UAD Rating Absolute vs. Relative

UAD Rating Absolute vs Relative

Where did those rating words come from?

Why is it so many appraisers have trouble with UAD and the CU (Collateral Underwriter), and how to apply the Quality and Condition rating between the Subject and Comps?

Not long after the UAD was implemented/mandated by FNMA (in 2011), and then the CU evaluation system came along, FNMA began discovering that many appraisers were improperly Rating the comps Quality and Condition AGAINST the Subject in the grid. And they began telling appraisers what they were finding. FNMA also discovered, and revealed, that many appraisers were using the same Comps over and over again in different reports, but were using DIFFERENT rating ‘numbers’ for those properties – depending on the Quality and Condition they applied to the SUBJECT.

Applying an ‘opinion’ of the difference for the Quality and Condition is not how we are supposed to do appraisals. Although many appraisers were taught to do that years ago by their mentors, who were also doing it wrong. Unfortunately, FNMA never really said much about it then, until the CU process started. So bad habits started, and were transferred from one appraiser to another, and down the line.

Everything on the grid pages is ABSOLUTE to those properties. The Address, the Site size, View, Design, Actual Age, GLA size, Garage & Carport spaces, etc. Everything. As I like to say – “It is what it is, where it is, when it is.”

Yet many appraisers still think the Rating for Quality and Condition for Comps should be applied Relative-to the Subject. Uh…NO! The Comps are rated what they are, based on the Quality and Condition Rating Definitions that apply with UAD. And so is the Subject.

Over the years, I’ve read countless laments by appraisers who say the ‘UAD definitions’ are hard to understand, and don’t have ‘steps’ between the numbers so appraisers can try to engineer precise differences in the ratings and resulting adjustments. That line of thinking is basically hogwash. If you think you need to make more precise adjustments, you can do so on the extra grid lines…such as ‘Add’l Qual Adj.’ or the same for Cond.

Why do I believe this is so? Let me ask those of you who believe UAD definitions are so difficult: before UAD came along, did you ever include definitions of the ‘rating words’ we used back in the dark ages – in your reports? That can be answered 100% no (except by some very elite appraisers). Another question: Where did those ‘rating words’ come from, and can you quickly pull out your reference guide to bring up the definitions for those? Again, probably 100% no. Before you whine, send me your definitions of Average(+) and Excellent(-), for both Quality and Condition, that you used prior to UAD.

So now we have UAD and the basically easy to use and understand definitions. These, by the way, should be included in every appraisal report. All the software vendors have definition pages to add into reports. Not including these in reports means you have produced a report that is NOT CREDIBLE per USPAP because without those, the reader(s) won’t know what the rating numbers and other codes mean.

Included with this is a PDF UAD Quick Reference Guide I produced in 2011. Look on page 3 of 6 for Rating definitions, which have not changed. These definitions are abbreviated from the UAD document to fit the page, but the key elements are included.

Dave Towne
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Dave Towne

Dave Towne

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

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39 Responses

  1. Avatar Jeff says:

    This biggest issue with the C’s and Q’s is the very words you mentioned in the first part of this blog which is a great blog and I appreciate bring the topic to front. But you mention in this blog that quality and condition of comps is to be compared to the subject which is a correct statement however fnma and CU compare the C’s and Q;s to the market therefore making them absolute. Appraisers have always compared properties to the subject which is how we  determine adjustments for the difference in amenities through market reaction. So there is a conflict with comparing properties to the subject and the absolute c and q ratings and that is where the problems start

  2. Avatar Jeff says:

    Some appraisers feel that in order to make an adjustment for quality or condition that they feel is supported, the ratings should be different which is not true. You can have comps with the same quality or condition rating as the subject and still warrant an adjustment

    • Baggins Baggins says:

      But underwriters stip you if you apply adjusts and all C’s match.  DouuuuuuuuU!~~~!!!!   It’s catch 22, but just fill a line item:  C line adjust notes, and you’re golden.

      Reasons why I never move Q ratings, and within cookie suburbs, they’re all either Q5, Q4, Q3.  I run Q’s uniform, and usually C’s uniform, with some at c3/c4 as necessary, and then apply individual line adjusts as expected.  Just important to not put the condition adjusts in a different line.  Condition adjusts still go in C line, despite FNMA hijacking the line and eliminating the appraisers free writing explanation potential.

      UAD Zombies, to the rescue.

