Index Tool Measures Home Prices & REO Sales.(Managing REO)

Byline: Amilda Dymi

Jacksonville, FL-At least one expert finds the foreclosure crisis has created demand for improved housing valuation and pricing tools that allow for more intelligent and sustainable business decisions.

Nima Nattagh, senior vice president, Lender Processing Services, Applied Analytics, told MSN there is a growing need for better tools, better data and automated valuation models that are more regionally based. It is pushing technology solutions providers to create more exclusive tools that can analyze statistical changes in home values and forecast future trends in housing prices.

Mr. Nattagh says one effect of the increase in foreclosure and REO activity is the uncertainty about the ability of existing tools to adequately capture the extent of that impact. "The appraisal and the valuation industry do not really have a standard in addressing these kinds of situations."

The market needs tools and statistical models that "can slice and dice" specific data groups, he said. For example, the newly developed LPS home price index has shown that the downturn in the market "is very much a regional story."

One way the index further differentiates market developments is by including or excluding REO property sales for a more in-depth review. Properties are analyzed geographically and at the ZIP code and property-type level, he said, unless a specific area of the market does not have enough numbers of observations to produce a reliable index. Data are gathered directly from the county recorder to capture and understand the nuances of the data that go into the AVM. Markets are going through rapid changes that have generated hunger for information, tools and models, he said. Most information sources built in the past six to seven years geared towards appreciating markets, so they do not necessarily facilitate the development of tools that reflect the current crisis.

Asset valuation remains a challenge as lenders constantly face the dilemma of whether they got it right. Another challenge is competition. According to Mr. Nattagh, LPS has internally developed the metrics that allow index ...