The New & Improved Fannie Mae “FRAUDULATOR 2.0”

The New & Improved Fannie Mae FRAUDULATOR 2.0. Originally known as Fannie Mae’s Collateral Underwriter (CU), and subsequently Collateral Underwriter 2.0 (CU-2)i this always dubious product of Fannie Mae is increasingly being referred to by some, if not many American Appraisers as The Fraudulator / Underwriter 2.0 (FU-2).

To be clear it is not limited to the Collateral Underwriter (CU & CU-2) software. The new Fraudulator (FU-2) combines the CU products with their numerous improper uses. The end result of which includes OUTRIGHT FRAUD being perpetrated against banks via the repurchase letters Fannie Mae now issues on a quota based system rather than because of legitimate appraisal defects. Whistle blowers available on confirmation of congressional protection.

Additional people and entities adversely affected (if not themselves also being defrauded) are those appraisers improperly defamed; state regulators, taxpayers, The U.S. Treasury, and any other Fannie Mae investors being misled about loan quality and collateral adequacy.


Prior to its release and adoption, member(s) of The Appraisal Foundation’s old Appraisal Practices Board had concerns about a then proposed automated system being proposed by Fannie Mae to screen appraisals. I was then sent a complete copy of the CU patent application for review back in 2014. A few immediately apparent concerns were:

  1. Not one of the seven original software developers was an active appraiser. Two had previously been low level licensees with very few years’ experience. Both had let their licenses lapse.
  2. The system was essentially based on regression analysis, with all the limitations and pitfalls associated with over reliance on regression and or multiple linear regression.
  3. The entire database had been compiled from misused data stolen from appraisers between 2011 and 2014. Purported data sets were scraped from or extracted from appraisals never intended for such use.
  4. The appraisers were never compensated for the extra unauthorized purposes their appraisals were now being put to. We calculated the impact of that theft from $12,000,000 to $15,000,000. National stature attorneys expressed agreement after multi hour conferences with their owners and senior associates. However, litigation over past data theft is not the intent of this narrative.

Fannie Mae’s original CU and CU 2 were never designed or suited to review either appraisers or appraisal quality. Instead, it was designed (very poorly) to be used as a rapid screening tool to rate risks associated with collateral. Meaning it was never intended to infer appraiser or appraisal inadequacy or defect. Its sole purpose was to raise a red flag that some aspect of collateral submitted to securitize loans being purchased by Fannie Mae have some type of underwriting defect or concern.

As originally designed and licensed for use by Fannie Mae to lenders, the CU was only intended to flag uploaded appraisals that needed or required further human intervention.

That could mean an appraisal review or possibly documented response to the concerns raised. The Fannie Mae CU license agreement with lenders prohibited lenders from simply copying and forwarding the “CU messages” contained in the Submission Summary Reports (SSRs) that lenders use to merge uploaded appraisals with loan application packages at the originating, or correspondent lenders.

That Fannie Mae prohibition recognized inherent defects or limitations of the CU system that required humans to intercede before appraisers were asked or required to replace or add additional comparable sales in support of their conclusions.

The most common abuse when implemented is that lenders would often require analysis of all 20 extra ‘potential sales comparables’ developed by CU… whether relevant sales or not.

Fannie Mae’s CU essentially checks back up to two years previous to the effective date of value, by nearby census tracts for all sales which meet the varying comparable sales selection criteria being sought. This put an exceptional burden on appraisers any time a value was lower than desired or hoped for by a lender or their borrower clients.

Some loan officers (typically for brokered loans) learned early on the CU scores could be manipulated by the selection of comparable sales, and by how they were ‘rated’ using the UAD system of absolute quality and condition (Q&C) ratings. Two average (typically C3 to C4) range condition sales rated at C3, could have one rated C3 & one at C4 to artificially reduce the overall CU score.

Hence a limit on lenders being able to do this was established. The license agreement dictated that lenders must first have a human review of the appraisal to determine (1) that the ‘new’ sales were in fact relevant, and (2) that their use would likely have an effect on the conclusions and value indicated before they could direct appraisers to reconsider based on CU developed data. CU manipulation was never addressed (in public or with appraisers). This is important further in this narrative.

Appraisers asked early on for access to the CU system (developed using unauthorized data from those same appraisers in the first place). Collectively we believed nearly all underwriter and lender / borrower concerns regarding selection of the most relevant potential comparables could be eliminated if appraisers had access to this data before the appraisals were concluded.

We were denied.

Early in 2015 (Lender Letter LL-2015-02) Fannie Mae eliminated certain historic percentile guidelines.

Peers 2014 analyses linked as follows:

While Fannie Mae didn’t focus on or even address this, the impact of that policy change negated the value and credibility of their entire “peer based” adjustment database. The database developed from 2011 through 2014.

If the database was compiled over periods Fannie Mae’s own data showed to be developed from improper appraisal practices of appraising to guidelines rather than to credible market perceptions, then at best the database would provide skewed results.

New “to market” data was simply added to the flawed database rather than replacing it. The errors may have become diluted as to impact, but they were never eliminated.