      • Avatar Jeff says:

        If they are good underwriters and know what they are doing they will not. If they insist that your c’s and q’s have a different rating to warrant an adjustment then let them know that fannie mae allows you to make adjustments on properties with the same c’s and q’s. There is a wide variety of C3’s and Q3’s in our diverse market. We do not have tract home development properties in our service areas.

    • Avatar Hans Schaetzke II says:

      All it takes is one well-worded reply to the Underwriter stipulation and you will never hear from them again. Explain your thinking and move on.

  3. Avatar Koma says:


    Don’t know what additional lines everyone talks about because in my reports those (3 big deal) lines are already full. As far as quality & condition they are still subject to my opinion and yes they stay the same for the life of the comps for a particular sale date of those comps. That’s not where I have a problem, it’s when the say ONE (not two or five or ten) of my “peers” have called it a different QofC that drives me crazy.

    Example; rancher with four walls/slab/.25 ac/stock materials/no upgrades/in a s/d but not a PUD and I called it a Q5. Well I received notice through the CU program my client has that one of my “peers” called it a Q4 and they want ME to go back and reconsider my rating. Notified them my QofC rating was correct and I would not go back to reconsider. Bye..bye..

    FNMA made these new requirements on forms that were already 5-6 yrs old when they pushed them out, so tell me how smart these pencil pushers really are! In my opinion, I’m sure 23,000 others, Chuck Upchuck is pure trash. Someone that has any free time (HA) should file a freedom of information act request to get a hold of and publish this gov information. Yes they are in control of the US gov and because of that we should have access.

    If CU wants to take my license it can have it! Another appraisal industry loss not mine.

  4. Avatar Brian says:

    The demise of our profession is from the disconnect within it and the exploitation of our disconnect by Fannie Mae and Freddie Mac and those Holiest amongst Holiest appraisers who are the experts in appraising in their eyes only. Fannie Mae isn’t telling us anything new that appraisers didn’t know already but what they are doing is making it main stream in order to disassemble our profession piece by piece by propaganda literature causing turmoil from within putting appraiser against appraiser igniting the implosion fuse from within at the same time chipping away at the preamble and the public trust we are meant to protect with the incompetency lender letter chisel hammers that are sent out in the masses and then redistributed all aimed at killing our profession off for the ultimate unjust enrichment and those of us within our profession taking aim at others from their holy thrones are the true idiots as they are Fannie Mae’s puppets and truly lack the individuality and competency needed for our existence as a whole.

    Those that post these articles about the wrongs of others which is to be judged by no one but the Licensing bodies of the state boards should not be in this profession as we are individually licensed for a reason and all have different levels of experience and knowledge that changes and grows relative to changes in the ever evolving and constantly changing markets that are absolute in the existence of our professional careers as appraisers.

    I am assuming and we all know what assuming means but I am assuming that MR. Towne is one of the Elite Appraisers he speaks of and has never utilized a rating of +/- within the quality/condition over they years and was blessed with the same skill set and experience at his time of licensure that he possesses today.

    I can assure you that as Real Estate Appraiser, Real Estate Broker, and Home Inspector that the knowledge I have gained over my 20+ years in the Industry has evolved so has my holistic view in determining my opinion of quality and condition of a property which is absolute as I was taught it to be absolute some 20+ years ago.

    Unless we all ban together as a whole protecting even the most incompetent of our PEERS, we will individually aid Fannie Mae in killing off our profession. We need to stick together and let the Licensing bodies decide who is incompetent and who isn’t NOT Fannie Mae or Freddie Mac or those that advocate for them.

    Think of this before anyone protects Fannie Mae again in these type articles and that is where is the Fannie Mae approved Lender/Seller Quality Monitoring List, The Mortgage Broker Quality Monitoring List, The Mortgage Originator Quality Monitoring List, The Home Inspector Quality Monitoring List, The Credit Reporting Quality monitoring List, The Title Company Quality monitoring List, The Settlement Agent Quality Monitoring List, The Mortgage Insurer Quality Monitoring List and where is the transparency in these Lists for the whole industry to see so that everyone knows what parties to transactions are incompetent. If it was truly about creating a stable housing market it would be full transparency and fairness throughout the industry not just what’s fair in the abusive eyes of Fannie Mae or Freddie Mac who have already played out their end in the destruction that they created in the financial crisis with the new beginning of the Common Securitization Platform that is the joint venture development of their existence

    • Avatar Bill Johnson says:

      Well said Brian.

