Fannie Mae ‘Lender Letter’ About the CU process
Lender Letter explains CU process
Appraisers,
The latest FNMA Lender Letter was released on February 2, 2015 (see PDF below). You really should print and read this new Lender Letter.
It attempts to smooth over lots of ruffled feathers among appraisers, AMC’s, Lenders, Underwriters, etc. To be honest, I find a bunch of ‘pipe dream’ info in this document.
Items such as:
- CU is a Fannie Mae–only risk management tool.
==> Freddie Mac is said to be working to implement this or a similar process very soon - CU does not accept or reject appraisal reports or characterize an appraisal as “good” or “bad.” ==> However, a Risk Rating Score is applied to a generated CU report which electronically analyzes the appraisal, with 1 being ‘low risk’ and 5 being ‘higher risk’ . Untrained non-appraiser clerks at a Lender or AMC may condition the appraisal based on these scores. To them “1” could mean a ‘good’ report and “5” a ‘bad’ report.
- CU does not provide an estimate of value to the lender.
==> But the generated CU report document shows the ‘estimate of value’ for up to 20 SALES CU finds and includes in the multi-page CU report. Again, untrained non-appraiser clerks at a Lender or AMC may look at those presumed value figures and mentally condition the appraisal value as ‘good’ or ‘bad’ depending on the range of values CU shows. - The lender must not make demands or provide instructions to the appraiser based solely on automated feedback.
==> Really? Baloney. It’s already been happening. The ‘risk comment(s)’ from the CU are being sent verbatim to appraisers by the untrained non-appraiser clerks at AMC’s with the demand that they add additional commentary in the appraisal about the comment(s). - Before asking the appraiser to consider any alternative sales, it is imperative that the lender analyze the relevance of the sale and determine if the use of such sale would result in any material change to the appraisal report.
==> Many lenders don’t have appraisers on-staff, so this determination is left to untrained, non-appraiser, non-geo-competent clerks at the lender or AMC to decide relevance of sale properties to justify the appraised value.
That’s enough here. There are a lot more of these ‘pearls of wisdom’ in this Lender Letter. Again, read this document for yourself.
I am not opposed to the initiative to ‘encourage’ appraisers to be more accurate, diligent and correct in the way “we” do reports. That’s a given, based on past and current history, with sloppiness and fraud prevalent in some cases.
But the CU process is wrong-headed on so many fronts.
What has appraisers so frustrated with CU (and its predecessor and potentially still used AQM) is the heavy-handedness of the process. Where secrecy is employed. No information is shared at the front end of the appraisal process (even though it could be). An unknown AVM ‘model’ is used to generate adjusted values. Reports are compared to ‘peers’ who generally are not communicated with by area appraisers. And the CU process is somewhat contradictory to the Assumptions and Limiting Conditions we agree to, when we sign the GSE form.
Fannie Mae – Lender Letter LL-2015-02 (About CU)
Dave Towne on e-AppraisersDirectory.com
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The problem is not the stated rules, but the common practices of correspondent lenders and some AMCs.
I have ALREADY SEEN purported ‘underwriter’ statements TELLING appraisers to either explain in detail why the suggested (19) alternate comps are not relevant or to grid them and make the changes necessary! THAT is going to be the norm-not an anomaly.
Now since FNMA does not want the text messages sent to the appraiser (one has to ask how I as a merely curious party was given it BEFORE an appraiser ever saw it); WHY would an appraiser EVER respond to a bulk shot gun approach questioning comparable validity?
You could just as easily set your NDC or Real Quest or Realist searches to deliver 25 “comps”; or have your title company run a closed sale ‘comp’ list in the area using their default criteria.
I provide the BEST and most relevant comps in all assignments. If they ALSO want additional analyses on why sales were r were not used I am going to charge $250 more for the additional service plus $20 per ‘comp’.
If you want to second guess every single aspect of my appraisal OR comment on its ‘apparent collateral risk’, then have a USPAP compliant review appraisal performed on it. You do NOT get to tell me how much extra work beyond that required under USPAP, I have to do.
Don’t claim its per FNMA “guidelines”. They don’t require CU to even be used.
I agree with your response to that type of situation Mike. That is precisely what I would do and what every appraiser should do. When lenders and AMCs see the additional cost they will beg FNMA to turn the Collateral Undertaker down to it’s lowest setting.
Retired! You’re starting to worry me now…we don’t usually agree!
Actually, I like reading your periodically cynical views-they make me think. Thank You!
I had to read your post twice as well and scratch my head in finding that we were in complete agreement. I cannot imagine working with CU rules in any other fashion.
After six years of posts everyone knows what I think about the future of appraising. Here’s some food for thought. For 4 years I preached equity trading to as a way out but I wouldn’t touch this stock market with Andrew Cuomo’s money. I love home inspection as a way to diversify an appraisal business and guard against interest rate hikes. I find Adobe’s Creative Cloud even more fascinating. An incredibly affordable way to mass produce videos, documents, or webpages. I never could find a way to do appraisal and sell it to 3,000 lenders. I would join an established and reputable MLM company. You can do it part time and if it works you can kiss appraising goodbye after several months. (Find a product or service you believe in or you’ll never be able to sell it.) Legalshield is the only that has ever appealed to me.
The letter reads something like this; Don’t worry. Go back to sleep. Trust the government. / Wake me up when it’s over. I’m on the tracks now, and can see the train wreck on the horizon. It’s official that those ‘clerks’ at amc’s and lender outlets earn more than the average appraiser. / For any statement that assumes financial compensation or relief to appraisers for additional work, such hopes are not realistic. As long as the amc fee is co mingled with the appraisers fee, there will continue to be a financial incentive to drive down appraisers fees for variable opportunistic profit to the order distributors. You can’t win that race, so just face facts that until amc’s fees are not mingled with appraiser fees, and C&R rules and daily 10k/20k fines are never implemented, there will be no earnings recovery, or any other recovery in this appraisal industry. This is what happens when people turn to the government for assistance. They get bureaucracy instead, with no sun set provision to speak of.