Neither I nor Fannie Mae have any credible information on the exact impact of the data dilution. For my part I would not knowingly ingest raw sewage. Nor would diluting it with pure or unadulterated water change my mind.

The same should apply to Fannie Mae’s CU; CU2.0, or as many appraisers refer to it their FU-2.

Read the linked previous description of how CU was explained in February of 2015 versus how it is described below.

As an aside, read it again (bullet points) it is based on census tract and census block demographic information. Location based demographics which if representative of specific neighborhoods has race based biases baked into them. Another separate issue members and users relying on the CU/CU2 & FU2 “systems” need to consider.

Back to the main issue.

Here is how current web searches will describe Fannie Mae’s CU:

“Collateral Underwriter® (CU®) is a web-based application provided at no charge to help lenders manage collateral risk as part of their underwriting and quality control processes. The application uses appraisal data and advanced analytics to help identify and research appraisals with overvaluation, undervaluation, appraisal quality, or property eligibility/policy compliance risks.”

In 2016 Lenders had a different interpretation of what CU did or did not do.

Note that any pretense that CU is not an appraiser or appraisal review system is completely out the window by 2016. Had it been redesigned in only 1+ year?

Though as promised in 2014 that scores of 1-5 were or could be ok, by 2016 CU scores of 4 or 5 were virtual loan stop signs.

Later it became 3.5 then 3.0 and now the magic number for Fannie Mae is 2.5. Not that 2.5 is required to make a loan.

Just that scores in excess of 2.5 can be and are reviewed up to a year or a year and a half after a loan is made.

The AQM sections of Fannie Mae may opt to refer such appraisals to state regulators, and or place the appraisers responsible for them on partial to complete monitoring lists. Meaning all or some appraisals uploaded by those appraisers will be reviewed internally by Fannie Mae or they will not be purchased at all. (My current as well as former inside sources tell me Fannie Mae’s reviewers simply laugh at AQM “exceptions” as not being credible.).

The LQC and CURE/Underwriter Teams are now on a quota system in their treatment of files where the collateral was rated over 2.5.

They are verbally told (required) to write repurchase letters on at least 50% by volume of files that cross their desks. If they do not write 50%, they are subject to enhanced personnel management ‘review’. Last year it was purportedly only 30%. No records were available from my sources as to what the correct percentage of actual defective appraisals is or should normally be. Except to say it is believed to be very much lower than 50%. Very much lower than 30% as well. Best guestimate? 5%-10%+-.

This is the set up to the fraud being alleged.

As the union Chairman of the American Guild of Appraisers National Appraiser Peer Review Committee (CNAPRC, AGA, #44 OPEIU, AFL-CIO) it’s been my job to closely review complaints made against our members by states, HUD, and GSEs. Especially those made by Fannie Mae.

Over the past six months to a year the volume of Fannie Mae originated complaints (they refer to them as TIPS in their news fluff pieces) made to many state appraisal regulatory agencies has exploded.

As the volume of complaints increased, I noted curiously that the number being sustained or concurred with by state agencies declined. In fact, in the past six months plus, not one state where we have interceded for our members has found those members in violation of USPAP. Not one.

Most recently, an AGA member who was a very long time appraiser for Ameris Bank because of his consistently credible and reliable appraisals received notice from his state regulators of two complaints by Fannie Mae.

By the time I heard of this case this highly respected bank had already hired their own reviewer who reportedly found no fault with the appraisals or its conclusions.

I also reviewed the appraisals involved. This was a senior residentially designated appraiser-member of the Appraisal Institute. Not a novice by any means. As I reviewed his work it was impeccable. In many respects it was / is superior to my own typical product as to form and format.

I was at a loss as to why Fannie Mae’s FU-2 teams would find exception to his work or his conclusions. The CU scores were not high (around 3.0-3.5). It was an atypical property, but the appraisal job was thorough and very credible.

I wrote to his state regulators on behalf of our union (The Guild) and our member. Ultimately the State cleared our member of any wrong doing or violations of USPAP.

None of the other three dozen plus complaint cases to many other states I reviewed also had supported or credible issues. In fact, the Fannie Mae complaints appeared as cobbled together generic boilerplate with little regard to the applicability of the allegations.

Those instances, more than any other single case, made me dig deeper. I reached out to our contacts at or for Fannie Mae.

That’s when I learned about the quota system. As well as even more allegations of non-compliance by Fannie Mae with the Financial Reform Recovery & Enforcement Act of 1989.

The term fraud was first used by these sources in describing circumstances and background to me. Not one of these appraisal complaints casually reported by Fannie Mae (mostly via email to regulators, as ostensible “tips”) were themselves SR3 or SR4 compliant.

As it turns out they (Fannie Mae “Reviewers”)  also repeatedly violated the Ethics Rule of USPAP and its prohibitions against bias, deception / being misleading, advocacy, predetermined assignment conditions, misrepresentation of role, communication with intent to defraud, communication of results known to be misleading, knowingly allowed others to communicate misleading results, violated requirements of record keeping rule, & performing assignments in grossly negligent manner.

