Latest / Chrisman Commentary - Daily Mortgage News / 9.8.26 Vantage Adoption; PCV Murcor's David Schiffmayer on UAD 3.6; CPI and PPI

Transcript

9.8.26 Vantage Adoption; PCV Murcor's David Schiffmayer on UAD 3.6; CPI and PPI · Chrisman Commentary - Daily Mortgage News

• 0:02
  Speaker: Welcome to the Chrisman Commentary, Daily Mortgage News Podcast.
• 0:05
  Speaker: I'm your host, Robbie Chrisman.
• 0:08
  Speaker: Topics on today's episode include Pulte, Fair Isaac, and Vantage Score, Don't Look for a Drop in Rates Before 2027, and my interview with PCV Murcors, David Schiffmeier, on the significance of UAD 3.6, Who Needs to Prepare, Where Organizations Should Invest, Its Impact on Appraisal Efficiency and Complex, and the key misconceptions.
• 0:30
  Speaker: Here, take a listen to a little preview.
• 0:33
  Speaker 1: Why should everyone listening to this podcast care about UAD 3.6, David?
• 0:39
  Speaker 2: First of all, thanks so much for having me.
• 0:41
  Speaker 2: I appreciate the opportunity to talk about this.
• 0:44
  Speaker 2: This is a huge change for our industry, one of the biggest ever.
• 0:48
  Speaker 2: And I think really the reason everybody should care about UAD 3.6 is that it's it's not changing the underlying valuation.
• 0:57
  Speaker 2: It's about changing how the valuation information is structured, how the information is standardized, communicated, and ultimately used.
• 1:05
  Speaker 2: So the appraiser is still observing the property, researching the market, developing an opinion of value.
• 1:12
  Speaker 2: That hasn't changed.
• 1:13
  Speaker 2: But the information coming out of that process is much more structured and machine readable, which matters to everybody downstream.
• 1:20
  Speaker 2: Appraisal management companies, lenders, technology providers, investors.
• 1:26
  Speaker 2: Because standardized data creates opportunities for better quality control, analytics, automation, and ultimately a better evaluation process.
• 1:36
  Speaker 2: So I wouldn't think of UAV 3.6 as a new appraisal form.
• 1:39
  Speaker 2: What it really is is a new day-to-day environment for valuation.
• 1:46
  Speaker: Are you looking for a fully branded or private label HELOC platform?
• 1:50
  Speaker: Whether you're a bank, credit union, or broker, it would seem to me that the answer is Nifty Door.
• 1:55
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• 1:58
  Speaker: Power your home equity lending with Nifty Door.
• 2:02
  Speaker: To learn more, visit nftydoor.com.
• 2:06
  Speaker: Many years ago, it seemed like people bragged about how late they stayed up at conferences.
• 2:13
  Speaker: Now they brag about how early they went to sleep.
• 2:16
  Speaker: This week I head to the great state of Texas for a private mortgage event and we plunged back into the mortgage conference season.
• 2:24
  Speaker: There are dozens of them in the next month or two.
• 2:28
  Speaker: I hope that some people are staying at their desks to work, but I'll keep you up to date on the talk in the conference hallways.
• 2:34
  Speaker: Seems like consumer direct channels is one area of focus, and I'm not sensing a higher volume environment.
• 2:41
  Speaker: It would appear through my email traffic and signing up for this commentary via home email addresses that things are scaling back personnel-wise.
• 2:51
  Speaker: There's a heightened focus by originators on where the servicing is going.
• 2:55
  Speaker: Interest rates certainly aren't helping anyone, and the continued war with Iran and its impact on oil prices continues to impact inflation numbers and therefore rates.
• 3:04
  Speaker: So lenders are focused on products and service and technology, of course.
• 3:09
  Speaker: One other place of focus is what's going on with FHFA.
• 3:14
  Speaker: Fair Isaac stock, that's FICO, crashed 17% on Friday after FHFA director Poulti ordered Fannie Mae and Freddie Mac to approve every mortgage lender in the country to use rival Vantage Score, effective immediately.
• 3:29
  Speaker: Rumors quickly swept the industry that Poulte had told selected parties ahead of time that he would be announcing this on social media.
• 3:37
  Speaker: The share price of TransUnion and Equifax, Vanish Score's co-owners, along with Experian, fell over 6% each after Poulte separately accused the credit bureaus of overcharging Americans for far too long and floated by merge reporting as an alternative.
