Enhance Due Diligence by Automating Collateral Valuations

Client Need

A well-known financial services organization was fined by the OTC for lack of due diligence on equity loans and miscalculation of improvement values for flood insurance. Upon reviewing their portfolio, they determined that 85% of their problem loans were the result of using outdated automated valuation models (AVMs) and related property valuation processes and business practices.

Solution

Working with the organization’s vendor management team, First American CoreLogic helped review their existing portfolio and conduct extensive AVM testing. The random sample tests revealed that First American CoreLogic ValuePoint®4 and Freddie Mac’s HVE® AVMs had the highest accuracy and collective hit rate of 100%. Based on these findings, First American CoreLogic proposed Vector™, a decision management platform with easy-to-use archiving and reporting tools, which provided the lender with the ability to automate their collateral valuation decisions in order to instantly meet their underwriting guidelines and the OTC’s valuation requirements.

Results

New internal procedures coupled with Vector helped this client become OTC compliant. They are now receiving up-to-date sales history through a reliable Web tool, increased AVM hit rate, and an improved value calculation.