    • Baggins Baggins says:

      Call in the FED to adjust the rate!  LOL.

      Blame the citizens, for continuing to be so irresponsible as to treat their homes as atm machines, and never actually achieve true and complete home ownership.

      You don’t own it, until the debt is paid.  Plain and simple.  Most ‘home owners’ are simply home borrowers with debt labels.  They willingly promote gse’s as a consequence to debt based financing choices.

      It’s a case of getting exactly what was asked for.  When we borrow, we voluntarily tie into government process, and there is no two ways about it.  It’s a choice, not a requirement.

      Your pal, X

  5. Avatar Jeff says:

    I totally agree Brain. We need to unite in a new independent coalition to protect our independence and our professionalism

  6. Avatar Fred says:

    Name is Dave Towne , appraiser sheriff boy.

  7. Avatar Bill Johnson says:

    Yes Mr. real estate agent I’m looking for my first home and here’s what I want. I would love to find something with a neutral view, preferably with a view of my neighbors (Residential). Its also been my dream to find a C4 conditioned property where all major building components have been adequately maintained, but please find me a home with some minor deferred maintenance. In finding this C4 home its imperative that the kitchen must have been updated not remodeled exactly 11 to 15 years ago while its okay if its unknown if the bathrooms have been updated in the past 15 years. My wife is a stickler for quality and she demands that our dream home also be built via standard or modified building plans and the design must include adequate fenestration (Q4). In previewing these homes in the MLS we will only review those with front pictures that were taken from an angle. We must warn you Mr. agent, we will NOT compare the properties to each other, but will independently determine a score for each one. Lastly, we will not take out a mortgage if the Collateral Underwriter Risk Score is higher than 2.5. The article is valid, but many will not understand our findings even if done by the book.

    • Baggins Baggins says:

      Sounds like it might be a C3 to me. I mean, if they had the previous update kitchen and previous update bath, they could go C3 with some new paints and carpets here and there. Here we go again…. lol Double dare you to try and market a property to the open market with FNMA coding. It’s a great idea, and realty agents definitely need to be forced to get in on this UAD deal as well. After all, they’re just as influential to GSE origination as appraisers are, if not more so. They deserve UAD 3000.

      • Avatar Bill Johnson says:

        Sorry Baggins but your C3 rating is materially different per a panel of your peers. Excuse me while I go search my MLS for those darn point one bathrooms that agents never seem to enter.

  8. Avatar Brian says:

    i’m specifically looking for a home within the census block xyz of census block group zyx in census tract Fannie Mae control the housing pricing now and I love that area because they dictate how my home appreciates if it appreciates at all because they have threatened appraisers livelihoods with keeping sales that aren’t comparable but comparable to them restricted to a certain area. All I know is that in Saint Louis there has never been books written on what census block you live in but what high school you went to defines the areas with variances of different developments within those market areas but there will never be a day in this market that any person markets or makes a buying decision based on a census block or census block group.

    • Baggins Baggins says:

      Which federal occupation zone are you referring to?

    • Mike Ford Mike Ford says:


      I have to break my own self imposed rule here about being critical of my fellow appraiser-posters. Before I do so, in fairness I have to say I often agree with Dave and many of his views. I respect him.

      As for his contention that CU and UAD absolutes rather than relative ratings are and always have been the correct appraisal methodology, well all I can think of to say IF I clean it up is “What a steaming pile of pony loaf” that is!

      I don’t know where Dave took his appraisal classes but my earliest classes were from AIREA back in 1986 (now the Appraisal Institute). Some consider them to be or have been an authoritative source teaching appraisal fundamentals to advanced concepts.

      Dave, ratings were ALWAYS relative TO THE DEFINED NEIGHBORHOOD; and comparisons were from the perspective of a hypothetical “most probable” buyer that we used to actually define in any good appraisal report (entry level; step up or step down buyers, etc.) so that the lender would better be able to give some context to the appraisal and related lending risks. We also used to explain what stage of the economic life cycle a given neighborhood appeared to be in.

      UAD is an artificial construct designed solely to facilitate computer data base building & tracking. One of the original FNMA criticisms or phony rationalizations for UAD was that so many ways of reporting ‘ratings’ were confusing borrowers was pure bull**** er I mean “pony loaf”.

