CU Process Will Improve Appraisals? A Pipedream or Reality?
Fannie Mae Claims the CU Process Will “Improve Appraisals.” A Pipedream or Reality?
A few days ago, I watched the FNMA eLearning webinar “Introduction to CU” video showing how their new Collateral Underwriter will be implemented, starting on Jan. 26, 2015, applying to 1004 and 1073 Reports (initially).
You really should watch this also! CU applies to FANNIE MAE only; FreddieMac, VA, FHA, USDA are not involved at this time.
Click this link, and you’ll find the link to the video ½ way down on the left.
I captured a few screen shots of their presentation to help explain what will happen, and have added comments below:
This is the basic process. Your appraisal (in .xml format) will be submitted by the AMC or the Lender to the UCDP portal. The UCDP will run a ‘rules set’ for UAD compliance, plus perform the new CU process to electronically review other aspects of your report. This will include generating a list of up to 20 additional properties considered to be ‘possibly comparable’ by the CU data base and FNMA models as shown below. The ‘user’ can then decide to send the report back to the appraiser, represented by the Dashed Red Lines (my addition to the screen shot), and ask for additional analysis and/or inclusion of one or more ‘comps’ into the report. Then your report has to be re-submitted back through the UCDP for final clearance.
Below is a sample of what the ‘user’ will receive from the CU electronic review – the list of appraiser reported comparables, and any additional ‘model-selected sales’ properties:
One aspect hidden in the CU process is FNMA’s property data base is tied to Census Tracts, and ‘value heat maps.’ So they can analyze property sales geographically very tightly in any area. While we don’t know yet for sure, the “perspective” I read between the lines is FNMA believes Census Tracts can be a defining aspect of comparable property selection. As I have previously written, when was the last time you performed comp selection research based around Census Tracts? Here’s a screen shot of Census Tracts in my area. Some are small and others are quite large. I can say that in all the years as an appraiser, I have NEVER considered comps based on Census Tracts:
Here’s what their ‘Census Tract Heat Map’ will look like (this is not in my area):
Also notice that the CU process will show the ‘user’ property value trends in the form of a graph based on the CU provided ‘model-selected sales.’
The most troubling aspects of this CU process are three:
- secrecy on the part of FNMA’s non-disclosure of (sometimes unreliable) market data until after the report is submitted to the UCDP;
- attempts to turn appraisal reports into entirely scientifically and mathematically supported discourses based on potentially questionable properties the experienced appraiser might consider inappropriate, or even appropriate, as to comparability, and
- insertion of the ‘user’ into the process to possibly manipulate the appraisal report, thereby removing mandated appraiser independence (in the Dodd-Frank law) from the entire process.
FNMA claims the CU process will “improve appraisals.” A pipedream, or reality? That remains to be seen, starting on Jan. 26, 2015.