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Historically, those with the greatest longevity have also been those most resistant to change. Very little change is seen in the software used to generate an appraisal. Mobile technology would be considered the next major transition from previous methodologies. In the next year, necessity will help drive the widespread adoption of new technology. The appraisal industry has become extremely competitive, and appraisers who do not adapt their practices accordingly will not be able to compete with those who have. We expect to see refinements to existing technologies more so than introductions of new ones in 2013. Cloud-based applications will become more mainstream next year and electronic devices will be applied more broadly in the field. Overall, we expect 2013 to be a critical year for the appraisal industry as it shifts toward a new paradigm centered on modernization—of its people, technologies, and business practices. Once these challenges are met, the sky is the limit for how much our industry—and its appraisers—can continue to grow. Brandon Boudreau is a state-certified appraiser with more than 12 years' experience conducting residential appraisals and reviews. He oversees daily operations for Metro-West Appraisal and its 150-plus staff members in 45 metropolitan markets across the country. V A L U A T I O N SARA W. STEPHENS, MAI PRESIDENT The Appraisal Institute Given the number of bad loans on lenders' books due to foreclosures, it's hard to blame them if they are cautious extending credit in the current economic environment. Appraisers, meanwhile, are performing the same thorough research and thoughtful analysis they always have in order to help lenders make wise lending decisions. In today's challenging real estate market, choosing the right appraiser is vitally important for both the lender and the consumer, making it necessary to select an appraiser that has gone above and beyond the requirements for state certification and demonstrated additional professional knowledge, understanding, ethics, and ability. Among other issues, appraiser competence will remain critical in 2013 for the U.S. housing market. Customary and Reasonable Fees | Valuation is perhaps the most heavily regulated 56 aspect of the real estate industry. Federal oversight continues to burden many appraisers, and despite Congress' intent, regulators have failed to ensure "customary and reasonable" fees for appraisers who accept assignments from appraisal management companies (AMCs). The problem is that many AMCs pay belowmarket wages and set unnecessarily tight deadlines. As a result, in many cases it's the least-qualified and least-experienced appraisers who accept assignments, with AMCs hiring out-of-market residential appraisers who don't know the area. Engaging qualified appraisers for valuation assignments will be a key issue for lenders in the new year. Separation of Fees | The National Community Reinvestment Coalition announced November 6 that it has joined the Appraisal Institute and the American Society of Farm Managers and Rural Appraisers in an effort to get the Consumer Financial Protection Bureau (CFPB) to separate the appraisal fee from the AMC fee on mortgage disclosure forms. The joint comment letter urged the CFPB to require "disclosure of AMC fees separate and apart from the fees paid to a professional appraiser for appraisal services when AMCs are used by banks and financial institutions." Under the proposed rule, disclosure of AMC fees is only optional, despite clear authorization under the Dodd-Frank Act to require such disclosure. This situation can be perceived as a conflict of interest since lenders provide instructions to settlement agents regarding fees to disclose. The groups note in their letter to the CFPB that "this is likely to result in inconsistency in disclosure of AMC fees, with some lenders listing only an appraisal fee and others listing both an appraisal and an AMC fee without any explanation." Cost-Plus Model | Some AMCs are utilizing a cost-plus model. This recognizes the distinct services being provided to lenders—one is a professional valuation service, the other is an administration and processing function. From a consumer protection standpoint, the cost-plus model is far superior to a bundled fee approach, which hides fees from consumers and inserts strange incentives—a reduced fee for the professional valuation service equals more profit to the administrative and processing function. Appraisers are hopeful that next year more AMCs will adopt the cost-plus model. The "Gold Standard" | A number of products will continue to compete with appraisals in 2013. Broker price opinions (BPOs), automated valuation models, and drive-by appraisals are just some of the lower-priced, lower-quality options available to lenders, but in many circumstances these options often fail to include interior inspections. Just because something is cheaper or quicker doesn't mean it's better. Appraisals are still the "gold standard" in valuation. Sara W. Stephens, MAI, has been a member of the Appraisal Institute for more than 20 years. In addition to her current role as president of the Institute, she is owner and principal of Richard A. Stephens and Associates, the oldest appraisal firm in Little Rock, Arkansas. L O S S M I T I G A T I O N SANJEEV DAHIWADKAR CEO AND PRESIDENT IndiSoft LLC The loss mitigation world looks very promising in 2013 compared to 2012. The regulations and policies implemented over the last few years have enabled servicers to refine their processes to generate the intended results for all parties involved. Because the mortgage industry has sown a lot of good seeds—improving processes, fostering better communication with consumers, etc.— 2013 could be the first year we see real benefits from all the hard work to advance and expand loss mitigation efforts. There are several signs that the servicing industry is on the right track. One example is the single point of contact (SPOC) rule. After some preliminary misgivings on how the requirement would materialize in practice, the rule is now in place and servicers have control of the process. Servicers realize that offering one knowledgeable, consistent resource as a distressed borrower's main contact improves the chances of reaching a true win-win solution for the homeowner and the servicer, all in a shorter timeframe. A second sign of improvement in the area of loss mitigation is the use of the single-track approach. The industry has gained a better understanding that loss mitigation strategies do not have to compete with foreclosure. Instead of the two areas racing to see which one will prevail, a single-track loss mitigation approach favors a more thorough review of the individual borrower's situation as opposed to just looking at the number of days delinquent. Additionally, legislative changes now hold servicers accountable for seeking foreclosure alternatives. This is one of the many reasons why more servicers are willing to work with financially troubled homeowners through short sales or deed-in-lieu options. While these are not optimal outcomes from the homeowner's perspective, these loss mitigation tactics ease homeowners'

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