FNC Receives Nod from U.S. Government

FNC was pleased to find itself cited throughout the U.S. Government Accountability Office’s (GAO) recent report on residential appraisals. The report, which was delivered to Congressional committees in July, responded to a mandate in the Dodd-Frank Act that directed the GAO to study the effectiveness and impact of various valuation methods and the options available for selecting appraisers, as well as the impact of the Home Valuation Code of Conduct.

The report’s introduction states: “To address these objectives, we analyzed proprietary data we obtained from the enterprises, lenders, AMCs, and FNC, Inc. (a mortgage technology company) on the use of different valuation methods and appraisal approaches. We tested the reliability of the data used in this report by conducting reasonableness checks on data elements to identify any missing, erroneous, or outlying data. We also interviewed enterprise, lender, AMC, and FNC representatives to discuss the interpretation of various data fields. We concluded that the data we used were sufficiently reliable for our purposes.”

Continuing, the report recognized FNC as a very helpful industry leader that was able to assist the GAO in its study by sharing excellent information on residential appraisals.

For example, the report states, “…valuation data we obtained from FNC suggest that appraisers use the sales comparison approach in a large majority of mortgage transactions, while the cost approach is used less often—generally in conjunction with the sales comparison approach—and the income approach is rarely used. FNC captures data on appraisals conducted for a number of major lenders; FNC’s data represent approximately 20 percent of mortgage originations in 2010. FNC’s data for both purchase and refinance transactions show the following:

Nearly 100 percent of appraisals from 2010 used the sales comparison approach. The percentage was the same for 2009 appraisals.

Sixty-six percent of appraisals from 2010 used the cost approach, generally in combination with the sales comparison approach, similar to 65 percent for 2009 appraisals.”

Maybe we’re partial, but we think the following section, from page 42, is particularly impressive:
“FNC, Inc. is a mortgage technology company that, among other things, provides software platforms for lenders, appraisers, and other participants in the mortgage origination process. It captures appraisal data electronically that pass through its systems and uses the information to build analytical tools for its clients, which include several national lenders, as well as various regional and community lenders. The share of the mortgage market for which FNC captures data has increased over time, reaching about 20 percent in 2010. We interviewed knowledgeable FNC officials about their processes and data controls to assess data reliability. In general, FNC was able to provide us with valuation data for approximately 80 percent of the appraisals it identified as being for purchase or refinance mortgages. These data provide some insight into how often different appraisal approaches are used, though they may not be representative of the mortgage market as a whole.”

Good stuff! At nearly 60 pages long, the GAO report is full of insightful information and intriguing conclusions. We were glad we could help. Be sure to check out the report here.