• 3:52
  Speaker: Rumors aside, Poulti's directive builds on a mandate that already existed on paper.
• 3:57
  Speaker: The 2018 Credit Score Competition Act, which President Trump signed during his first term but told federal housing regulators to let Fannie Mae and Freddie Mac approve additional scoring models for mortgage underwriting.
• 4:08
  Speaker: The Trump administration frames Friday's expansion as finishing that job, lower costs for home buyers, and more competition in the scoring market FICO has dominated for decades.
• 4:19
  Speaker: FICO's mortgage score runs more than $10.
• 4:26
  Speaker: Recall that in April, Freddie and Fannie said they would accept mortgages underwritten with Vantage Score 4.0.
• 4:33
  Speaker: Poulti's post then certainly got attention.
• 4:36
  Speaker: As you've probably heard by now, and changing subjects here, hiring was unexpectedly strong in August.
• 4:43
  Speaker: Payrolls far exceeded expectation as employers pushed past uncertainty related to the war in Iran, tariffs and AI, with NFIP rising 162,000 versus 55,000 expectations, alongside upward revisions to July and stronger private manufacturing and government hiring.
• 5:01
  Speaker: The household survey also strengthened with employment up 569,000 and labor force participation rising to 61.6%.
• 5:09
  Speaker: Overall, the report supports the Fed's hawkish tilt and pushed treasury yields higher again, but inflation is likely to remain the decisive factor for the September 16th rate decision.
• 5:37
  Speaker: With $40 trillion of treasury debt, continued pressure on long-term yields, plenty of potential AI hype, and a Fed that can't ignore the dollar's purchasing power, it's a tough landscape for mortgage investors.
• 5:49
  Speaker: If rates stay higher for the remainder of the year, shorter duration agency MBS may be a good place to stash money.
• 5:56
  Speaker: Remember what we learned from 2022.
• 5:59
  Speaker: Aggressive Fed tightening, the end of QE, and a sharp bear flattening produced the worst year ever for agency MBS.
• 6:06
  Speaker: While Fannie Mae 15 year mortgage backed securities held the best thanks to its shorter duration and shrinking supply.
• 6:12
  Speaker: Today, Fannie 15 year and 20-year mortgage backed securities still look attractive versus treasuries with durations of just three and a half years and five years compared to five and three-quarters years for the broader MBS index.
• 6:24
  Speaker: Their outstanding balances have also fallen sharply as refinancing has stayed muted.
• 6:30
  Speaker: A meaningful decline in mortgage rates could unlock more refinance activity than today's aggregate incentive suggests.
• 6:37
  Speaker: This is concentrated in newer vintages.
• 6:40
  Speaker: 2019 to 2022 pools are generally either deeply out of the money or, in the case of 2021 and 2022, locked into exceptionally low coupons, while 2023 to 2025 borrowers have higher loan balances, higher original rates, and a demonstrated willingness to refinance when opportunity arises.
• 6:59
  Speaker: The 2025 cohort shows an unusually steep early aging/slash prepayment curve, second only to the extraordinary behavior of the 2019 to 2020 borrowers during the record low rate era.
• 7:11
  Speaker: Although most borrowers are currently out of the money, only 5.3% of FHA and 1.7% of VA borrowers retain refinance incentive, the passage of time has raised the universe's weighted average coupon.
• 7:23
  Speaker: For today's interview, I wanted to welcome to the show PCV Mercor's David Schiffmeier to talk about the significance of UAD 3.6, who needs to prepare where organizations should invest, its impact on appraisal efficiency and complexity, and the key misconceptions.
• 7:39
  Speaker: He's Senior Vice President of Operations at PCV Mercor, where he brings his broadset evaluation skills and varied management experience, along with his two decades in the appraisal industry, to oversee PCV's operations management, client services, vendor relations, operational compliance, and quality control.
• 7:59
  Speaker 1: Everybody in the mortgage ecosystem at this point has heard of UAD 3.6.
• 8:04
  Speaker 1: And it's going it's going to apply to a lot of people.
• 8:09
  Speaker 1: But specifically, who needs to be ready in the valuation ecosystem?
• 8:13
  Speaker 1: Appraisers, AMCs, lenders, tech providers, investors, give us give us a little rundown, please.
• 8:17
  Speaker 2: Yeah, I mean, honestly, I think it's everybody.
• 8:19
  Speaker 2: Um, everybody's got a different job.
• 8:21
  Speaker 2: This this whole industry is made of all of these different groups and how they fit together.
