Duration: 15 minutes
Featuring Darius Bozorgi, Veros President & CEO
Moderator: Welcome to Veros Real Estate Solutions’, December podcast. Darius Bozorgi, our President, and Chief Executive Officer is back with us as we wrap up 2012. We’re taking a look back at what’s occurred in the last twelve months and maybe offering a peak at what’s to come. Darius, thanks for joining us again.
Darius Bozorgi: Glad to be here.
Moderator: All right, so if you could identify just one thing that you would consider the most significant change or maybe event for 2012, what would that be?
Darius Bozorgi: Well, 2012 was a very exciting and significant year especially in the property valuation space. Since you are asking me to pick one, I would have to go with the UMDP mandates going live. UMDP, of course is the Uniform Mortgage Data Program under FHFA’s direction and obviously involving Fannie and Freddie. Specifically you had the Uniform Collateral Data Portal or UCDP mandate go in effect in March of 2012 and then you had the ULDD mandate go into effect in July of 2012.
Those two events were very – one unprecedented in the industry and were very significant for how loan data flows into the secondary markets. Specifically appraisal data and then obviously loan delivery data as well.
Moderator: So what’s the net impact for lenders who are now submitting through the portal?
Darius Bozorgi: Well, okay the net impact is really two-fold. First of all, appraisal data never had to be submitted into the secondary market prior to 2012 that is significant in and of itself. So, lenders had to re-engineer their entire process for how they accepted appraisals, made sure they were compliant with the UAD, the Uniform Appraisal Data set, and that those could be effectively submitted into the Uniform Collateral Data Portal. Then similarly, there were significant changes made to the loan delivery file. Now they previously had a loan delivery file that was submitted to either GSE, but now that was enhanced significantly. They have already announced ULDD-2 that will be coming down the path. But, those were two major changes.
I would add, I think another significant change, at least from our perspective in 2012 that I think most people have been talking about, I don’t know if anyone has really put a finger on it yet, and that’s regarding housing in general. I mean we feel at Veros, based on everything we track in our forecast models, that we hit the bottom in 2012 and that we are now coming out the other side of that.
Moderator: A lot of big changes. So let’s bring it home for a little bit. You shared the biggest industry impact being UMDP’s go live. What about for Veros significantly, what was big for the company?
Darius Bozorgi: Well Veros was a big part of the Uniform Collateral Data Portal that I was just talking about. Veros is the technology provider for UCDP. We built the portal, we support it, and we maintain it on behalf of the GSEs. And that was no small effort. It was really a tremendous effort on both Veros’ part, Fannie Mae’s part and Freddie Mac’s part. It was a herculean effort and something that was several years in the making. That was the first time that the enterprises had actually worked together on a project like this, a project of this significance, and hats off to them.
I think they did a great job working in partnership with one another and I would like to think Veros was a big part of the smooth roll out of that platform. That was huge.
Also, in 2012 Veros made some significant enhancements to our AVM’s, our automated valuation models that we are very excited about and really pushed us up as the leading AVM provider in the market. The performance that our AVMs are delivering right now in terms of accuracy, hit rate, useable hit rates, really is unprecedented and we are very excited about it.
Moderator: So where does Veros go from here?
Darius Bozorgi: Well several things, first of all, let’s talk about UCDP and initiatives going under UMDP. I don’t speak for the GSEs, so much of my comments on things around UCDP are my opinion. But, UCDP will continue to evolve. The GSEs have already announced upcoming changes in 2013 to UAD. There will be messages that are now soft edits or non-fatal edits, that will turn to fatal over time. There will be new rules that will be added to the system. I think you are going to see a lot more proprietary messaging coming from each GSE through the portal. I think those will be very large changes.
We will continue to further enhance our AVM and that was I think, probably one of the most exciting things for us. We feel like – and what we consider kind of our next generation, third-generation AVM status that I was describing earlier. We are just really scratching the surface of that and we will be able to take that up to a new level.
Moderator: Very good, well you touched on it already with UMDP, but obviously, industry stabilization continues to be where everyone has their sights set for at least another year as we continue to correct the market. So, can you maybe get out your crystal ball for us and talk about what needs to occur in 2013 to get us into industry stabilization?
