Lenders have learned that credit scoring works when qualifying borrowers. The credit score, when combined with income and employment information, can reasonably predict the likelihood of a borrower's willingness and ability to repay.
Appraisals are still the gold standard for collateral valuation assignments.
In today's competitive marketplace, lenders seek ways to keep loan origination costs low without compromising their investor grades. The results of these tests indicate that AVM conclusions tend to deliver conservative values in comparison to appraised values. But because the quality of their loans is critical, lenders are cautious. The solution might be a collateral valuation model that combines AVM conclusions with a local appraiser's expertise. This new hybrid keeps intact the gold standard for collateral valuation, an appraiser's expertise.