• 8:25
  Speaker 2: So appraisers are going to need to understand all the new data requirements and how it's going to affect their workflow.
• 8:31
  Speaker 2: Appraisers have new tools and technology that they're going to be using and new things that they're going to be looking for during the inspection.
• 8:38
  Speaker 2: So they're going to need to understand all of that.
• 8:40
  Speaker 2: The form software is different.
• 8:41
  Speaker 2: Um, so there's a lot changing for appraisers, but the underlying appraisal process is not changing.
• 8:47
  Speaker 2: AMC is my mind.
• 8:48
  Speaker 2: We need to think about the entire operational process from ordering and vendor readiness through QC, compliance, data validation.
• 8:57
  Speaker 2: And we need to know what to do once receive all of this information and interpret and use the new data.
• 9:03
  Speaker 2: Technology providers, um, they have a significant technical responsibility because they have to make sure that their platforms can support the new structure and communicate with the rest of the ecosystem.
• 9:15
  Speaker 2: And ultimately, I think investors uh need to care because standardized structured valuation data uh potentially gives them much better information for analytics and risk management and portfolio decisions.
• 9:28
  Speaker 2: And I think the important point here is that these groups can't prepare in isolation.
• 9:34
  Speaker 2: So a perfectly prepared at Razor, for example, doesn't solve the problem if the AMC or the lender can't receive or interpret the data.
• 9:43
  Speaker 2: So this really is an all hands-on-deck initiative.
• 9:47
  Speaker 1: And now this is the point of the podcast at which I ask a very loaded question.
• 9:51
  Speaker 1: Where should organizations be investing their time right now?
• 9:55
  Speaker 1: People, process, technology when it comes to UAV.
• 9:59
  Speaker 2: The process first, technology second, and the people throughout the entire process.
• 10:06
  Speaker 2: So it's tempting to jump straight into technology because this is such a data-driven initiative.
• 10:13
  Speaker 2: But if you don't understand how all the new requirements are going to impact your workflow, you might end up automating the wrong things or spending your time in the wrong areas.
• 10:23
  Speaker 2: So, what I would suggest is you want to start by mapping your current process and identifying the changes under 3.6.
• 10:30
  Speaker 2: And then you want to figure out where the new requirements are going to create friction points or failure points.
• 10:37
  Speaker 2: Because that's what we tend to see is that you know it's a it's a small break along the chain that sort of creates all of the uh all of the friction in the process.
• 10:47
  Speaker 2: So you can use technology to support that process.
• 10:51
  Speaker 2: Um, but all the way through this, so you're gonna need people involved.
• 10:54
  Speaker 2: So you're gonna need people to understand not only what's changing, but why it matters and how their enrollment's gonna change.
• 10:59
  Speaker 2: What you don't want to do is end up automating something and then creating confusion.
• 11:03
  Speaker 2: We need to understand your process first and then automate it.
• 11:08
  Speaker 1: I've heard conflicting reports out there.
• 11:11
  Speaker 1: Maybe they're not mutually exclusive, but on one hand, it's great to have a uniform appraisal data set.
• 11:17
  Speaker 1: On the other hand, people are going, God, there's so many more pages to deal with.
• 11:23
  Speaker 1: So, in your opinion, do you do you believe UAD 3.6 is going to make appraisals more efficient or more complex?
• 11:29
  Speaker 2: Yeah, and I I think it is going to make appraisals more efficient eventually, but in the near term, it's certainly adding a level of complexity.
• 11:39
  Speaker 2: The appraisal form hasn't changed in you know over 20 years.
• 11:44
  Speaker 2: And everyone was very familiar with the process and that sort of thing.
• 11:48
  Speaker 2: What we've seen so far is that there's a lot of complexity during transition.
• 11:51
  Speaker 2: This is a huge change.
• 11:52
  Speaker 2: Appraisers have new requirements that they have to learn.
• 11:55
  Speaker 2: Companies have to change their systems, their delivery methods, and everybody has a learning curve.
• 12:00
  Speaker 2: Your quality control engine, long term, it's a much greater efficiency gain.
• 12:05
  Speaker 2: Just take, for example, the structured data.
• 12:08
  Speaker 2: Currently, an appraisal is very, very unstructured in the way the data is received.
• 12:13
  Speaker 2: It's very hard to run analytics around that.
• 12:14
  Speaker 2: It's very, very narrative driven.
• 12:17
  Speaker 2: Those things are all changing.
