costs a lender $99 per loan file, on average.

Appraisal QC Cost Before Reggora

• Average QC Time: 0.75 hours per loan file
• Labor Cost: $132 per hour
• Appraisal QC Cost: $99 per loan file

How Automation Improves the Appraisal Review Process

Reggora’s integration with Clear Capital automates much of the workflow described above and even supplements each appraisal with additional machine-generated calculations and analyses to better prepare the underwriter for their work. There are three key components of appraisal review automation that enable lenders to achieve sizable efficiency gains, broken into three steps below.

Step 1. Automated Document Collection

In less than a minute, the system imports more than 500 property data points from 12 sources — including MLS photos, public record data, and case and loan information from the LOS — and organizes them into a comprehensive report summary. 

Step 2. No-touch Intelligent Appraisal Review

The system runs standard and business-specific quality rules and automatically checks every aspect of the appraisal, from property photos to comparables, to instantly detect errors in the appraisal. Through machine learning, it creates numeric value, accuracy, and confidence scores based on available data. The scores are intelligently generated and designed to guide the underwriter in understanding the required review scope.

Step 3. Instant Triage

Appraisals are automatically assigned to the appropriate underwriter based on an assessment of both risk level and the available underwriters’ expertise.

Reggora and ClearCollateral Review^®’s automated appraisal review solution decreases photo-related errors by 65% and reduces overall review times by 82%. That brings down the total cost per loan from $99 to just $18.

Appraisal QC Cost With Reggora

• Average QC Time: 0.14 hours per loan file
• Labor Cost: $132 per hour
• Appraisal QC Cost: $18 per loan file‍
• Reduced Cost per Loan: $81 per loan file

Want to calculate how much your organization could save? Contact our mortgage solutions team for a free cost per loan consultation. Our team will quantify your current costs related to quality control and provide a detailed model of the costs you can eliminate.

The Value of Optimizing Your Appraisal Process

By spending less time on manual imports and data gathering, underwriters are able to focus on their core task of assessing risk for each loan file. Reggora’s ClearCollateral Review^® integration enables lenders to automate the workflow where possible and supplements the appraisal with additional data that supports collateral risk management.

Labor-intensive work isn't the only costly issue that lenders face when it comes to appraisal management. In our white paper on the ROI of appraisal innovation we cover the costly problems and revenue-saving solutions in appraisals for billing, revenue leakage, management time, and visibility into the process, all of which we will outline in future posts as a part of our value series.