Also, though their reliance upon geographic location and neighborhood based rating systems (such as Neighborhood Scout) or their own census tract derived locational keyed ratings scores (de facto redlining). It was hard to find a line of the Ethics Rule (between 188 and 207 of USPAP) that they have not collectively violated.

A strong argument can be made that every other (50%) of these assignments constitutes acceptance of contingency prohibited assignments (find fault or lose your salaried position).

I have even harsher critiques of the managers of the AQM, LQC and CURE Teams for not only allowing these actions but promoting them. FHFA you are very remiss in your oversight obligations. Though Fannie Mae managers did tell all staff (April 2023) to stop talking about the issues to outsiders. I guess hide it rather than fix it is their motto.

I’m told there are no USPAP compliant work files in support of the appraisers’ review findings, or alternate values. The appraisers have been told that because they are a GSE (Secondary Mortgage Market service) that they are exempt from the requirements of USPAP under FIRREA. That isn’t how FIRREA reads.

Title 12 CFR Chapter III Subchapter B Part 323:

title XI provides protection for federal financial and public policy interests in real estate related transactions by requiring real estate appraisals used in connection with federally related transactions to be performed in writing, in accordance with uniform standards, by appraisers whose competency has been demonstrated and whose professional conduct will be subject to effective supervision. This subpart implements the requirements of title XI and applies to all federally related transactions entered into by the FDIC or by institutions regulated by the FDIC (regulated institutions).

Federally related transaction means any real estate-related financial transactions entered into after the effective date hereof that:

(1) The FDIC or any regulated institution engages in or contracts for; and

(2) Requires the services of an appraiser.

Real estate-related financial transaction means any transaction involving:

(1) The sale, lease, purchase, investment in or exchange of real property, including interests in property, or the financing thereof; or

(2) The refinancing of real property or interests in real property; or

(3) The use of real property or interests in property as security for a loan or investment, including mortgage-backed securities.

An exception noted is:

12 CFR 323.3(a)(10)(ii) Essentially: The transaction either:

(i) Qualifies for sale to a United States government agency or United States government sponsored agency; or

(ii) Involves a residential real estate transaction in which the appraisal conforms to the Federal National Mortgage Association or Federal Home Loan Mortgage Corporation appraisal standards applicable to that category of real estate.

My contention is that quota based findings do not conform to ANY proper recognized appraisal standards.

I’ll let the learned legal experts for Fannie Mae, FDIC, FHFA and Texas TALCB (since Dallas, Texas is where virtually all of these deficient ‘appraisals’ are performed) decide if a GSE is regulated.

So, where is the fraud?

When Fannie Mae tells any FDIC regulated bank (or NCUA regulated credit union) that they must repurchase or reprice a loan in which improperly alleged “Fatal Appraisal Flaws”, or “Fatal Appraisal Defect” is given as a reason that the loan was not eligible for sale to Fannie Mae in the first place. At the point in which the bank is coerced into actually buying back the loan.

… and the appraiser is treated as collateral damage when their professional reputation is defamed by Fannie Mae.

Who cares?

I’ve known at least two appraisers to have had heart attacks after they were confronted with unfair state complaints originated from spurious sources. One died.

Without exception every appraiser I ever interviewed for a state complaint will try to describe the visceral agony as similar to being punched in the gut or kicked in the groin when they first receive a state complaint or bank buyback notice.

Then they have to take an unreasonable amount of time away from work complying with the states needs to respond to the allegations as well as compile their electronic work files, print them out and merge them into their hard copy work files.

They cannot renew their Errors and Omissions Insurance at all as long as the complaints are pending. For those working with AMCs and some banks, that makes them ineligible for new GSE related appraisals.

Some marriages break up over complaint issues like this. Income is affected. Mortgage payments are jeopardized (along with all other credit payments). Legal fees are often an issue.

Is that all?

As bad as the above is, it is not ‘all’ that happens.

Banks can be driven out of business. Depositors and investors are not going to want to keep their money in a bank that has unmarketable loans on their books or that keep having to buy them back from Fannie Mae.

Loan fraud at the application and submission levels will increase. Once commissioned parties whose income depends on closing loans and then selling them to the GSEs realize that only loans with CU (or “FU-2”) scores of 2.5 have any relative degree of safety, borrowers with unusual but benign property conditions won’t have access to equity.

My suspicion is that many if not most of these high risk properties will subsequently be found to be located in predominantly minority owned neighborhoods.

Now might be a good time to look at exactly how the census tract prices are utilized. Both at Fannie Mae, and at Black Knight who previously claimed to have a demographic keyed AVM designed to eliminate bias, and who has been selected as one of the six preferred companies to help Fannie Mae roll out its bifurcated-trash (I’m being polite) products.

“Trash Products” that arguably work best only in the CU / CU-2 (or FU-2) automated collateral review environment.

Fannie Mae does NOTHING that Freddie Mac, FHA, and VA can’t do better. The U.S. Government thought Fannie Mae bad policies could be prevented by placing them into conservatorship. Clearly that didn’t work. Their new direction is worse than the actions that resulted in them being put into conservatorship in the first place.

