How Big, Really… Size Matters… Suggestions
Very often the public records are dead wrong…
We all know Fannie Mae (FNMA) has their Collateral Underwriting (CU) report scoring system after the .xml file of the report is submitted through the Uniform Collateral Data Portal (UCDP) portal used by both GSE’s. This system of theirs is used to ‘score’ an appraisal for a loan quality rating, and it’s also used to provide a lender with a guarantee of relief from a FNMA loan buy-back demand, if the report ‘scores’ a number of 2.5 or lower.
We’ve previously discussed how that can be manipulated by a lender or an Appraisal Management Company (AMC) to coerce appraisers to modify reports to achieve a “passing grade.”
Well, the ‘other half’ of the conservatorship GSE’s is Freddie Mac (FrMAC). They also have an on-board review process for submitted appraisals. Theirs is called Loan Collateral Advisor (LCA). It also issues a quality rating score “…to assess the overall appraisal quality and valuation risk of the appraisal. All results are returned (to the lender) within the tool, including scores that represent a view of appraisal quality and valuation risk.” This info is from a FAQ document issued by FrMAC. The ‘results’ are in the form of warning messages generated by the LCA system.
Just as CU does, the LCA review is also designed to assist the lender to avoid buy-backs of loans based on “appraisal deficiencies.” FrMac’s message to lenders is “correct the deficiencies before you deliver a loan to FrMac.” The material I’ve read does not disclose a minimum score number to “pass” as does FNMA. In fact, we don’t know what the ‘scoring range numbers’ are in the LCA.
I give you this background info so you understand why my message subject line says ‘size matters.’
There is a tendency among the GSE’s, lenders, AMC’s, borrowers, real estate agents, loan originators, etc., to believe public records are absolutely accurate in the property data they report, especially for what we call the above grade, gross living area (GLA), of a home.
Very often the public records are dead wrong.
Several of the LCA warning messages concern discrepancies between the appraiser’s reported GLA and the public records… as shown here:
- The gross living area for the subject property ([GLA] sf) varies by more than [X]% and [Y] sf from public records ([GLA] sf). Please confirm the reported gross living area for the subject property is accurate and adequately supported.
- The gross living area for the subject property ([GLA] sf) varies by more than [X]% from public records ([GLA] sf). Please confirm the reported gross living area for the subject property is accurate and adequately supported.
- The subject reported gross living area of [GLA] sf, is [larger] than [X]% of homes within the vicinity which range from [GLA] sf to [GLA] sf. Please ensure that the provided sales adequately support the marketability of the subject property.
- In every report, add the statement that YOU measured the dwelling to determine the GLA used in the report. Also state that your measurement is considered more accurate than other sources. (Add this to your starting template or ‘master’ report.)
- Compare your measurement with public records. When there is a difference, state the public records larger or smaller amount in either a percentage or actual s/f difference.
- When you find a difference, state that YOUR measurement is more accurate “due to an assessor measurement error.” You may want to include further details to explain why. Don’t be afraid to call out why public records are wrong.
- For proposed new construction, when using a set of blueprints, state that those were your source to determine the GLA. Don’t forget to add a comment about a Hypothetical Condition (also applies to #5).
- When appraising a new, not yet delivered Manufactured Home, state that you used the ‘builder drawing’ to determine the GLA. Note that these sometimes are not very accurate, so you may need to talk with a sales rep or even the factory rep to get the ‘real’ dimensions, or perhaps even visit the retailer’s lot to measure a display model which is the same model as being purchased.
If you follow these suggestions, this will be one less ‘ding’ you’ll get from the FrMAC and FNMA electronic reviews, because the lender is required to confirm data source material before asking for a correction. If you state how you derived the GLA, it will satisfy that issue.