Misinterpreted CU Update Message

Properties Editing Tool of Collateral Underwriter 4.2 MisinterpretedWhere the EDITs are used, they are within the "model properties"…


This is the message many appraisers have seen over the past week or so, which came from FNMA:

“During the weekend of Dec. 9, we will implement Collateral Underwriter® (CU™) 4.2, (which includes) the ability to edit the subject and appraiser-provided comparable sales property characteristics. CU 4.2 will also provide mortgage insurers (MIs) with access to CU. Lenders will be able to give their MI risk partners access to appraisal-specific data by providing them the Doc File ID generated at the time of appraisal submission.”

As so often happens with poorly written communications and instructions, many appraisers, including me, became alarmed about what that says.

Before I continue with this explanation, I want to acknowledge the many appraisers and others across this country who see my messages, and interact with me.  Because this association has many deep and wide tentacles, there are appraisers who have employment at various levels in this industry, with vast experience and knowledge. There are also people inside banks, others are Chief Appraisers, while some are instructors, state regulators, and owners or managers of associated product development firms we interact with daily. I appreciate everyone who allows me to invade their cranium occasionally!

On 10/13/17, I had a phone conversation with a person inside a bank who has full knowledge of how FNMA’s CU works. This individual provided me with screenshots of CU data generated by an actual appraisal (without revealing the appraised property, value, ownership, etc). The call focused on how CU works and what this EDITING function can and will do, and won’t do.

The caller stated that the CU user (lender, etc.), or even CU itself (the giant data base in the sky), CANNOT MAKE CHANGES to the actual submitted report subject and comp data. This is what was misinterpreted in the FNMA message above. Report changes can only be done by the appraiser.

Where the EDITs are used, they are within the “model properties” which are generated by CU, but may include properties within the report, in addition to the other sales CU finds. These all are on a separate list outside the actual report. “Editing” is basically playing a “what if” game of chance with the CU “model properties” to see how modifications might change the Adjusted Range of Value – but not in the actual report. This can be used to assist the user in a report analysis function or perhaps to provide rationale for further communication with the appraiser about making changes to the report. Editing can also be used to see how the risk rating number changes.

Collateral Underwriter is an extraordinarily robust data base containing millions of properties – none directly available to appraisers who feed it. The caller told me it takes just a few minutes (less than 5) for a CU analysis report to be generated after a report is uploaded. CU also is a ‘black box’ with built in algorithms that in some cases don’t make logical sense when it generates suggested adjustment values across a collection of properties (which I saw in the sample). No one on the outside of FNMA can pry into CU to see how it actually works.

CU is a ‘fannie’ creation, and shared by Freddie Mac. None of the other agencies we deal with currently have anything that functions the same way as CU.

Things are not quite as dire as some of us reacted initially.

Dave Towne
Image credit flickr - Quinn Dombrowski
Dave Towne

Dave Towne

AGA, MNAA, Accredited Green Appraiser - Licensed in WA State since 2003. Dave Towne on e-AppraisersDirectory.com

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17 Responses

  1. David Samnick on Facebook David Samnick on Facebook says:

    Sure. Don’t panic. Similar to I’m from the government and here to help.

  2. Avatar Chaz Thomas says:

    and this will give untrained unqualified loan officers, so called “reviewers”  and others an excuse to send us “three more comps” and what ever to try to steer the reported value.

    • True. Don’t you especially like the part where the service is intended for MI’s (purportedly mortgage insurers).

      So now when the Direct Endorsement Lender-Client is Fly By Night Mortgage, using FNMAs criteria for expedited processing, with a CU score of 2.5 and a PIW was allowed the intended and [FNMA mandated]  authorized users are (1) the lender FBNM; (2) FNMA, (3) Some unknown PMI Company; (4) their internal staff of reviewers and other undescribed property experts, (5) the aggregator that will bundle the loans, (6) some re-insurer over in France (thank you AIG!) (7) Wall Street brokerages that will sell the (securitized) MBS (8) Worldwide investors (9) the SEC, and (10) FDIC…plus any specific lender regulators as may exist.

      THIS is why I choose not to do anymore FNMA work at all! FNMA has simply become more trouble than they are worth…at all levels. I’ll do HUD/FHA work’ VA work if I ever bother to try to get on an approved panel, and private work, but there is simply no incentive to do anymore open-end-liability work for FNMA.


  3. Avatar Xpert says:

    Many appraisers misinterpreted fnma’s “new and improved” cu update message. Doesn’t this tell you something about fnma’s communication skills?