These events are occurring far below the level of Fannie Mae CEO Priscilla Almodovar. I’m told its several layers below Lyle Radke as well. However, it IS his responsibility as he is Director of Fannie Mae’s Collateral Policy team.

My hopes are:

  1. That federal regulators will take a much closer look at Fannie Mae collateral policies and practices.
  2. An immediate cessation of quota based repurchase letters will take place within a week of this being published.
  3. That ALL complaints or “tips” claiming to have been “after review” by Fannie Mae are signed by the responsible parties complete with their license numbers.
  4. That all Fannie Mae internal property reviews flagged by CU / CU-2 or (FU-2) processes must be subjected to USPAP Compliance including SR3 and SR4,
  5. Members of Congress more closely exercise their oversight with respect to this rogue GSE.
  6. That Members of Congress also review the proposed Value Acceptance SCAM products calling for waivers; unqualified third party inspectors, and bifurcation of appraisal by anyone other than licensed appraisers or licensed trainee appraisers operating under direct supervision of a properly licensed appraiser-mentor.

Lastly, it is more than past time to stop taking Fannie Mae’s word for how “robust” and wonderful their CU/CU-2 and FU-2 automated processes are. Congressional oversight needs to be directed at the actual software and algorithms used.

Specifically, what improper metrics are being weighted in CU, CU-2 & FU-2 scoring, and most important of all, HOW are baked in census tract demographics being scrubbed or adjusted to eliminate any negative impact based on race, or other prohibited metrics?

The one single constant in the U.S. loan production process since the Civil Rights & Fair Credit Acts were passed is that census tract numeric data was mandatorily required to be placed on all appraisals. That is where lender/loan/equity bias originates!

It is the one single source for which any malevolent intended persons could analyze racial characteristics of an area and directly redline… or embed it in their algorithms drawing from that core information.

Congress must appoint a team of appraisers and software experts to look under the hood at ALL automated valuation systems being used by GSEs. Team participant weighting should be toward appraiser representation. Software algorithm & data science expertise can be found in the appraiser community. It’s rarer to find appraiser expertise in the software community.

My recommendation is that representatives from the Appraisal Institute, American Society of Appraisers, American Guild of Appraisers, NAR and functioning and effective State Coalitions be appointed to address these concerns.


Michael Ford
Latest posts by Michael Ford (see all)
Michael Ford

Michael Ford

Over 28 years appraising all property types and interests, in Southern California real estate. VP/Chairman National Appraiser Peer Review Committee, American Guild of Appraisers, #44OPEIU/AFL-CIO. - Michael Ford on e-AppraisersDirectory

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42 Responses

  1. Avatar David says:

    Can you say Lyle Radke! This very much his doing with a sketchy background.

    • I just listened to a podcaster I’d stopped listening to some time ago. Dr. Mark Calabria, former Head of FHFA was interviewed. Yes, he is selling a book (which I’ll now likely buy after hearing him speak). I approached it with a certain amount of skepticism.

      He has as thorough an understanding of the issues we face, as a non-appraiser can have. Well worth the 48 minutes. Then decide for yourselves..

  2. Avatar PwM says:

    I think it is unprofessional to call something FU-2. That is not coincidence. Welcome to continued disrespect.

    The saga continues. I do not think it will be better ever. I don’t think the income is here as well. I do not expect this field to be growing.

    In 10 years they likely will have some AI thing and 10% physical inspections. This is the future.

  3. Avatar Bill Billson says:

    I assume Fannie Mae would argue their “reviewers,” many of whom are appraisers, are taking off their appraiser hats and putting on their underwriter hats, and thus not required to comply with USPAP.

    One thing to note: The mere fact that complaints are now occurring at higher volumes than they were 1-2 years ago, or that complaints and appraisal-premised buybacks are in some way cyclical based on broader financial conditions, indicates that user expectations of appraisals, which are a primary consideration when appraiser determines the required SOW, have changed AFTER appraisal delivery and acceptance. If there were issues with these appraisals, why weren’t they communicated to the appraiser by the lender’s underwriter, or even by Fannie Mae at the time the loan file was accepted? In short, buybacks are not increasing because appraisal quality has now all of a sudden changed. They are increasing because user expectations have changed.

    Also of note, Fannie’s waivers generally require a prior appraisal on file, and in determining whether a waiver is granted, the prior appraised value is adjusted for “time” using Fannie’s zip code level HPI. A zip code-level HPI analyzes all residential properties within a Zip, without respect to market segment. That is going to lead to some substantial valuation errors.

    • Mike Ford Mike Ford says:

      When an appraiser sends a ‘tip’ or complaint as states consider them and claims specific appraisal defects “after review”, then what they communicated are the results of an appraisal review.

      They don’t usually sign these or even encourage states to show the respondent appraisers who filed the complaint. FNMA submitted two I saw via unsigned email. They didn’t even follow the STate of Missouri’s requirement to (1) use the official form, (2) to submit a SIGNED complaint.

      Euphemisms such as calling a complaint or written professional character assassination a tip dont change the fact that appraisers are completing appraisal reviews improperly and basing negative findings on a quota system at FNMA.

