What’s Going on With Fannie Mae’s Collateral Underwriter?

The recent announcement that Fannie Mae will expose its sellers to the Collateral Underwriter™ (CU™) appraisal review tool has appraisers wondering if the process will affect their current and future appraisals and even present problems for past appraisals. Well, from the appraiser perspective, the short answer is you probably won’t notice much difference when this change takes place in January 2015.

Fannie Mae’s Collateral Underwriter appraisal review process is not a new concept. This is the same tool that Fannie Mae has been using internally to review appraisals submitted to the Uniform Collateral Data Portal® (UCDP®). Receiving the appraisals as electronic data files allows Fannie Mae to use their proprietary analytic tools to look for potential issues with every appraisal. Data is also compiled about each appraiser based on all the work submitted (this aspect was covered in recent articles you can find posted on the AP Blog). At the same time, the information from all appraisals is added to their database and continually enhances the information available to further analyze the appraisals. This process is not changing; it will continue as it is today.

The change is this: Fannie Mae is now making this analytic tool and its feedback available to the lenders during the underwriting process. CU will provide an overall collateral risk score and detailed messaging directly to the lenders, highlighting specific aspects of the appraisal that may warrant further attention. The detailed messaging will simply add to the messages that the UCDP already returns to the lender. The long-term plan is to integrate CU with Fannie Mae’s Desktop Underwriter® software and make it part of the lender’s existing underwriting process. Fannie Mae’s hope is that using CU during underwriting will allow the lender to assess additional elements in the appraisal and address any issues prior to closing and delivery to Fannie Mae. CU will be an additional tool in the suite of products lenders are already using to help underwrite appraisals they intend to sell to Fannie Mae. (Note: the CU feedback and tools will not apply to loans to be sold to Freddie Mac, to non-conforming loans nor to those to be guaranteed by FHA or VA).

In January, after lenders submit the appraisal to Fannie Mae via the UCDP, they will receive an expanded analysis of the appraisal. The lender will receive from Fannie Mae a risk score, flags, and messages via the existing UCDP process as it happens today. Ideally, it will help the lender find issues with appraisals before they are officially submitted with the loan package. The hope is this process — the appraisal passing through the CU while still being reviewed and underwritten by the lender — will reduce the number of loan buy-backs that Fannie Mae requests due to appraisal issues.

Here is a quote from the Fannie Mae website concerning the lenders’ use of the CU tools:

Collateral Underwriter Risk ScoreHow to Use CU Risk Scores and Messages

  • Lenders may use the CU Risk Score to segment appraisals by risk profile, resulting in more efficient resource allocation, workflow management, and collateral risk management processes.
  • Risk flags identify appraisals with heightened risk of quality issues, overvaluation, and property eligibility or policy compliance violations.
  • Detailed messaging directs reviewers to specific aspects of the appraisal report that may warrant further attention.
  • Perform in-depth analysis using CU’s dynamic web-based interface that includes comparable sales data, market trends, mapping, aerial photography, public records, and other functionality to assist with manual review of the appraisal.

So if you are doing a great job and rarely, if ever, have an appraisal returned, I wouldn’t expect to see that change. If you have been getting some appraisals returned due to Fannie Mae hard stops, then you may get them back for correction a little sooner in the process, which is actually a good thing. Today, CU will only be used on the 1004 and 1073 forms and only applies to loans being purchased by Fannie Mae. At this time, it does not apply to FHA, VA, and loans purchased by Freddie Mac. The bottom line is that this will likely not affect your day-to-day work, though after Jan. 26 you may be asked by your clients to comment on feedback generated by the Fannie Mae CU process. If you are following your lenders’ and Fannie Mae’s guidelines and using your UAD compliance checker, you probably won’t even notice these changes.

Steve Costello

By Steve Costello, a Relationship Manager at FNC working directly with the appraisal community since 1986. When not in the office, Steve can be found riding off-road motorcycles and doing home improvement projects. Steve can be reached on LinkedIn or Twitter. ~ Source AppraisalPort




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4 Responses

  1. Avatar Mark Freitag says:

    I think appraisers may expect another change. The opening page of the CU will display “comparable sales”. Appraisers may soon have to defend comps they didn’t use as well as comps they did.

    • Retired Appraiser Retired Appraiser says:

      Absolutely…IF they are allowed to defend themselves at all. If I were still appraising I would hope that I can’t defend myself and the comps that I used. Why? You will easily spend more time in explaining why you didn’t use certain comps than you did choosing the comps that you did use. I had the unfortunate experience twice during my career of having bankers send over 15-25 comps and asking me why I didn’t use each of the sales. We wisely agreed to do so at a rate of $50 per comp analyzed. Both bankers went poof…and magically disappeared. You won’t be so lucky if this thrashing machine comes knocking on your email account door.

  2. Retired Appraiser Retired Appraiser says:

    You’ll think “nothing’s changed” when AMC auto responder suddenly has no emails to respond to and nobody will take your calls.

  3. Avatar Peter says:

    We are already receiving notices from clients to be prepared for more UW stips. Here is a direct quote from one of mine: “It may be necessary for us to ask you for more information regarding comp selection, adjustments, and other information as a result of submitting the appraisal through this new portal.”

    I hope all those AMCs and Lenders who hire the cheapest and fastest are ready to hit a speed bump. Seems to me that they are the only ones interested in crap.


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What’s Going on With Fannie Mae’s Collateral Underwriter?

by AppraisersBlogs time to read: 3 min