• 12:18
  Speaker 2: And I think that's going to allow for much better analytics and QC down the road.
• 12:24
  Speaker 2: So I don't think that it automatically is going to make the appraisal process more efficient, but it is going to create an infrastructure that can allow us to make it more efficient over time.
• 12:36
  Speaker 2: The payoff is going to come down the road from what the industry builds on top of the standardized data sets.
• 12:43
  Speaker 2: That's where we're going to see the impact of this new reporting form.
• 12:48
  Speaker 1: So fill in this link.
• 12:50
  Speaker 1: By this time next year, UAD 3.6 will be it will be the new normal.
• 12:59
  Speaker 2: I think it's going to be, I think it's going to I think it's going to be the new normal.
• 13:03
  Speaker 2: I think we're going to look back and we're going to wonder why we've spent so much time talking about this transition.
• 13:09
  Speaker 2: Because I think it's the better conversation is going to be what can we start to do with the structured data.
• 13:15
  Speaker 2: Right now we're just trying to we're just trying to, you know, make this process work, get the appraisal into the system, make sure that it's delivered correctly, and that sort of thing.
• 13:25
  Speaker 2: But down the road, it's going to get much more interesting.
• 13:28
  Speaker 2: Um, not just complying with the new standard, but what we can build on top of all of this structured data.
• 13:34
  Speaker 2: And I think that's that's gonna be the the exciting future.
• 13:39
  Speaker 1: You're one of the first people I've I've heard you put exciting and UAD 3.6 in the same sentence, but chapeau to you for for doing so.
• 13:46
  Speaker 1: Any myths or misconceptions about UAD 3.6 you'd like to put to rest?
• 13:53
  Speaker 2: Sure.
• 13:53
  Speaker 2: Um, and by the way, fear and excitement are kind of the same emotions.
• 13:58
  Speaker 2: So I'm trying to just take the excitement angle, but um, but I would say this 396 is not a form change.
• 14:05
  Speaker 2: This is not just a form change, it's a way that the entire valuation ecosystem is gonna be structured and used in information going forward.
• 14:15
  Speaker 2: So I I think that is a huge misconception.
• 14:19
  Speaker 2: I also think that it's a misconception that this is something that you know appraisers have to look at.
• 14:25
  Speaker 2: This is really gonna change the way that everybody looks at valuations and what should people do uh with data in the future.
• 14:32
  Speaker 2: And so people that are thinking this is just a form change or just impacts appraisers should really take another look at all of the changes that are happening and start thinking about what they can do once they have all of the structure.
• 14:45
  Speaker 1: People have various options in the valuation ecosystem.
• 14:49
  Speaker 1: Can you talk about what PCV Mercore has been reworking on recently, what you're excited about to use that word again?
• 14:54
  Speaker 1: It's not fear, it's not fear and loathing, it's fear and excitement.
• 14:57
  Speaker 1: I like it.
• 14:57
  Speaker 1: Yeah, exactly.
• 14:59
  Speaker 1: No, I like that.
• 15:00
  Speaker 2: We you know, we've been working on a lot of different things.
• 15:03
  Speaker 2: You know, I everybody talks about AI, and what we are really focused on are technologies that can assist people because we still think that people sitting at the core of all of this technology is the key.
• 15:16
  Speaker 2: I like to think of it as you know, the architect or the maestro that sits on top of the data and orchestrates activities.
• 15:23
  Speaker 2: So we're using great technologies like computer vision technology to scan reports, identify things like damage, condition and quality ratings, go out to multiple listing service information and attach condition and quality ratings to all of the sales so that we can look at um data more efficiently.
• 15:41
  Speaker 2: I think we're looking at natural language processing and that sort of thing, not just optical character recognition, but actually how words fit in context in the report.
• 15:51
  Speaker 2: And we're trying to use all of this information so that we can identify red flags, easier potential red flags, and get in front of them before others have to be.
• 16:00
  Speaker 2: And then obviously we've been working on 3.6.
• 16:02
  Speaker 2: It's it's been a huge change.
• 16:04
  Speaker 2: So I feel like we're ready for it, but I think that's what I would say is we're focused on those kinds of technologies that still keep the human in the loop, but allow them to be more efficient, more scalable, and better at their job.
• 16:18
  Speaker 1: And finally, if the audience remembers only one thing from today's discussion, what should it be?
• 16:24
  Speaker 2: It's a new environment for valuation.