      In my 25+- years experience before UAD ( plus 6 years sales experience reading appraisals as far back as 1971) I never had a buyer or seller say that they were confused by the rating of average minus; avg.+, sim., similar, sup., superior, inf., inferior, or fair-avg., or equal, same, or even “+, -, or =” etc..

      What’s more those explanations never required a two to three page addendum with arbitrary and capricious “definitions” that no known “most probable buyer” would ever use, and certainly could not understand absent the new two+/- page glossary of terms!

      {By the way for our UAD attuned readers +/- is an old timers 3 character rendering of a commonly accepted abbreviation for ‘approximately, more or less’}

      When FNMA unilaterally decided to dictate how appraisals must be written in order to be acceptable for their data base compiling priorities, they also changed how appraisals are actually performed. Oh, they say there is no change, You can still make relative comparisons with respect to gradation within the acceptable absolute comparable property ratings… you just have to explain them in the text addendum portions of the report…which is neither read nor factored into YOUR performance ratings with FNMA.

      For example; Comparable sale 1 is rated Q3/C3 as is the subject however the difference in both partial quality of material used and resulting apparent condition is inferior (or superior) depending on whatever the actual reasons are. “An adjustment of $15,000 is made based upon approximate estimated costs to eliminate the differences; supported by meaningless regression analysis and the far more reliable Ouija and dart board techniques”, when the differences may not ‘fit’ the canned comments and rating criteria.

      Human nature being what it is; and AMCs hiring of idiots that know less about appraising than even the clowns at FNMA do, what happens is the appraiser now asks if having the absolutely predictable fight with the AMC; or Wells-Fargo-Rels-CoreLogic pseudo-reviewers is worth it.

      Taking the extra time to explain themselves about making a line adjustment that is not visually self evident as the old relative ratings would have been; knowing a fight will ensue with people that don’t read the text comments anyway! Or, will they save time AND just avoid the whole thing and NOT MAKE the adjustment that 90% of most probable buyers will make?

      Somewhere along the way non appraiser policy makers decided they know more about appraising than appraisers do, and we allowed it to happen.

      They are the same people that told us the old percentile line item; gross & net adjustment guidelines were no longer applicable because appraisers were appraising to the guidelines rather than to the market. Of course THAT admission does not prevent them from using a database derived from those very same “appraised to guidelines rather than to market” data sets in telling us what our peers adjustments have been.

      Its not surprising that FNMAs patented CU process was developed without one active appraiser being involved. FNMA has outlived its usefulness. Big banks like Wells Fargo have proven they need no FNMA quasi governmental / private enterprise partnership to commit fraud on a massive scale.

      I don’t care anymore if FNMA fails as long as whatever replaces it does it without taxpayer assistance or guarantees. I would actually prefer to see FNMA fail completely before they are given the chance to completely erode America’s confidence in the appraisal process…there are still other appraisal users that want legitimate, real appraisals for purposes other than promoting loan fraud with plausible deniability.

      • Avatar Jamie says:

        I as well have been Appraising for over 20yrs now and +/- were always well understood throughout the Industry by Underwriters, Reviewers, etc., as well as by Fannie/Freddie as an accepted standard in reporting quality/condition. Marshall & Swift and other Cost Handbooks set the standard for determining Quality of Construction Ratings which resulted in like terminology utilized for our Opinions in Condition Ratings; hence, seasoned appraisers typically have more knowledge, experience and a much better understanding when in applying Q/C ratings that most accurately reflect the holistic view of the improvements, and why a one size fits all discriminatory approach by Fannie Mae in labelling and grouping all Appraisers as equal peers is unlawful violating many federal and state laws and acts in fair housing, civil rights, and appraiser independence to name a few, not to mention tortuously interfering with business relations creating unfair business advantages for appraisers in Fannie/Freddie unlawful use of our assignment results in Collateral Underwriter which they use for improper reviews of our work increasing their profits by not hiring appraisers for review work and taking away from our profits.

        The following is in regards to Collateral Underwriter copied from part of a Lender/Sellers master Contract with Fannie Mae:

        CU 15-01 Collateral Underwriter Schedule

        1. Licensed Application. Fannie Mae’s application known as Collateral Underwriter™ or CU™ (the “Licensed Application”), is licensed pursuant to this Schedule and the Master Terms and Conditions between Fannie Mae and Licensee (the “Master Terms”) into which this Schedule is incorporated. As of the effective date of this Schedule, the Licensed Application will include certain functionality and features relating to the identification of certain appraisal issues.

