Appraisal Quality and UCDP Notification

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On December 10, 2013, Fannie Mae issued a lender letter focusing on appraiser selection, data quality issues, and new processes for appraiser monitoring, and has added messages in UCDP related to appraisals from specific appraisers.

Appraisal Quality

Fannie Mae began collecting appraisal data in 2011 through the Uniform Collateral Data Portal® (UCDP®). Millions of appraisals have been submitted by lenders and their authorized agents through UCDP. UCDP enables Fannie Mae to monitor and evaluate appraisals for data accuracy and consistency. The purpose of this Lender Letter is to remind lenders of Fannie Mae’s appraiser selection requirements, highlight several data quality issues, and describe new processes that Fannie Mae has implemented to identify and monitor individual appraisers.

Appraiser Licensing Requirements

Fannie Mae performs a weekly check of appraisals submitted through UCDP against the National Registry maintained by the Appraisal Subcommittee of the Federal Financial Institutions Examination Council (ASC.gov). Based on those checks, Fannie Mae has identified instances when lenders have delivered loans supported by appraisals submitted through UCDP that were completed by an appraiser whose license or certification had been suspended or revoked as of the effective date of the appraisal. To assist lenders in identifying potential appraiser license or certification issues, UCDP issues warning messages regarding the status of an appraiser’s license or certification. Those messages do not trigger a rejection of the appraisal submission because of potential timing or database issues; however, lenders must not ignore the messages and are required to confirm the validity of the appraiser licensing information and to ensure compliance with Fannie Mae’s policies described in the Selling Guide, B4-1.1-03, Appraiser Selection. The Guide requirements include, but are not limited to, using an appraiser who is state-licensed or state-certified as of the effective date of the appraisal. Fannie Mae reminds lenders that failure to comply with appraiser licensing requirements will result in a repurchase request.

Accuracy and Consistency of Appraisal Data

Appraisal Quality UADFannie  Mae  can  now  identify  certain  inaccuracies  and  inconsistencies  in  appraisers’  work  products.  Data accuracy  issues  seen  in  Fannie  Mae’s  analysis  include,  but  are  not  limited  to,  instances  when  the same appraiser has provided inaccurate, inconsistent, or contradictory information on the same property and same transaction across multiple appraisals. Fannie Mae reviews appraisal reports for patterns of discrepancies and inconsistencies related to property characteristics such as gross living area, sales price, room count and lot size, as well as condition, quality, view and location ratings.

Examples of Inaccuracies and Inconsistencies Identified During Appraisal Reviews
  1. An  appraiser  used  the  same  property  and  sales  transaction  as  a  comparable  sale  across  multiple appraisals. In one report, the appraiser showed a sales transaction of $400,000 for a property with 2,354 square  feet  of  gross  living  area.  In 10 other  reports,  the  appraiser  listed  the  sales  price  of  the  same property  at  $375,000  and  the  size  as  2,034  square  feet.  Those  10  other  reports  were  consistent  with Fannie Mae’s verification of public records as well as sales price and square footage reported in 13 other appraisals that included information on the sale of this property under the same transaction. Fannie Mae’s Selling Guide requires appraisers to report property data accurately and consistently.
  2. An appraiser assigned a condition rating of C4 to a property on a specific transaction. The same appraiser used  the  same  property  transaction  as  a  comparable  sale  in  a  subsequent  appraisal  and  assigned  the property  a  condition  rating  of  C3.  Fannie  Mae  requires  the  appraiser  to  consistently  report  the  physical characteristics  of  the  property  from  appraisal  to  appraisal  when  referencing  the  same  transaction.  The Uniform Appraisal Dataset (UAD) mandates that rating selections be determined on an “absolute” basis and not on a “relative” basis. The rating should not change when that property transaction is compared to other  properties  (UAD  Update,  April  2012)  except  in  rare  cases  when  more  accurate  property  data becomes available.

