New EBA Guidelines: Leveraging Data for Mortgage Origination Valuations

The new EBA guidelines now specifically include advanced data systems and software be used in home valuations. It also recognises the role AVM technology can play in the process.

The valuation 

The European Banking Authority (EBA) has taken a significant step in 2021 to align the regulatory valuations standards across the European Union. That year, the EBA guidelines on loan origination and monitoring went into effect, giving mortgage lenders the regulatory framework to start relying on advanced data-driven software solutions to back their home valuations. Countries across Europe spotted an opportunity, and twenty-six central banks signed up

Though a handful of markets have been paving the way in applying Automated Valuation Model (AVM) technology in home valuations at origination, the vast majority of markets still rely on manually construed valuations, with little or no data system support, leading to an incomplete overview of market transactions, data errors and gaps, and little to no quality control on submitted valuations.

While the guidelines now explicitly prohibit the use of only AVMs at origination (with no human intervention), they specifically include advanced data systems and software be used in home valuations. It also recognises the role AVM technology can play in the process. This new recognition of the power of data, AVMs and software opens the door for hybrid processes between human and machine, allowing for fast, objective, data rich, quality-controlled valuations. 

Importantly, EBA article 210 explicitly mentions the power of data driven desktop valuations when the data warrants it. In a world where mortgage lenders are shortening their mortgage journey from months to days, this is a potential game-changer. Where average turnaround time for full visit valuations are currently 5-10 business days, this can now be reduced to 1 day. 

The concept of desktop valuations is not new to the mortgage sector, where they have been used for loan book transactions for years. Even for origination, they have been regularly used in countries like the United Kingdom and the Netherlands, and during COVID-19 in-person restrictions markets such as Ireland and beyond started allowing them for mortgage origination. 

“Our data driven platform lets valuers understand the market evidence supporting a home’s value in minutes. This way, they can turn around a valuation in no time’’ - Stefano Francavilla, CEO at Geowox

Most mortgage lenders agree that hybrid desktop valuations hold enormous opportunities for the sector, spotting potential improvements in customer experience, turnaround times and data quality as they move to the end-to-end digital mortgage closure. Post origination, they cite the potential for the application of machine-learning analysis on richer, more objective data for revaluations, funder and central bank reporting and stress testing. 

The digital mortgage 

With the technological possibilities available to us today, data valuation companies can go beyond the improvement of the data and workflow of the valuation at drawdown, which is a final step in the mortgage journey.

Mortgage lenders across markets find themselves implementing new origination systems to offer an end-to-end digital journey. Where a standard time to close a mortgage is 45 days, many lenders are now aiming to decrease this to under 15 days. In this, speed and accuracy of decision making is key, and going back in the process to fix data mistakes made early on is to be avoided. This opens the way to apply AVM technology from the early offer stage, for example for switchers or refinancers. Companies like Geowox can offer open APIs, allowing lenders to receive home details and value range in seconds, greatly reducing the chance of erroneous data entry early on, and having to withdraw or redraft a loan offer. 

The role of the surveyor

It’s important to point out that the EBA regulation, and the software being produced today is not aiming to replace the surveyor. Rather, it aims to reduce the surveyor time spent on the ‘grunt work’ of scouring marketplaces and land registry databases, finding market evidence, and piecing together home characteristics. By means of powerful data collection and presentation, the surveyor can spend more time on the tasks they were trained for; analysing, interpreting and defending their valuation work. 

“Valuation platforms like Geowox allow my surveyors to be more efficient with their time and have all data at their fingertips, so they feel even more confident about each valuation’’ - Ed Dempsey, MRICS - CEO at Ed Dempsey & Associates

About Geowox 

We are a home valuation company operating in the Republic of Ireland, the United Kingdom and the Netherlands. Would you like to learn more about our solutions? Contact us for a demo to learn about fast, detailed, objective valuations backed by accredited surveyors.

We will be making a big product announcement about the future of Irish mortgage valuations soon. Keep an eye on our blog and check out our FULL REPORT on Regulatory Compliance.

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