        4. Acknowledgments. Licensee acknowledges and agrees to the following:

        (b) Output generated by the Licensed Application, in whole or in part, has not been prepared by a licensed or certified appraiser and does not constitute an appraisal or valuation of the subject property.


        Unfortunately Fannie/Freddie have been playing us all for fools for a while now, creating turmoil throughout the appraisal profession in their one size fits all approach to valuing collateral.

        The UAD has little to do with Fannie/Freddie’s so called uniform approach to reporting certain data fields like Q/C ratings so that readers/users of appraisals are able to gain a better understanding of our work.

        All appraisers should read FHFA’s report to congress as well as their Bulletins to the Enterprises as well as the Report on Modeling which within those one can easily interpret without much confusion in FHFA’s description of Pilot Programs Fannie/Freddie have been implementing slowly in phases into the industry. UAD Data is needed for controlled observable and unobservable inputs in creating and effective Model application such as Collateral Underwriter and those of us rogue appraisers that apply Q/C Ratings inconsistent with our so called Peers but consistent with our expertise cause the model to provide unreliable outputs in the fair market value of collateral on their books, and if our independent opinions based on seasoned knowledge and expertise doesn’t align consistently with other appraisers in respective markets those appraisers will be required to sit at the back of the bus, and yes I did say fair market value not market value as CU is designed around accounting principles, algorithms, regression analysis, with manipulated data input controls implemented in phases such as previously stated by another appraiser on this thread with census blocks and groups as they remove arbitrary guidelines in neighborhood boundary inputs by exchanging uncontrollable and inconsistent boundary inputs to a specific defined input reliable only to Fannie/Freddie and not the market which we appraise to.

        • Jamie’s analysis above is spot on!

          The last half of the last paragraph pretty much says it al for those that understand the difference between an accountants opinion of FMV and MV. Its also why IVSC cannot work, and why we should never have capitulated and allowed appraisers to be called “valuators”. We may use the same ‘Approaches’ (Sales Comparison, Income, Cost) but our application of them is day and night different.

          For Wall Street and international accounting purposes there is nothing wrong with FMV. It does not however translate well to MV of individual properties NOR SHOULD the sum of the parts MV equal the total FMV of any given portfolio. They are different animals.

  9. Avatar Ralph says:

    My interpretation of UAD cliff notes version.


    Very Good/Complete renovation=C2

    Average/Good (a favorite among industry veterans)=C3

    Average=C4   I would also note the primary reason UAD was implemented, was due to appraisers calling every thing in the report AVERAGE.  New=Average, Busy St=Average, Culd a Sac=Average New Construction=Average, House partially on Fire=Average.  House next to Gas Station= Average You get the idea.

    Below Average=C5 (the key to C5 is FNMA says “the dwelling remains habitable, but overall livability is diminished”  Think of a 2 bath house where one bath functions and the 2nd bath has been gutted and not used in years)

    Uninhabitable=C6 (Hopefully you can figure out when you are in one of these, if not you need a new career)

    • Avatar Sabbie says:

      I disagree, I think C3 = good and C4 = average to good and average also.

    • Avatar TOM D says:

      this is reasonable.  a recent fannie mae comment noted that a 1.5 year old house should be rated a c1 or c2.

    • Mike Ford Mike Ford says:

      Ralph, love the ratings cliff notes but you are 100% wrong about the primary reason UAD was implemented.

      It had nothing to do with appraisers calling everything average. FNMA has stated repeatedly it was to create greater uniformity and less confusion among users of appraisals.

      What they did NOT ADMIT to is their own lie that the entire purpose was not only  to facilitate “big data” tracking and potentially the elimination of human appraisers from the process.

      Way back when we used to actually BE appraisers, we ‘rated’ a specific property relative to the neighborhood it was located in. THEN we compared our subject to it.

      An average property in Beverly Hills might well be an excellent (condition or quality) property if located in a more middle income neighborhood; just as an average property in Detroit’s abandoned quarters might be rated only fair or even poor if located in that Beverly Hills (or Chappaqua; Hilton Head, etc.) neighborhood.

      But again, that was back when we used to actually analyze and report salient neighborhood characteristics.

  10. Avatar chris says:

    Has everyone forgot about using effective ages for the comps ???

