Collateral Underwriter Crumbles
CU Robot Keeps Score on Appraisers
No, this is not about “cuukie” crumbles. It’s about what the Fannie Mae Collateral Underwriter (CU) process is finding in far too many appraisal reports.
A few days ago, I had an opportunity to speak with someone on the ‘inside’ of Fannie Mae. The discussion evolved to “what are the most serious items the CU process is finding in appraisals?”
The CU process, which became effective January 26, 2015, is a giant electronic robot collecting tons of specific data from submitted appraisals to FNMA. This data can then be tied directly to the individual appraiser. Every appraiser in this country who has reports submitted to FNMA has a unique CU ‘ID number’ assigned to them. The latter becomes part of the data collection stream. So, if a researcher wants to examine a series of reports from appraiser #12345 during a specific period, their giant CU robot can capture and spit out the info in milliseconds. They are doing just that.
Because data in reports is mostly numerical info, the reported info can be easily compared. They have been doing lots of comparisons for reports done by singular appraisers. The two most serious issues are these:
- Appraisers are changing the Q & C rating numbers for the same property in later appraisals. This is happening with sold subject properties in a current report later being used as a comp in a successive report, and with the other comps used. Appraisers are changing the rating number either up or down in successive reports. As FNMA explained a year and a half ago, the rating numbers are ABSOLUTE from the first time used. They are not meant to be changed unless there have been significant changes to the property between the report use dates. Even then, this needs a careful process and explanation (see below). Far too many appraisers believe that the rating numbers are RELATIVE to the subject. This is incorrect. The ratings are meant to be firmly fixed to that individual property the first time used in a report, rating it to itself in terms of the CU rating definitions. If you are changing rating numbers for the same property in different reports, you’re a prime candidate to receive a questioning letter from FNMA.
- Appraisers are using inappropriate, and the “same” GLA adjustment for different property types, and even similar ones. According to the ‘person on the inside’, many appraisers use ‘one’ GLA adjustment figure for SFRs, Condos, and Manufactured Homes. And maybe even 2-4 Multi Family properties. FNMA has found that the age, condition, quality and other aspects of those properties make no difference to the appraiser. ”One number and done” is how far too many appraisers are making the GLA adjustment. Makes absolutely no sense at all! The giant CU robot is able to compare different property types appraised by the same appraiser. So, if you do your reports this way, expect to get a letter from FNMA asking for explanation. The same thing is happening for similar type properties, i.e. SFRs, but of different GLA sizes, ages, etc. Appraisers are using exactly the SAME adjustment number for the GLA across multiple reports. Makes no difference if the subject is 900 sf or 3000 sf. The GLA adjustment amount is exactly the same. Again, makes absolutely no sense at all! If you are doing this, you will be discovered. And you will probably have a ‘robot representative’ ask for further explanation.
Changing the Q & C rating
“One number and done”?!
In a separate post, I’ll give you a simple, supportable way to make the GLA adjustment. I have to get another report finished first!
Use the exact original Q or C rating number
In regard to item #1 above, many good appraisers who understand the CU process highly recommend that regardless of changes to the property, the exact original Q or C rating number be kept and re-used for every successive appraisal, on the Quality and Condition line. This is because the giant CU robot sees and compares your reports to one another.
If there have been significant changes to the property over the time period, and you decide that a rating number change is necessary, use one of the ‘spare’ lines below Porch/Patio/Deck to make a separate “Additional Quality/Condition Adjustment.” Use which ever word applies. Doing it this way will keep you from getting knuckles wacked by the CU robot. Be sure to provide commentary in the report about why this separate adjustment is made. This will help a reviewer working with the robot, or anyone else, understand your opinion and method.
Remember, the CU robot is looking over your shoulder for every report you do submitted to FNMA.