Appraisal technology and home equity loans: A win/win for credit unions

Despite dips in the housing market, the average U.S. homeowner with a mortgage still has more than $300,000 in equity since the purchase date.

For credit union members who want to tap into that equity—to renovate their home, consolidate debt, pay for education, have an emergency fund, etc.—credit unions need to ensure that they can quickly approve members’ loans.

Incorporating modern appraisal technology into your process can help streamline operations and mitigate risk.

Enhancing member retention through home equity loans

In a challenging market, credit union members often face liquidity challenges when trying to manage their financial well-being. Whether for home improvements, debt consolidation, or education expenses, credit union home equity loans offer a flexible and cost-effective way to meet those needs. Credit unions are turning to home equity loan program offerings as a member retention benefit and a growing source of income.

Easy access to equity: Empowering members financially

Over the past four years, most credit union members who own a home have seen a significant increase in home equity. For many members, their home is their largest asset, and tapping into this equity can be transformative. Credit unions offering these loans empower their members to leverage their home equity for various purposes, thereby providing a tangible benefit of membership.

Appraisal technology: Streamlining the process of loan approval and saving members money

The integration of modernized appraisal technology methods into the home equity loan process is a game-changer for credit unions. Traditional appraisal methods can be time-consuming and costly, potentially deterring members from pursuing loans, and in many cases making the costs prohibitive for credit unions and CUSOs (Credit Union Service Organizations) that want to offer home equity loans to their members.

Modern appraisal technologies, however, offer a more efficient, cost-effective, and accurate alternative. These technologies can quickly provide a reliable estimate of a home’s value, significantly speeding up the loan approval process, and can also provide verification of property condition with a myriad of lower cost inspection options. This efficiency enhances member experience and lowers the cost, making it more likely for them to engage with their credit union for their borrowing needs. Importantly, these types of valuations can also address appraisal bias concerns, creating a more equitable valuation environment for members.

Alternative appraisal valuations

Appraisal modernization has been a hot topic in real estate due to several challenges that are forcing credit unions to look for alternatives to traditional appraisals. Turn time challenges in key markets, a growing appraiser shortage, and the need for consistency across the entire appraisal process have brought about a wave of valuation technology advances. In today’s digital age, several tools and methodologies have emerged, making property assessments more efficient:

• Automated Valuation Models (AVMs): AVMs use mathematical modeling to value properties by analyzing transaction records, tax assessments, and other data points. They offer quick results and can be more cost-effective than traditional appraisals.
• AVM based evaluations: These more advanced evaluation products provide an AVM with analysis of local data and inspections of property, while being very affordable and a fraction of the cost of an appraisal product. They are a popular choice with credit unions looking for more property veracity but wanting to keep the cost manageable.
• Desktop appraisals: Rather than physically visiting a property, appraisers use online data and satellite imagery to determine its value. This reduces the time and expense of an onsite inspection of the property while still giving a USPAP compliant appraisal product to the credit union. In instances where an appraisal is required, this type of appraisal is a wonderful and  inexpensive alternative to a traditional GSE appraisal.
• Hybrid appraisals: Combining elements of AVMs and traditional methods, hybrid appraisals may employ a third party for the physical inspection while the primary appraiser analyzes the data and provides the final valuation.

Changing the credit union game for home equity property value assessments

As more homeowners seek to tap into their home’s equity, the need for property assessment tools that correlate with the unique products available in today’s market has grown.

In response to this need, Class Valuation has developed the most extensive solution for evaluating and safeguarding against collateral risks. Known as the iCollateral Series, Class Valuation has created a suite of options that allows credit unions to create a customized valuation process that is based on individual lender rules, regulations, and risk appetite. Class Valuation also has a specialized division, Class Union, committed to serving the unique needs of credit union clients. Contact Class Valuation today to learn more.