    We had scales that went from 0 – 65,

    Now we have 6.

    And there lies the problem.

  11. Avatar Sabbie says:

    The big problem with the UAD ratings is C4. Before UAD I used poor, fair, fair to average, average, average to good, good, very good, excellent. C4 represents average but also average to good. I have to make a ton of adjustments within the same rating, which is confusing to the reader.

    • Avatar Ralph says:

      Sabbie, in FNMA’s selling guide it’s perfectly acceptable to have an adjustment within the same rating, as they recognize that no “2 homes are the same” that is their words. I have adjustments all the time within the same rating especially C3, as both homes may be well updated but one has kitchens and baths done to a higher standard etc. You can do anything you want, as long as you explain what you are doing.

      I differentiate C4 from C3 as I feel C4 the house is decent, but kitchens, and baths may be dated from the 70’s-1990’s and while functional, they are dated to semi modern and not what today’s typical buyer would expect. This becomes more of an issue with an angry homeowner on a refinance, than a sale that has tested the market, had a adequate exposure time, maybe a reduction or 2, then goes under contract. If you read the definitions in the report and quote from there, it should help.

  12. Avatar TOM D says:

    my recent thinking should be a c condition with an additional -/+ to denote that there is a warranted adjustment. all the same c conditions with no adjustments most of the time will get you a letter, and on the watch list. on appraisers blog all the appraisers in this one office were doing that. now there a death notice sent, arriving in a fannie mae letter.

    • Mike Ford Mike Ford says:

      Too logical. Besides, that is precisely what FNMA wanted to eliminate because C+ or C- could not be adequately quantified in their UAD software plan.

      Always remember that FNMA and all of its processes are designed by software programmers to give executives what they think they wanted at the time, before it became obsolete as a result of having been poorly planned by the wrong type of ‘professionals’.

      As long as it provides them with plausible deniability for any criminally negligent behavior, they are content.

      • Baggins Baggins says:

        Dang Mike. You’ve got such a great understanding of the issue. Appraisal is a side note for some of these major lending enterprises. What’s your take on the fed backing derivatives exposure as that relates to appraisal? I’ve felt like the plausible deniability eventually rolls downhill to my doorstep, and I don’t play the risk vs reward game. Are there tangible concerns if appraisers do things like sub see addenda, boilerplate, outsource data entry, etc, as they flip more than average report count? How does report development approach relate to exposure in this new confine of centralized appraisal review? Do mortgage backed investment companies get to use the CU upon any default? Does every appraisal come with detailed CU data accompanying which can be used by parties antagonistic to the appraiser? Where does the access to CU begin and end? thanks

        • Mike Ford, AGA, GAA, RAA, Realtor(r) Mike Ford, AGA, GAA, RAA, Realtor(r) says:

          Hi Baggins…thank you

          “What’s your take on the fed backing derivatives exposure as that relates to appraisal?” What do you mean specifically? Generally I don’t think the FED should ‘back’ ANY mortgage backed securities period. Its the vehicle that allows investors to completely side step personal and professional responsibility for due diligence. “Let the taxpayers worry about it.” Just picture Wells Fargo telling Congress or the Fed “Sure, you can trust US!”

          As for (see?) sub addenda I see no problem at all. In fact just the opposite. Failure to adequately explain or support is what causes us our greatest vulnerability. I cant force the users to actually read it. I’m upset that it can be separated from the report via XML or ENV formats.

          I think WE need to go back to either hard copy appraisals OR locked pdf formats and to hell with giving FNMA, CoreLogic, First American or a host of others a free database of OUR PROFESSIONAL WORK PRODUCTS without being separately compensated for it. If they need it for a giant governmental database to eventually eliminate appraisers, then let them manually retype the data into whatever formats they want. Theft of my labor is still theft.

          Boilerplate (bp); it has its place. For example bp is appropriate for explaining California’s so called Prop 13 tax rules (actually Article XIII of our state constitution now); or for explanations about earthquake fault lines proximity.

          I don’t like boilerplate for neighborhood descriptions in lieu of meaningful information; however, as our ability to use honest descriptions is curtailed further and further by nonsensical GSE policies (don’t say gang area; gang graffiti, high crime, run down neighborhood, well maintained, pride of ownership or 12 registered violent sex offenders within a half mile radius) even though the lender can read the census tract number in the report and still redline the property while pretending some other reason caused a loan to be denied. So, I’m torn on the idea of ‘safe’ neighborhood boilerplate versus honest, meaningful analysis like any probable buyer would consider.