      The broader financial condition may be a factor in the buyback demands. So too can the lowering of the CU score that triggers these. Anything over the magical 2.5 is now fair game. Thank you or your inciteful insider level comments.

      • Avatar Bill Billson says:

        Fannie’s review appraisers have long claimed they don’t have to comply with USPAP. Ask any appraiser who works in the collateral department of a lender who has dealt with them on buybacks. Their reviewers out of Plano (or wherever) don’t necessarily even have geo-competence in many cases. A HousingWire article that was published today stated that small and midsize lenders are the ones dealing with these buybacks, and it’s not just appraisal related. The large lenders, such as Rocket, are likely getting a pass because they have enough clout and they actually wield power over the GSEs. I can almost guarantee that buybacks are not being universally applied.

        • Claiming exemption from USPAP is not actually the same as BEING exempt. Since FNMA doesn’t conform to their own published standards (or any other recognized standards), I contend they do not meet the requirements under FIRREA for exemption.

          Facilitating fraud against a federally insured bank is not an accepted standard anywhere, outside of FNMA.

          I read the HousingWire article.

          I’m also told very few have any experience outside of Texas, and none very recent. Several sources they rely on lack credibility for the purposes they are being used. Neighborhood Scout left nearly 50% of my own neighborhood out when they mapped it. (I was auditing its reliability).

          It’s pretty clear that screening is going on to make sure only low-hanging fruit is selected to fulfill buyback quotas. Small, midsize banks can least absorb the hits.

  4. Avatar Pat says:

    Another brilliant presentation.
    I’m proud to call you my friend!

    • Pat (#4) that means a lot coming from you!

      (For readers who don’t already know, Pat T. has the oldest surviving appraiser’s license in his state. When he first started as an appraiser the worst thing appraisers risked was being attacked by any saber-toothed lions that might be in the cave being appraised; or hitting their thumb with the rock chisels used for writing reports on the walls. )

      In 2018 Pat was awarded a Lifetime Achievement Award in San Antonio, TX by his peers from all over America. I’m truly humbled by, and similarly proud to be his friend. Much respect Amigo! (though I will carefully avoid showing it in public, lest people begin to talk).

  5. Baggins Baggins says:

    What an excellent article. This also touches on the TAF’s ridiculous proposal to develop an ‘avm accreditation program’ which would substitute a human credentialed appraisers signature. Just rubber stamp these avm programs. I’ve talked to many a realty sales agent about avm programs as well. Their firms are constantly switching from one avm subscription to another, as there are very high variances in results, some function as bait and switch, others more on high numbers for improved customer intake, others land lower more focused on accuracy for less customer surprise. To think the governments version of this would be any better, unlikely. The tech people working on this are not individually accountable, there is no transparency, the algorithms subject to change without notice without disclosure to avm users. This leaves entirely too much room for biased manipulation and fraud, consequences of outside pressure. Avm developers have performance quotas too.

    I’m picturing Mr Bagott reading this and saying; Which copy of USPAP is applicable for these reviews, the one for the reviewer in their location, for fhfa’s location, the applicable state where the appraisal was performed? Which version of uspap, the last technically legal adoption in that location, or the most recent version not compliant with that states rules? And they won’t stop rewriting it, the latest version took 5 rewrites. Guaranteed book sales to a captured audience.

    ‘Depositors and investors are not going to want to keep their money in a bank that has unmarketable loans on their books or that keep having to buy them back from Fannie Mae.’ Fractional reserve lending strikes again. These companies originate 10x the amount of loans compared to their actual available capital funding. Throw the entire gse program out, let institutional investors deal with loan originators on an individual basis, let comprehensive logical risk management return. In which case, nobody in their right mind would dare to use an avm, unlicensed property data collectors, a bifuricated appraisal, or any other of this new age hippy tech faux appraisal quasi appraisal nonsense. They would be especially hesitant of any valuation report originated through appraisal management companies. This may very well be one of the most important appraisal based articles on this blog in some time. Great job, will forward to many people.

  6. Wow lots of good information and I keep getting stuck on the name “FU” Because that is what they are saying to all of us Appraisers! If you have not already, get out of the lending business and do only personal business. All of the above only confirms that one way or the other you will be in the cross hairs. I do alot of complex properties on the lake. I can just imagine how Fannie CU would rate those. Large adjustments. Net, Gross adjustments high due to lake lots and limited truly comparable sales. AND YET they want to make it easier to get into the business and want more diversity. Who in their right mind will want to enter this Hell Hole!

    • Baggins Baggins says:

      Nope. Respectfully, those terms are not acceptable. We can not leave the majority body of unsuspecting home owners and would be home owners to these devices and poorly implemented errantly conceived new programs. Removing the majority body of appraisers from mortgage lending is a clear violation of restraint of trade practices, that the GSE’s alongside amc’s, have already engaged in.

