Fannie Mae ‘Lender Letter’ About the CU process
Lender Letter explains CU process
The latest FNMA Lender Letter was released on February 2, 2015 (see PDF below). You really should print and read this new Lender Letter.
It attempts to smooth over lots of ruffled feathers among appraisers, AMC’s, Lenders, Underwriters, etc. To be honest, I find a bunch of ‘pipe dream’ info in this document.
Items such as:
- CU is a Fannie Mae–only risk management tool.
==> Freddie Mac is said to be working to implement this or a similar process very soon
- CU does not accept or reject appraisal reports or characterize an appraisal as “good” or “bad.” ==> However, a Risk Rating Score is applied to a generated CU report which electronically analyzes the appraisal, with 1 being ‘low risk’ and 5 being ‘higher risk’ . Untrained non-appraiser clerks at a Lender or AMC may condition the appraisal based on these scores. To them “1” could mean a ‘good’ report and “5” a ‘bad’ report.
- CU does not provide an estimate of value to the lender.
==> But the generated CU report document shows the ‘estimate of value’ for up to 20 SALES CU finds and includes in the multi-page CU report. Again, untrained non-appraiser clerks at a Lender or AMC may look at those presumed value figures and mentally condition the appraisal value as ‘good’ or ‘bad’ depending on the range of values CU shows.
- The lender must not make demands or provide instructions to the appraiser based solely on automated feedback.
==> Really? Baloney. It’s already been happening. The ‘risk comment(s)’ from the CU are being sent verbatim to appraisers by the untrained non-appraiser clerks at AMC’s with the demand that they add additional commentary in the appraisal about the comment(s).
- Before asking the appraiser to consider any alternative sales, it is imperative that the lender analyze the relevance of the sale and determine if the use of such sale would result in any material change to the appraisal report.
==> Many lenders don’t have appraisers on-staff, so this determination is left to untrained, non-appraiser, non-geo-competent clerks at the lender or AMC to decide relevance of sale properties to justify the appraised value.
That’s enough here. There are a lot more of these ‘pearls of wisdom’ in this Lender Letter. Again, read this document for yourself.
I am not opposed to the initiative to ‘encourage’ appraisers to be more accurate, diligent and correct in the way “we” do reports. That’s a given, based on past and current history, with sloppiness and fraud prevalent in some cases.
But the CU process is wrong-headed on so many fronts.
What has appraisers so frustrated with CU (and its predecessor and potentially still used AQM) is the heavy-handedness of the process. Where secrecy is employed. No information is shared at the front end of the appraisal process (even though it could be). An unknown AVM ‘model’ is used to generate adjusted values. Reports are compared to ‘peers’ who generally are not communicated with by area appraisers. And the CU process is somewhat contradictory to the Assumptions and Limiting Conditions we agree to, when we sign the GSE form.
Fannie Mae – Lender Letter LL-2015-02 (About CU)