Inside the Valuation Nexus: Strengthening your valuation program to help limit losses, reduce costs, and deliver a positive customer experience

December 2012
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Inside the Valuation Nexus: Strengthening your valuation program to help limit losses, reduce costs, and deliver a positive customer experience

At a glance

Property valuations help residential mortgage companies protect assets, minimize losses, and make lending decisions, but many valuation programs are exposing companies to greater losses, higher operating costs, and increased risk of customer dissatisfaction. This point-of-view describes components to balance cost, risk, and the customer experience.

Property valuations have long been one of a residential mortgage company’s first lines of defense in helping protect its assets, minimize losses, and make well-informed lending decisions. Now, as the housing market has rapidly transformed, property valuations have never played a more important role.

Consider that $1.3 trillion in mortgage originations (including purchases and refinance activity) is forecast to occur in 2013. When you couple this information with the fact that 2.3 million properties are estimated to exist in the residential shadow inventory, it could translate into $411 billion in distressed assets across the industry.

But despite their strategic importance, many valuation programs aren’t delivering the benefits that they could, leaving companies exposed to greater losses, higher operating costs, and in the case of originations, increased risk of customer dissatisfaction.

Why aren’t valuations fulfilling their intended purpose? In carrying out their valuation strategies, companies focus on three primary objectives: managing risk, controlling cost, and delivering a positive customer experience. But many organizations place an unbalanced focus on these objectives. The problem with this approach is in the trade-off: a gain in one area is often achieved at the expense of another. This constant push and pull prevents valuation programs from delivering longer-term, strategic benefits.

This point-of-view describes the 5 components that will help companies attain a strategy that balances cost, risk and the customer – what we refer to as the valuation nexus. Achieving this nexus has more benefits than just a satisfied customer base, lower operating costs and reduced risk exposure. It will also move your valuation program from a transaction-based approach to a strategic one. This in turn can help limit the financial exposure on the real estate assets your organization values as well as boost the returns they deliver.