  4. Avatar Eric West says:

    “What if” implies that CU users are second guessing appraisers and their work!

  5. Dave, thank you for clarifying the miscommunication of FNMA.

    However, the new 600 lb gorilla in the room is now “WHY do MI’s have a need to play “What if” games to my comparable sales and adjustments at all? To what end? Its a question for FNMA, not yourself.

    What if the appraiser used a different comparable sale?

    What if the appraiser adjusted the comparable $25 a sf rather than $150?

    What if the appraiser didn’t adjust the comparable for the view?

    What if the appraiser is wrong about the comparables selection?

    What if FNMA had SR3 compliant appraisal reviews performed if there is any doubt?

    What if FNMA and the MI leave tampering with MY appraisal and its results 100% alone?

    What if lenders and mortgage insurers simply hired qualified people that were competent to make their decisions in the first place? Experienced, without need for  second guessing the process with a spurious program like CU ad it’s make believe “market data”? [see other articles in AB re CU reliability]?

    What if those same people had the confidence, skill and knowledge to stand up like appraisers are expected to do, and say “I underwrote that loan. Right or wrong, it was MY decision based on a properly completed appraisal; an apparently qualified borrower and a properly completed loan package with all necessary verifications; and in accordance with applicable policies.”

    There is no end to playing the “What if” game.

     What if it serves no discernible purpose except to create doubt where none should exist to begin with?

  6. Baggins Baggins says:

    The GSE’s are private companies. Crystal ball glowing, if you would just make this one change we can get the risk assessment score down….. Is it irony that the professionals sourced to feed the reliability of a data model, are excluded from providing feedback or reviewing the results of that data model? I think there may be a historical reference to this somewhere…


  7. Baggins Baggins says:

    Appraisers nationally, get ready to post this link and copied portions in your reports, over and over again. And always copy the exact text of the client or in the case of amc’s, agent of the client’s, alteration or clarification request in your report as well.

    Fannie Mae Collateral Underwriter FAQs

    Let’s be honest about how this works. The employees who use the system turn over frequently. The time and resource drain on the appraiser is notable and never ending. There will every day of the week, be a new ‘reviewer’ who has not read the above document.

  8. Just for chuckles, I think I’ll post FNMAs original CU-Process Patent Application….along with the early Jan/Feb Lender letter about how appraisers in the past appraised to guidelines, rather than to market. May need a day to dig if out of old computer.

    • Baggins Baggins says:

      Mike, you posted that last year. Here you go.

      Fannie Mae Collateral Underwriter Patent Application

      • Baggs: You are a scholar and a gentleman!

        I’d urge all that are interested in the topic to read it. Especially those readers that are particularly versed in statistical analysis for real estate valuation purposes. Two things to keep in mind:

        1. It is the process itself that was patented. Certainly it could be upgraded (and has been up through versions 4.2) – the underlying process would still have to be fundamental otherwise a new patent would be required, wouldn’t it?

        2. Note the dates involved. Data up through 2014 was used for their database. FNMA lender letter of either January or February 2015 disclosed that in the past a majority (or if not majority; a significant number) of appraisers had been appraising to guidelines rather than market.

        GIGO (IMHO)

  9. Avatar Koma says:

    From above; This can be used to assist the user in a report analysis function or perhaps to provide rationale for further communication with the appraiser about making changes to the report. REALLY! WTF!

    You better bring more than some CU finding to challenge me on one of my reports let alone to make changes. I’m getting tired of this and thinking the states better start to challenge these attempts to subvert us appraisers.

  10. Avatar Tom D says:

    are we talking about cu being converted to a slot machine algorithm? just pull the handle and watch the value spin.  i think that there are good non amc lenders, like good appraisers, who will not do that.  then again, walking thru the amc swamp will get leeches stuck to you.

  11. Avatar Tim says:

    I give it 1 year before they control what is ultimately in our reports… I dont’ trust them as far as I can throw them..

  12. There is no way to apply the FNMA license limitation about ‘further human review’ in a manner that would be perceived by appraisers to be credible, AND to be in compliance with USPAP in an affordable manner.

    The latter meaning that lenders have already spoken on the issue. They expect ALL required FNMA and USPAP compliance to come out of the AMC fee. Translation: IT WILL NOT GET DONE.

  13. Baggins Baggins says:

    Is similar model scrutiny applied to the something something trillions derivatives market? Let’s contrast the numbers.

  14. James Tracey on Facebook James Tracey on Facebook says:

    I am so glad I can walk away from this job.


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Misinterpreted CU Update Message

by Dave Towne time to read: 2 min