      I’m still waiting for a paper printable version of this new form. I can’t defend myself from the neighbors pit bull with an e device, or shield my camera from the rain, snow, or sun glare, but the clip board has been useful for those exact situations many times. We need scratch paper, printable forms, competent systems management. The appraisal portion of lending is not what is wrong with the system. If the government people want meaningful reforms, take a very long vacation and never come back to work. They should try doing their jobs independently and take a lesson from appraisers, how to actually stand up to lenders and be independent while maintaining ethical principal adherence. Fannie is turning into the FDA or FCC, they just rubber stamp approve whatever the big industrial players ask for. If someone notices the corruption, they’ll figure out some talking point to justify the action after the implementation.

      • Mike Ford Mike Ford says:

        Baggs, may I borrow that pic? Its great!

        • Baggins Baggins says:

          Hey there. Made it just for this thread. I’ve been playing with premade elements and paint 3-d. It’s within the public realm now, fair game under Fair Use laws, no permission is necessary. Feel free. All meme’s with ready made caption images on sites like ‘img flip’ are already recognized under fair use laws.

          ‘WBs won’t be coming forward without Congressional protections guaranteed.’
          Sounds like a job for the OMG group. Citizen journalists with hidden cameras. They’ve made the most substantial waves in undercover reporting in decades. Despite setbacks, they remain deeply committed to this type of exposure. One way or another, we’re going to teach and train these people in positions of power they are not above the law, that they will remain accountable for their own activities. Shining the light on corrupt practices and back room arrangements, one covertly recorded minute at a time. Former producer; ‘James, you can’t be the personal editor for thousands of citizen journalists all at once.’ James; ‘Watch me.’

    • Retired Appraiser Retired Appraiser says:

      One might also ask, who in their right mind would stay in that Hell hole?

      • The ones who stay in this profession are the ones who are righteously defending our profession. We are the ones who believe in truth. We are the ones who protect the public trust. America is being attacked from within on so many different levels and we are defending the financial freedoms of its citizenry. And we’re stubborn. Don’t forget that too.

  7. Bravo Mike. So much time and effort goes into researching and defending appraisers. I appreciate your efforts.

  8. Avatar ej says:

    Mike, thank you for exposing this fraud. We need the whistleblowers to come forward and save what’s left of the US economy.

    • Mike Ford Mike Ford says:

      Thanks, EJ, but WBs won’t be coming forward without Congressional protections guaranteed. FNMA has already made serious efforts to find out who they are, as well as to intimidate them with more generic threats. I’m told FHFA is not unaware of the criticisms.

      Aside from Mr. Radke (because ultimately he is the boss on collateral policy issues), I have not named the lower-level managers directly responsible for communicating the quota threats (always orally) though I do have names.

      • Avatar EJ says:

        Thanks, Mike. Is there anyone we should contact to help get the whistleblowers Congressional protection?

        • Mike Ford Mike Ford says:

          Josh Tucker; A few others but this is very new and though some meetings of appraisers are scheduled (and two pending meetings with individual Congress Members) are in the works.

  9. Mike Ford Mike Ford says:

    Oddly from another perspective.

    I wonder if MBA knows they can force FNMA into INDIVIDUAL LOAN arbitration over these?

    It never ceases to amaze me that FNMA blames literally everything connected to credit-granting processes and loan purchases EXCEPT their own deficiencies! CU was supposed to catch/prevent these types of things from happening right out of the gate.

  10. Avatar Seneca says:

    Fannie filed a complaint against me in August 2022. Still have not heard from the state board. I just don’t think they care anymore about these Fannie Mae complaints and probably have written up some one size fits all letter about their findings.

    • If they filed with the state board you should have heard the details of the complaint already. Are you referring to a complaint they made to the bank where the bank is supposed to reach out to you for a rebuttal?

      OR was it a state complaint that already hit the board and you responded and are waiting for the state’s decision on the complaint? If it’s the latter, all you can do is wait as patiently as you are able. If yu think it may help you are more than welcome to send a copy of this article as an indicator that many complaints (50%) are quota driven.

      • Avatar Seneca says:

        The state sent me the complaint letter from Fannie. The only statement from Fannie was “Use of dissimilar comparable sales.” I sent in my work file as directed back in August 2022. Believe me, I haven’t been losing any sleep over this.

  11. Avatar Brian Jarrard says:

    Truth bombs ALL OVER this article

    Former FNMA Subject Matter Expert

      • Baggins Baggins says:

        Now every time I read an AI based article, my mind goes to the Fannie Mae Fraudulator. Inspired title. Mr Ford, you’re a very busy person, we sincerely appreciate your time and efforts.

        • In reading over arguments for another bogus complaint they sent out (to Colorado) Im beginning to think they are using AI chat to communicate their fraudulent complaints; or should I say bogus complaint in support of their banking fraud exercises?

          • Baggins Baggins says:

            Oh no, getting closer to home, that’s the first I’ve heard of CO.

            Actually, have what may be a relevant article on the matter, with legal defense implications, if an AI based program was used to make these decisions. Some college professor tried to use an AI system to recognize if students were cheating paper writing assignments with AI, which is becoming a real problem lately. It came back that all were likely cheats, which was not true. One student then ran the professors older works through the same program and the AI said yep, that’s a cheat. When technically illiterate people place faith in biased programmed software that is not quite as competently developed as they think. Your suspicions are well warranted and entirely plausible. I mean, they’ve only so much as stated they want this technology to become utilized more broadly for that exact purpose.