          Im ok with BP that says “The 1004MC is a poorly designed form and procedure for accurately reporting market trends that are not potentially misleading. Therefore I have completed it solely because it is required by the lender. No client should rely on it for any decision making purposes. The answers to the neighborhood market conditions and trends were derived as follows: (insert meaningful source data here).” USPAP requires that I not produce a misleading appraisal. The appraiser generated market data is deemed more credible than the 1004MC data.

          Centralized appraisal review is a growing concern as it is used more and more often to bully and beat up appraisers to “make deals happen” by creating plausible excuses for ordering second appraisals. If that was all it is then Id not be too concerned. Let the lenders take their chances. BUT it is much more than merely creating an excuse for ordering second appraisals.

          To maintain the illusion of compliance with Dodd Frank, lenders such as Wells Fargo routinely turn the original appraiser in to their states. Those same corporate review appraisers that show Phoenix Arizona as their address may not even be in Arizona. I tracked one down yesterday to Minnesota. He lives and works out of Minnesota; doing “reviews” of property in New York and then pretends (via his stated address) to be from Corporate Review HQ in Arizona. I cant tell you how many cases I’ve researched where its pretty clear they sacrificed honorable appraisers reputations for no other reason than covering up their subordinates DF violations. Beware of making ANY tiny technical mistake folks!

          WHY DOES FNMA OR ANY GSE CONTINUE TO ALLOW WELLS FARGO TO access FNMA or any other GSE or regulated investment pool? It certainly is not because of any demonstrated corporate adherence to high ethical standards! Instead of being allowed to participate in mortgage markets I agree with Senator Warren that these folks should be under investigation (possibly for RICO Act violations?). They don’t limit their abuses to only one area of the banking industry.

          Regarding CU; it is not a single document. It is a ‘process’. Only lenders get to use the process which is patented and licensed to them for their use. It is a semi automated process much like searching for comparables via NDC; RealQuest, Realist or even mls would be. By default the process is set to search possible alternative comparables by census tract number however that can be manually over ridden and any other search parameter can be substituted.

          When an appraisal is submitted or uploaded into the system it is automatically “reviewed” and scored by CU. An “SSR” document is generated that has the CU risk score on it. I’ll have to double check and see if it also has the possible alternate comparables in it. I’ve simply forgotten.

          Under the FNMA license agreement the lender is not allowed to communicate with the AMC or borrower using any of the 21 (17 appraisal related) FNMA CU canned comments; NOR are they allowed to simply send the up to 20 ‘possible alternate comparables’ asking the appraiser to analyze or explain their non use without some form of human ‘review’ of them first to determine IF their use would ‘probably’ affect the concluded value. THIS IS WHERE IT GETS EXCEPTIONALLY STICKY! by MY understanding that ‘review’ IS an appraisal review though CU tries to pretend it is not. In fact it is not even required to be a review by an appraiser (see the NEW can of worms THAT opens up?)

          Anyway, “some human being” with unknown qualifications determines that the use of 3 of the 20 alternate comparables would likely have produced a higher or much lower value. Then the infamous, almost always violated rule about not using FNMA canned comments results in us being told our adjustments are outside the range of our peers; and we are asked to explain /justify the use and non use of our original comparables as well as a faulty / inherently flawed AVMs ‘suggested’ comparables.

          FNMA has no rule saying a 2.5 or 3.0 CU score kills the loan. THAT is purely a near universal lenders policy because otherwise they’d have to accept exposure to possible buy backs or renegotiation of loan discount fees (reimburse FNMA).

          Now, CU does have one very nice feature. It provides an actual mapped picture of where the comps used are in relation to the subject versus the alternate comparables. So if cherry picking was a factor, it will be visually apparent. Picture a wagon wheel with the subject at the hub. If all your comps are out on the rim of the wheel in one direction and there are ten alternate comps right around the hub much closer that were not sued…there may be a problem.

          As used, CU is horrible and abusive because it is used by people (picture low paid bank or mortgage company clerical / administrative clerks) with no more appraisal training than their 45 minute online CU course.

