The Network Letter RE CU Program

Network of State Appraisal Orgainzation’s letter to FHFA Director Watt Regarding Fannie Mae Collateral Underwriter (CU) Program

For over the past couple of months, VaCAP has participated with 18 other State Appraiser Coalitions in drafting an unified response to Fannie Mae’s Collateral Underwriter Program. Their letter to FHFA Director Watt briefly outlines their concerns, offers recommended solutions, as well as asking for a meeting to discuss the issue for the benefit of all vested parties.

Please take a few minutes to peruse the letter below:

Dear Director Watt:

On behalf of the independent state professional appraiser organizations signing below, I invite your attention to concerns expressed by the majority of real estate appraisers regarding Fannie Mae’s announcement making their Collateral Underwriter (CU) program available to lenders and their third party affiliates (but not to appraisers).

We understand and appreciate the intent – to reduce the rejection rate of appraisal reports by FNMA through improved screening at the lender level.

Our concern is that lenders and their appraisal management companies will take an overly conservative misunderstanding of the CU’s output and continue to implement processes that result in a degradation of the quality as well as the timeliness of residential appraisals. These misunderstandings contribute to actions such as FNMA’s recent elimination of some of their appraisal guidelines regarding net and gross adjustments. It can be difficult to convince lenders that these guidelines are not hard limits. The same is almost certain to occur with lenders’ employment of CU. The program’s identification of alternative property sales as possible better comparables for analysis will likely result in the rejection of reports and the requirement for appraisers to spend considerable additional time responding to questions as to why those other sales were not used – hence extending loan processing time and increasing fees. Since those alternative sales come from a database with information not presently accessible by appraisers, this is not a self-correcting situation.

The solution that we recommend is to make the Collateral Underwriter program available to individual appraisers, including sales data, local market trends, imagery and other public records, that is being made available to lenders and their affiliates. The originating appraisers could then be alerted to the identification of the alternative sales as superior, and either utilize them or add appropriate explanatory commentary as to why they are not being included. This would improve the overall quality of appraisals by making selected property information from the FNMA database available to appraisers during initial appraisal development. It would also dramatically speed up loan processing time by eliminating delays caused by continuously growing requests for appraisers to reconsider the facts and conclusions in their reports. It is only logical for appraisers to have access to all the data possible. There is no apparent reason why this would not be possible, nor any potential downside or detriment to the process.

Not providing FNMA’s Collateral Underwriter data to appraisers at the beginning of the valuation process not only disregards Appraiser Independence Requirements but also FNMA’s own guidance as noted in: FNMA Selling Guide (4/15/2014) B4-1.1-05

“Disclosure of Information: “Any and all information about the Subject property that the lender is aware of must be disclosed to the appraiser. The appraiser must determine if the information could affect either the marketability of the property or the opinion of the market value of the property.”

Additionally, there is contradiction within the actual FNMA Uniform Residential Appraisal Report; as Appraiser’s Certification 12.

“I am aware of, and have access to, the necessary and appropriate public and private data sources, such as multiple listing services, tax assessment records, public land records and other such data sources for the area in which the property is located.”

Appraisers must have access to the data. Otherwise, it is not possible to certify what is unknown to be known.

Providing the Collateral Underwriter to appraisers would significantly improve the residential mortgage process and further the satisfaction of FNMA’s own requirements of an appraiser.

We would like to meet with a member of your staff to discuss this in greater detail. I am serving as the contact person for the state organizations signing below. Please advise me as to a proposed date and time for such a meeting. I can be reached at (704)752-6252 x101, or at p…
Thank you for your consideration.

Sincerely yours,
Peter Gallo

Appraiser’s Coalition of Washington
Arizona Association of Real Estate Appraisers
California Coalition of Appraisal Professionals
Delaware Association of Appraisers
Georgia Coalition of Appraisal Professionals
Idaho Coalition of Appraisal Professionals
Illinois Coalition of Appraisal Professionals
Louisiana Real Estate Appraisers Coalition
Maryland Association of Appraisers
Mississippi Coalition of Appraisers
North Carolina Real Estate Appraiser Association
Ohio Coalition of Appraisal Professionals
Oklahoma Professional Appraisers’ Coalition
Real Estate Appraisers Association (CA)
South Carolina Professional Appraisers Coalition
Tennessee Appraiser Coalition
United Appraisers of Utah
Virginia Coalition of Appraisal Professionals
West Virginia Council of Appraiser Professionals

VaCAP Board
VaCAP Board

VaCAP Board

Coalition of individual appraisers working together to unite, promote and protect the collective interests of all appraisal professionals in Virginia; to promote needed changes in laws, rules, regulations, policies and standards affecting all appraisers in Virginia; to observe and report the actions of regulatory, legislative, oversight, and standards-setting entities of the Commonwealth.

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3 Responses

  1. Avatar Jane Krupnick says:

    Due to the new Collateral Underwriter rules. I hereby announcing an increase in my Appraisal fees: Att. AMC Effective immediate Single Family Homes and condos $225 GO F YOURSELF . $650 I will accept. Multi Family $250 GO F YOURSELF $ 800 I will accept. to all Amc please don’t bother me if you dont agree with my prices.

    Jane the appraiser

    • Retired Appraiser Retired Appraiser says:

      I love the way you think Jane. You should create a grid on your company website with a two column pricing list. The AMC Go F Yourself Column and the Reality Pricing Column. Don’t forget the $50 to $100 add on fee for each additional CU comp analyzed box.

  2. Baggins Baggins says:

    The UCDP is a train wreck in progress. The solution to financial security in mortgage backed securities markets is not more pressure on the only independent participator left, which is the appraiser. The solution to risk management involves stopping the backing of private banking risk with tax payer dollars. If FNMA and others want to be effective at risk management, they’ll need more putbacks, more lender penalties, and should allow the too big to fail lenders, the ability to fail. Can I place a derivative bet on the performance of the UCDP? Great letter though, at least someone is looking out for appraisers. I fear that the UCDP data will be misused, one way or another though. I can see it now; all the quick copy appraisers will log into the UCDP if not outright auto export the data, to fill their appraisal grids. If this information is shared with appraisers, it’s possible that systemic data issues could arise, and be impossible to manage over the longer term. The margins of price difference need adjusted on a per assignment basis, and there is no reliable standard for constant adjustment methodology. The human factor, is the reason why almost all pieces of real estate have such potential for steep variability. UCDP won’t identify that one person who puts more or less value into their home. It sure will put the appraiser in a tough spot, if they happen to appraise that particular individuals home though. Salaried based lending instead of commission based lending would go a lot further and probably cost much less in the end, than this UCDP program.


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The Network Letter RE CU Program

by VaCAP Board time to read: 3 min