We live in the information age. Every day we see computers, software, and algorithms automating tasks that were once reserved for the highly educated?are loan officers next? James Wang, a PhD student at the University of Michigan, crunched the numbers and came up with an answer.

Should Lenders Choose High-Tech Options to Replace Loan Officers?

Much can be said about the value of personalized service, but when it comes down to it, the decision involves money. Loan officers are an investment. Lenders invest in qualified loan officers because they?re required to analyze a plethora of data and make a judgment about a borrower. Naturally, if there were an automated process that could perform the same job, lenders wouldn?t hesitate to use the cheaper options. Recent technological advances in underwriting software demonstrates a method that looks well beyond credit scores to evaluate the creditworthiness of a borrower?but can they make the same subjective judgments as an experienced loan officer?

The Verdict

According to Wang, loan officers are still ?worth their salt.? Wang studied data that spanned 32,000 borrowers over the course of three years, 2010 to 2013. This lender specialized in making large, cash loans to individuals and small businesses. Their loan officers evaluated references, financial statements, credit scores, and employment records to make a decision about each loan candidate. So, the big question: was the job performed by the loan officers more or less valuable than what an algorithm would produce?

According to Wang?s calculations, each loan officer contributed an average of three times his or her salary in profits every year. Keep in mind that this is just an average?the decisions made by loan officers are subjective, and, therefore, some are bound to be incorrect. Several loan officers were unprofitable when compared to Wang?s algorithm, but others were many, many times more profitable.

Could a Better Algorithm Outperform a Loan Officer?

The nature of technology is progress, so it?s only a matter of time before a newer, better algorithm comes along that will finally replace loan officers, right? Not according to Wang. Because the algorithm is calibrated according to the borrowers? actual repayment data, the chances of success are somewhat limited. The decisions that lead to one loan officer?s failure are the same that lead to another?s success. If an algorithm could be developed to replace loan officers, a similar one could be used to make all the right picks on the stock market?and that?s not happening anytime soon.

Acuity Solutions

Acuity National Real Estate Solutions, LLC is a national title agency that works with lenders and real estate agents to facilitate hassle-free closings. For more information about our services, please visit our homepage.

The FHA drafted and published a letter earlier this month outlining all changes and updates regarding reverse mortgages and Title II mortgages. The new policies will take effect on New Year’s Day of 2016, replacing all previous Attorney Fee schedules, Reasonable Diligence Timeframes (RDT), and Cash for Keys Allowances.

RDT Updates

The document lays out all updated Reasonable Diligence Timeframes, which now begin when the First Legal Action in a foreclosure occurs. In regards to the RDT, the document allows extensions of the deadline when all parties involved in bankruptcy take the appropriate steps promptly. Extensions are permitted in cases where a separate legal action is necessary to initiate the possession process in a foreclosure case.

Cash For Keys Updates

Cash for Keys allows landlords, banks, and any other mortgage entities to give cash incentives to tenants who willingly vacate a foreclosed property. The new maximum allowance for Cash For Keys outlined in the FHA letter is $3,000 per dwelling, and the allowance is awarded when the occupant vacates the property within 30 days.

Attorney Fee Schedules

The FHA has also provided a table with the maximum amount of reimbursable fees from legal procedures that accompany the foreclosure process. These fees include a foreclosure attorney fee, a bankruptcy clearing fee, a possessory action fee, and a completion of deed-in-lieu fee. The total amount is different in every state and is laid out on a table in the FHA letter. Moreover, the fees must pertain exactly to the outlined duties and cannot be allocated to any other category or facet of legal fees incurred.

Details and Tables

For exact tables and timelines outlining the changes feel free to click HERE and read the entire FHA letter for yourself. While at first the changes may seem a bit daunting to understand, the wording is very clear, and it only takes about 10 minutes to read

Further Advice

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Homes that are in foreclosure, but have not yet been taken back by a lender are called ?zombie? homes. According to the ?Zombie Foreclosures and Vacant Property Report? by RealtyTrac, Q3 has seen a reduction of these vacant homes by 43% compared to one year ago and 27% compared to the quarter before. The number currently stands at 20,050 ?zombie? properties across the U.S., which is just 1.3% of the total 1.5 million vacant properties.

Review of the Market

Foreclosures of all types, ?zombie? and otherwise, have fallen by 36 percent in the past year. Of all vacant properties in the United States, over 36% have at least one open loan. 6.2 percent of these homes are ?seriously underwater,? meaning the value of the loans secured are at least 25% greater than the market value of the home. One surprising development is that many of the owners of the foreclosed homes are not in financial distress. 63% or these homes are not under any lien at all. Despite the fact that the real estate industry has recovered from the recession substantially, some areas have been left behind. Many ?zombie? homes are likely in poor condition and/or located in areas that have yet to bounce back from the recession.

Markets with Most ?Zombie? Homes

Recovery from the recession has not been enjoyed equally across the country. As a result, some regions have larger numbers of ?zombie? homes than others. States with the highest total number of ?zombie? homes are:

? New Jersey ? 3,997 zombie homes
? Florida ? 3,512 zombie homes
? New York ? 3,365 zombie homes
? Illinois ? 1,187 zombie homes
? Ohio ? 1,028 zombie homes

In some states, the total number of zombie homes is lower than the states mentioned above, though a larger percentage of total vacant properties are zombie homes. Below are the percentages of all vacant properties that have yet to be taken back by a lender:

? New Jersey ? 9.4%
? New York ? 8.2%
? Nevada ? 2.7%
? Massachusetts ? 2.5%
? Illinois ? 2.1%

Only two states in the nation have seen the number of zombie homes increase since the recession. In Massachusetts, the total number of zombie homes is up 66% when compared to eight years ago. In New Jersey, zombie homes have increased over 29% over the same time period.

How Acuity National Real Estate Solutions and the Real Estate Industry

Acuity provides a full range of title services to lenders and loan officers. We help facilitate the mortgage closing process with thoroughness, expedience, and excellent communication. For more information, please visit our homepage.