          IF allowed to be used by appraisers before we ever select our final comparables or inspect the property it could or would be an outstanding additional tool that could help us be better appraisers. Certainly it would tell us what the perceived alternate comparables are so that we can address them up front. Additionally is presents some of the adjustments in a bell curve. GLA might be $40 to $120 a sf. So if I believe my market adjusts at $250 a sf I know up front it is an issue requiring more proof than a simple comment. If my market is at $70 or $80 a sf, then Im probably not going to go much beyond the statement of that’s what it is and how I determined it.

          As it is actually used in the real world, the system or process is pure garbage where its flaws are ASSUMED to be overcome or minimized by “big data”. IE: “Close enough for government work!”

          Again, no one but the lender is authorized (licensed) to use CU BUT if a state agency wanted to go after you and use spurious CU results as proof of your deficiency, they certainly could subpoena the SSRs and screen shots of the CU results.

          The fact that I have seen many SSRs is proof positive that the rule against the lender sharing the CU data with the AMC that is in turn shared with the appraisers is routinely violated. You and I should never see an SSR if the rule is being followed.

          FNMA needs to rethink their application policies in this area. Open CU to appraisers OR stop using it to “judge” (score) our work and rate US!

          1. EVERYONE needs to fully understand MISMO. Its what is driving all these new practices such as UAD, UCDP, CU, SSRs, etc..

          2. Everyone needs to go to the FNMA website and sign up / log in to take the free CU course online. The ONLY questions are who are you, and how long you have been “in the mortgage business”. Its OK for appraisers to take the course. Since you had a couple questions I couldn’t answer Im going to take it again.

          Hope this answers most of your questions.

          • Baggins Baggins says:

            Yes sir, that does answer many questions. Thank you. If the argument is backing the risk, the GSE’s need wound down, as they no longer follow their original mantra. Or they could be restructured to follow their mantra which justified their federal charter in the first place. It’s important for appraisers to understand that although these organizations have official sounding names and are federally chartered, they are private institutions none the less, answering to share holders, not We The People. FDA, CDC, FNMA, the list goes on. They’re not altering and creating all this new policy for the benefit of the people, that much is certain. Insuring derivatives is over my head, and the reported numbers vary wildly. Some of the buzz going around now, detail how the FED has backed unfunded liabilities surrounding derivatives, essentially acting like an insurer of the risk.  Some numbers point to unfunded liability being 100x world gdp. It’s all digi-money fiat, and not real. Begging the question; If the whole world is in debt, to whom are we indebted? I / Points 51-56 on this one, but I just picked it out of thin air. There are thousands of these types of articles out there. 
            50 More Reasons Why Donald Trump Is Right About the Federal Reserve

  13. Avatar Jeff says:

    I hear a lot of talk about how a properties c’s and q’s are absolute. I have properties that are purchased as quick sale properties and are completely renovated and updated where the c’s and q’s change and this within a years time. So I don’t see how anyone can ever say with complete certainty that the c’s and q’s are absolute

  14. Avatar John says:

    This is some good stuff. The UAD standards aren’t that hard for me but I can certainly see how they would be for someone just starting out.

    • Baggins Baggins says:

      The more you know about the big picture, the more difficult these seemingly simple rudimentary grading points become. This industry needs more carpenters and construction professionals, people whom understand real property. If appraisers are just starting out with zero experience in any form of construction or mechanic, they should acquire real world non-desk based skills before they seek re entry. Case studies in a class room is absolutely not going to cut it, and most appraiser based CE presents more like elementary school material. At no point what so ever during apprenticeship or licensing are appraisers asked to answer TILA, RESPA, describe HUD forms, demonstrate compliance with state and federal regulations, or answer a single question about what activity is illegal, and what is not. The states don’t police anything effectively. Its a free for all, and I’ll bet 100 bear skins that if quizzed, 98 out of 100 appraisers could not answer multiple choice quizzes which ask the appraiser to name the source of this and that regulation. I know amc’s cannot answer those questions, because when they bother me, I immediately quiz them on regulatory understanding. If you really want to stick it to an amc, don’t ignore them.  Instead answer the phone for them. “He who crosses the bridge of death, must answer me these questions 3, err the other side he see.”  What is your name? What is your favorite color? In which regulatory document are junk fee rules detailed and recite the rule? Actually, I could use a brush up on that. Surprise surprise, I cannot get that education through regular appraisal based CE.


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UAD Rating Absolute vs. Relative

by Dave Towne time to read: 2 min