Appraiser Monitoring and Lender Communication

Fannie Mae is developing a number of processes to provide information to lenders and appraisers regarding the quality of appraisals submitted through the UCDP.  Fannie Mae will provide information directly to appraisers whose appraisal reports exhibit a pattern of minor inconsistencies, inaccuracies, or data anomalies. The intent and expectation of communicating these issues to appraisers is for training and educational purposes, and to provide them with an opportunity to improve their work. Future appraisal reports from those appraisers will be monitored to assess improvement. A process is also being developed that will identify appraisers whose appraisal reports exhibit more egregious issues.  In  those  cases,  Fannie  Mae  will  contact  the  appraiser  and  the  lender  that  delivered  the  loan(s) informing them that either 100% of  the loans submitted with appraisals from the identified appraiser will be reviewed  in  the  post-purchase  file  review  process  or  that  Fannie  Mae  will  no  longer  accept  loans  with appraisals completed by the specific appraiser.

All approved sellers and servicers will receive access to the list of appraisers whose appraisals are subject to 100% review or whose appraisals are no longer accepted by Fannie Mae. The list will be available to approved
sellers  and  servicers  on  or  before  January  6,  2014.  Access  to  the  Appraiser  Quality  Monitoring  (AQM)  list, which will be protected content on Fannie Mae’s website, will be set up through Technology Manager. Details about  how  to  obtain  access  will  be  provided  on  Fannie  Mae’s  business  portal  and  in  communications  to approved sellers and servicers.

NOTE:  The new processes described in this letter may not identify all issues that could lead to an appraisal-related repurchase request. The presence or absence of communications between Fannie Mae and an appraiser, or Fannie Mae and a lender, concerning the quality of appraisals submitted through the UCDP does not imply that a lender has met its responsibilities under the Guide regarding appraisals or that a lender will not be required to repurchase a loan for reasons related to the appraisal or the performance of the appraiser.

Updated UCDP Messages

In conjunction with the above processes, Fannie Mae will also add new proprietary messages in UCDP effective December 10, 2013, to notify lenders about actions regarding appraisals from specific appraisers. The
messages will indicate either that 100% of the loans submitted with appraisals from the identified appraiser will be reviewed or that Fannie Mae will not accept appraisals from the identified appraiser, as applicable.
Lastly, lenders are reminded that in accordance with the Selling Guide, B4-1.1-05, Field Reviews, Fannie Mae has the right to refuse to accept appraisals prepared by specific appraisers.

Lenders who have questions about this Lender Letter should contact their Account Team.

Appraisal Quality and UCDP Notification Lender Letter 2013-10

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1 Response

  1. Jeremy Hall Appraisals - Colorado Jeremy Hall Appraisals - Colorado says:

    Appraisers should be able to access the UCDP database, in a limited manner, to at least review UCDP ratings and entries for the properties in question. We should be able to know ahead of time if discrepancy exists, and perhaps there should be a specific fill area meant specifically for explaining variance. / The UAD entries being located right on the primary 1004 form is a mistake I think. It would be better if there was an integrated form for UAD descriptions, that would be tied to the primary 1004 form. Appraisers should still be able to freely express statements of quality and specific description within the 1004 adjustment lines. And there should be an integrated and associated new form for UAD entries. Having the appraisers free writing grid lines in the 1004 form taken away by ‘coding description entries’ is both confusing to users and developers of appraisal services alike. Fannie has of yet; not provided a premade appraisal report inclusion to explain coding to readers of appraisal services. Nor has Fannie provided picture based guidance for quality and condition ratings so appraisers can know for certain what the expectations are. UAD feels like a field of landmines, where an appraiser will inevitably make a mistake, even if they are very cautious. The direct approval system with Fannie is imbalanced, if appraisers are constantly more and more restricted in UAD form filling, and also do not have access to the form filling UAD/UCDP results database. So I think requiring an integrated UAD specific additional form would be a much wiser approach to auto tracking, than replacing appraisal fill lines with auto coding lines which often confuse both appraiser and user of appraisal services alike.

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