            Someone should do an experiment and see if these AI programs can write up an appraisal properly or not. After all, the GSE’s are touting the AI integration as ground breaking for their review and accompaniment purposes in dealing with appraisals, which seems flimsy if it could not properly perform the activity of fulfilling the requirement of making over 2,000 important quality decisions for each and every appraisal report developed. (Remember that article where the appraiser said we make that many important decisions every time we fill out the 1004?) And you know what, that gets me thinking. Imagine this scenario; a PAREA graduate getting the lions share of amc requests, while using an AI program to write up the ‘appraisals’. I am in agreement we need to completely shut down all AI based programs and shelve them permanently.


            Also the incandescent light bulb sales ban comes into effect in July. This is the very last month to get them if desired. I just paid another five hundred dollars for incandescent. Found the only seller on ebay whom had legit 100w reveals, at 170 per 48 pk. $3.50 per bulb but one day people may look back and say, wished I would have had more. These other types disrupt sleep patterns, I switched all back to incandescent and am sleeping much better lately. These things are appreciating faster than gold. Only the government could screw something up this badly. (That’s my new favorite tag line, borrowed from another appraiser here, brilliant.)

            • Baggins Baggins says:

              Related FHFA report on use of AI/ML technology.

              In June 2021, Fannie Mae described its use of AI/ML at the time as limited,”
              and it leveraged AI/ML in applications such as property valuation, fraud detection, post-purchase loan reviews, and language processing. In May 2022, Fannie Mae reported to OIG that the Enterprise also uses chatbots to answer customer questions regarding the mortgage process and has since retired AI/ML use in post-purchase loan reviews
              Use of AI/ML through third-party providers: The Enterprises rely on third-party cloud providers to meet AI/ML’s data storage and computing needs. Additionally, the Enterprises use third-party machine learning platforms for data processing and model development. These third-party uses present additional risk concerns, including information security, business resiliency, and concentration.1

              Well they were using artificial technology for review purposes, if I’m interpreting that accurately. Is what’s coming through now the delayed result? Hell that does not seem to bother them when the amc industry is using this tech, sweetheart deals and all which result in continued abuses of the system where amc’s discriminate against appraisers and exclude us from participation in our own industry, while ramping up the use of this very same automation. aka; Restraint of Trade Practices.

              If there is more in this doc, not sure, I just skimmed this one, a random find. I googled this term; Fannie Mae Artificial Intelligence. There is a lot there…


  12. Baggins Baggins says:

    It gets better. Because when you can’t actually pull off detailed comprehensive descriptions and analysis of market value conditions associated with real property, just ask chat gpt your inquiry question and let the artificial intelligence fill out the appraisal report. Dustin beat me to it, of course he did. Because if there is a way to game the system and cheat other people out of their hard working efforts, that guy will find a way.
    This third one is a peach.

    These blind idiots, they’re all in on this new tech. Just one problem, the AI system relies on the AVM data. Optimism vs pessimism is an irrelevant concept when talking about this technology. The potential for systemically increasing data irregularities and faults to one day dominate and skew data perception beyond any hope of salvageability or reliability is astonishing. So is the potential for malicious actors to affect these data outputs and data input systems reliability. It’s like these fools have never even bothered to read security tech news, which continues to disturb with the breath taking pace of malicious actors advancements. Smart technology is so very very stupid and poorly developed with consistently identified vulnerabilities no matter where you look. Yet most people continue to believe the public relations lines of for profit companies regarding security and competent tech development. They continue to pay hard earned dollars to actually bring more of this technology into their lives rather than working diligently to mitigate the risks and return to a safer more limited technological usage footprint. Which would be the wiser approach these few decades later now that we can so clearly see how exploitative and exploited all these technical advances have become.

    They just hand it off to the IT department with blind faith and hope for the best. Meanwhile routine penetration attempts worldwide continue. Search this term; Hacks per minute worldwide. It’s the human error factor, accentuated with government bureaucrats.

    One ponders how the appraisal robots of the future will perceive health and safety hazards, or if perhaps we’ll see a funny video of them slipping on a dog turd in the living room of an abandoned double wide, totally short circuiting and smoking out. Dare to dream. When the FNMA CU system eventually goes into the wrong hands, it’s going to be big. I mean, similar events have happened before. The miracles of working with third party tech companies. Especially all these start ups and amc’s working ‘appraisal modernization’. The exposure by simple company count is tremendous, there are now thousands of companies networking and relying on each others tech and each others security, to accomplish what used to just take a manual effort with a few specialty licensed vendors, a lender, and a few people within the gse networks. Now they’re addicted, they bring new third party companies into these networks on a near daily basis. Bureaucrats often find it difficult to stop the process of handing out special favors, when they do so with other peoples money, no risk to themselves personally.
    The Guardian has established that a host of clients had material that was made vulnerable by the hack, including: “Fannie Mae” and “Freddie Mac”, the housing giants that fund and guarantee mortgages in the US. “The hackers had free rein in the network for a long time and nobody knows the amount of the data taken,” said one source. * “A large amount of data was extracted, not the small amount reported. The hacker accessed the entire email database.”

