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24 APPRAISAL MODERNIZATION: WHERE WE ARE NOW, WHAT TO EXPECT IN 2023 Phil King is VP, Principal Product Manager for EXOS Valuations at ServiceLink. As a key technology leader of EXOS, ServiceLink's digital mortgage services platform, he drives the continuous improvement of valuations technologies available to lenders and servicers, and their customers. King's appraisal management career spans more than 20 years; he has been part of ServiceLink since 2009. As Freddie Mac and Fannie Mae are now powering the push behind appraisal modernization, the mortgage industry is energized. e prospect of standardized, high- quality appraisals that can be turned around within two days is cause for excitement, and suddenly feels well within reach. e technology is here, and the processes are being piloted in anticipation of potential industrywide implementation in the first half of 2023. Phil King shares some insights into what's happening in the appraisal modernization space right now and what we can expect to see in the coming months. How is the GSEs' embrace of appraisal modernization accelerating the industry's progress toward incorporating more technology-forward appraisal solutions? Fannie Mae and Freddie Mac have made pivotal moves that are influencing the pace of appraisal modernization adoption: First, they are helping drive what data and images are being collected during a hybrid inspection so that every inspector is capturing the key details. In the past, a hybrid inspection entailed sending a real estate agent, broker, or third party to do a quick walk-through, documenting conditions (including notable positive or negative attributes), and taking photographs, which they would then send to an off-site appraiser. e data and images captured varied by lender and/or AMC without any industry standard. e appraiser would pull additional data about the property and neighborhood from online sources and build their appraisal on that combined intelligence. Spurred by guidelines recently set forth by the GSEs, new modernized products are improving that inspection process significantly. Now a third-party inspector walks into a home and opens an app on their mobile device that guides them through the inspection so that they are certain to document all required attributes or data elements. ey can capture 3D images, floorplan layouts, measurements, and more—quickly and easily. e resultant information is more robust than what we have been able to collect previously in the alternative valuation space. e technology is driving a very accurate capture of properties, which is driving unprecedented lender confidence in hybrid products. Second, Freddie Mac is modernizing the waiver process for refinance transactions through its ACE+ PDR (Automated Collateral Evaluation plus Property Data Report) solution. Certain mortgages submitted to Freddie's Loan Product Advisor® automated underwriting system now require a third-party inspection, guided by Freddie's proprietary PDR dataset, to be eligible for a waiver. is new requirement was put into place to mitigate the risk involved in issuing a waiver when a loan doesn't meet certain waiver requirements. What should lenders/ servicers understand about the technology being used in hybrid appraisals? e most important thing to understand is that all of the new technology is being designed and built to ensure a reliable appraisal. e mobile apps have to be able to geolocate the device to make sure they are, in fact, inside the subject property. e image capture guides the user so that they have to capture the entire home, providing a complete view of what's going on inside and outside the property. e inspector can't avoid a specific room because there's damage or some other issue. Also, these technologies, which use machine learning and artificial intelligence (AI), assist in the property analysis so that lenders no longer need to rely solely on human scrutiny. While scanning the imagery, the AI may detect a potential problem or attribute of the home that may have otherwise gone unnoticed. e technology can also detect people, pictures of people, religious artifacts, etc. in the collected images and screen those out to help prevent bias from entering into the process. We can count on this technology to improve over time, too, because the more images and data that are input into the machine, the smarter it will get. So as the industry moves further down the road in capturing images and teaching the inspection model, we can look for enhanced accuracy and reliability. How can lenders/servicers best position themselves to adopt modernized processes in 2023? ey should evaluate their infrastructure, staffing, and workflows to ensure they can take advantage of the new products that are The Exchange Phil King VP, Principal Product Manager for EXOS Valuations, ServiceLink