• 16:28
  Speaker 2: So, you know, I like to think of you know how far we've come with you know, with data in general and you know, all the generative AI technology.
• 16:37
  Speaker 2: When we start capturing data in this structured, machine readable, formatted way, there's so many different things that we're going to be able to do with it.
• 16:47
  Speaker 2: So this is not just an IT implementation or a form.
• 16:52
  Speaker 2: There's going to be all kinds of ways to take advantage of this data and this new reporting format as it comes to just how property information is captured in general.
• 17:02
  Speaker 2: And so I would challenge people to think of it as a new environment for valuation that can lead to a lot of insights that were just not possible to glean based on the prior reporting.
• 17:15
  Speaker 1: Well, you certainly seem like you're on top of it.
• 17:17
  Speaker 1: PCV Mercore seems like they're on top of it.
• 17:19
  Speaker 1: For people that might have a little more fear in their life than they should, but best ways to get more information about the company or reach out to you or um, you know, work with some work with a company that that is, you know, really being proactive when it comes to this new appraisal form.
• 17:34
  Speaker 2: Yeah, sure.
• 17:35
  Speaker 2: I mean, we're, you know, first of all, I think the leveraging vendor partners that are dealing with this every day and have the perspective of multiple different lenders who have attempted to implement 3.6 in different ways, I think is super valuable.
• 17:50
  Speaker 2: We're PCBmercore.com is is a really easy place to find us.
• 17:54
  Speaker 2: I think the name is unique enough uh that you'll be able to find us.
• 17:58
  Speaker 2: We've been in business since 1981.
• 18:00
  Speaker 2: We've been around for quite a long time.
• 18:02
  Speaker 2: Uh, and so I think we've just we've got the expertise, we've got the knowledge, we've got the people to be good at this.
• 18:08
  Speaker 2: But you know, we're ready to partner with with lenders and clients, no matter what stage they're at in this process, and really partner with them and help them understand best practices and make this as efficient as possible.
• 18:22
  Speaker 1: Certainly a pleasure speaking with you today.
• 18:24
  Speaker 1: You're a wealth of information.
• 18:26
  Speaker 1: So thank you very much for the time, sir.
• 18:27
  Speaker 1: Thank you so much.
• 18:31
  Speaker: U.S.
• 18:31
  Speaker: inflation readings, that's producer on Thursday and consumer on Friday, will be the highlights on this week's economic calendar and are expected to show a modest pickup in headline prices due to higher energy costs.
• 18:42
  Speaker: Other highlights this week include a $39 billion 10-year treasury note auction tomorrow, August existing home sales, which likely weakened further as elevated mortgage rates continue to weigh on affordability and demand on Thursday, and preliminary September University of Michigan consumer sentiment on Friday.
• 19:01
  Speaker: Today's economic calendar kicked off with the August NFIB Small Business Optimism Index, which was down 1.1 to 98.7, and later today brings a $58 billion three-year treasury note auction in July consumer credit.
• 19:15
  Speaker: We begin the shortened trading week with agency MBS prices, little change from Friday's close, the two-year yielding 4.37, and the 10-year yielding 4.80 after closing last week at 4.78%, up six basis points over the course of last week.
• 19:30
  Speaker: Let's wrap up with a joke and some housekeeping.
• 19:33
  Speaker: The huge college freshman decided to try out for the football team.
• 19:38
  Speaker: Can you tackle?
• 19:39
  Speaker: asked the coach.
• 19:40
  Speaker: Watch this, said the freshman, who proceeded to run smack into a telephone pole, shattering it to splinters.
• 19:46
  Speaker: Wow, said the coach.
• 19:48
  Speaker: I'm impressed.
• 19:49
  Speaker: Can you run?
• 19:50
  Speaker: Of course I can run, said the freshman.
• 19:53
  Speaker: He was off like a shot, and just over nine seconds he'd run a hundred-yard dash.
• 19:58
  Speaker: Great, enthused the coach.
• 20:00
  Speaker: But can you pass a football?
• 20:02
  Speaker: Freshman hesitated for a few seconds.
• 20:04
  Speaker: Well uh well, sir, if I can swallow it, I can probably pass it.
• 20:09
  Speaker: Thanks again to Nifty Door for sponsoring this week's podcast.
• 20:16
  Speaker: Nifty Door is the fully branded or private label HELOC platform for banks, credit unions, and brokers.
• 20:22
  Speaker: Close in zero days with warehouse funding and power your home equity lending with Nifty Door.