Darius Bozorgi: I think there’s really several items that need to occur. They are nothing new and you hear folks talk about them. First, I think FHFA and the GSEs are really some of the few institutions out there that have put forth some tangible, really instruments of reform coming out of what was this crash and this perfect storm. That’s not to say other agencies aren’t working on various projects and initiatives. But, FHFA and the enterprises actually put out very tangible proven systems like UCDP, like ULDD. Those need to be expanded upon so that work that effort needs to be expanded to other agencies.
And it also – we also need to have an honest discussion about how these types of initiatives get expanded into the POS market. You know we talk about how to bring private money back into the secondary market, but one aspect of that is the economic model and making it financially attractive for private money to come back in and that’s where you hear people talking about raising G-fees, etc. But the other half of that equation is providing a framework for transparency and accountability, which will provide much needed investor confidence to come back in, knowing what is in the securities down to the loan level, and being able to update that information through the life of the loan. So, expansion, I think this needs to be expanded.
The other I think really significant aspect is that we need to complete and finalize the rules that had been set forth in laws like Dodd-Frank and that uncertainty has been hanging over the market they are set to be formalized and published in 2013. So, I think that’s something that everyone is expecting. So, I would certainly say that is much needed, because that will hopefully erase that uncertainty that people have been trying to navigate around. I think the same thing applies to other rule changes or proposed rule changes like Reg.AB. Those need to be finalized, again to erase that uncertainty, let everybody have a hopefully a very clear understanding of what the rules of the road are so we can all move ahead.
Moderator: So it sounds like some of these major elements of change that we need to see in 2013 are really a continuation of a lot of efforts that have been started at least in 2012.
Darius Bozorgi: In 2012 and prior thereto, so yes a lot of work has started. It has been underway and what is exciting is that all of this should come to light in one way or another in 2013. So, 2013 is going to be a very important year just from a standpoint of hopefully everybody understanding what the rules are. That in it of itself and then building upon things like those that I mentioned earlier with the UMDP program.
Moderator: Absolutely, so what about from a Veros perspective, I know you touched on a few earlier. But, what are the company’s main area of focus, more specific to the stabilization efforts?
Darius Bozorgi: Well, we certainly intend to continue what has been excellent work with our involvement in UCDP and UAD particularly around its expansion and into other areas as well as enhancement. We will continue, as I mentioned earlier, to further enhance VeroVALUE, which is our AVM and its related derivative analytics around property valuation risk. Those provide independent analytic measures which helps with stabilization. Obviously, we are not the only company that provides those types of tools, but I think that’s very important when you talk about market stabilization.
We are very excited about enhancements we’ve made to an offering we refer to as a “Sapphire,” which is our valuation policy workflow and decision platform. So, that is something that allows institutions then to manage their entire valuation policy. The appraisals they order, the BPOs – Broker Price Opinions – they were all these analytics integration with platforms like UCDP. So, that is a risk management tool that further delivers stabilization.
And then we are very excited about an offering we call “VeroSCORE,” is actually – and at the end of the day rips an appraisal apart and analyzes the risk in that appraisal from many different angles whether you are concerned about whether the appraisal has been completed properly, whether it meets various compliance guidelines, whether it is credible, or is the assignment a complex one or not when you are looking at things like are the fees reasonable and customary. All those things are that kind of a major focuses with Veros in 2013 and in one way or another lend themselves to helping. Again, we are not the only folks that offer these types of tools, but helping further stabilize the market.
Moderator: Well sounds like another exciting year ahead, are there any final thoughts for our listeners as we transition from 2012 to 2013?
Darius Bozorgi: I think 2013 again is going to be a very exciting year. A lot of things should finally come to light. A lot of work was done between 2009 and 2012, which laid the foundation for again, which should be completed next year, whether we actually should see the delivery on the promise of that foundation that was set. Again, I’m really hopeful to see a clear up of all this regulatory uncertainty, which has been hanging, I think over a lot of folk’s heads and then finally as I mentioned earlier in our discussion, you know housing – we are really coming out the other side on the housing problem.
We are seeing, you know some huge numbers of increased appreciations, which we are excited about and I think that’s very positive.
Moderator: Great, we are going to talk about that in our next podcast I’m sure. Well, thanks Darius we appreciate your insights and your time and perspective on this coming year.
Darius Bozorgi: Thank you, Adrienne.
Moderator: For our listeners, additional information can be found in our newsroom on Veros.com or through our Twitter handle @verosres. Also, please submit questions or feedback to email@example.com. Happy New Year and we look forward to bringing you more great podcast content in 2013.