    Hell, most of the people here have already had your information pilfered from a company with lackluster security, but may simply be unaware it happened. Check your credentials; Have I been Pwned. If you get the green screen instead of the red screen, consider it a small miracle.

    The important moral lesson here; You can’t substitute some technical program or software application for the reliability and security which comes from a hard days work, completed by a qualified and competent human being. These psychopaths dreams of some automated utopia will always remain just somehow so slightly beyond their grasp. Something they can envision and imagine, work towards their entire lives, constantly make advancements towards, but never actually successfully implement as planned. AI will result in more harm than good, the first roll out stages are already a disaster, as people find unique, novel, and quite unexpectedly surprising ways to exploit the technologies capabilities. Automating these systems when the entire world seeks to exploit Americans technical systems vulnerabilities, and they’re getting quite skilled and proficient, successful in their goals, such is a fools errand.

  13. Avatar Dave says:

    Those of you who still drink the match pair cool aid or even pretend that regression analysis can generate adjustments are destined to never understand AI! Back to you Baggins! And YES Lyle Radke doesn’t get it either!

    • Baggins Baggins says:

      Special appraisers life hack; One can extract the market reaction to be used in the adjustment grid for pretty much anything home related, by knowing how much a contractor would charge for that completed service including materials. Then estimating down for depreciated effective age.

      Every single value adjustment one could need to extract for individual adjustments, can come from just the simple method of closely examining a small set of reliable comparables themselves while filling out the grid. No special special proprietary software or advanced mathematical skill is necessary. The market reaction is already present, in the market data, for those real world homes that real world people already showed market acceptance or market resistance regarding.
      The closer the comparables selected are to each others character and effective age, there is a diminished need for the amount to be adjusted. It’s the ‘distributed allotment’ method. A regular joe keeping up in uniform suburbia knows how much it costs for all those individual components, they have to actually pay for them. Most minor item adjustment amounts can be rooted in real world costs for better report defensibility than pointing to some chart and saying the extracted market data told me so. I got a sweet deal on a hot water heater because I paled around with the owner, and tipped him a twelve pack of beer last time around. Positive value gain, achieved. Winning. And saving. Two distinctly different consumer expectations, gaining value vs saving money.

      The garbage in garbage out argument and data becoming stale argument, that’s happening right now in real time. There is no such thing as artificial intelligence, although we do seem to have software which seems to be capable of self learning, while being fixed in time to comply with it’s initial operating peramiters, however flawed they may have been. Reminds me of the ending of Tron; I did everything, everything you asked. I know you did. I executed the plan. As you saw it. You promised that we would change the world together, you broke your promise. I know, I understand that now. I took the system to it’s maximum potential. I created the perfect system. The thing about perfection is it’s unknowable, it’s impossible but it’s also right in front of us the whole time. You would not know that because I didn’t when I created you. I’m sorry.

      If the AI system was so good, why did FNMA suddenly limit the scope of it’s use, yet continue to sell this product as an adequate replacement for human appraisers?

  14. Avatar Dave says:

    One can extract the market reaction to be used in the adjustment grid for pretty much anything home related, by knowing how much a contractor would charge for that completed service including materials. Then estimating down for depreciated effective age. – DON’T BELIEVE IT – POPPYCOCK!

    • Baggins Baggins says:

      Why not? You’ve done the research, narrowed down the search results, selected appropriate comps. That’s your market, a micro view of it at least. If your adjusted values are in alignment after such reasonable adjustment applications, then you’ve achieved market reaction level adjustments. Market value is a moving target.

      A logical fault to believe in the ability for data to be meaningful when extracted through regression tools and such, but then to deny the reality that all those data points come from individual homes, and one could simply just review individual homes for meaningful data. If one trusts the regression to be so accurate for market extraction for feature differences like a bed is worth this much, parking that, then one has no room left for quality of materials considerations. A balance between the two is wise. Problemo?

  15. Avatar Dave says:

    Bracket, bracket, bracket – you’re done!!!! The rest is narrowing the bracket with transparancy not silly mechanical adjustments – show your knowledge by explaining the differences – so easy!

  16. Avatar Howard Wettreich says:

    In Fannie Mae’s Lender Letter LL-2015-02, it states, “The risk analysis performed by CU is for the exclusive use by the lender in their analysis of the appraisal report. After completing a thorough review, a lender should be able to have constructive dialogue with the appraiser to resolve specific appraisal questions or concerns.” Also, “Fannie Mae expects the lender to use human due diligence in combination with the CU feedback, and will actively follow up with lenders who are reported to be asking appraisers to change their reports based on CU feedback without any further due diligence…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. If the lender determines that there would be no material change, then they should not ask the appraiser to make revisions. Fannie Mae expects CU to enable lenders to accept appraisals “as is” with greater confidence.”

  17. Avatar Dave says:

    Howard, are you serious that we should consider a nine-year-old Fannie press release as a continuing outlook on how they are doing. Please thanks but no thanks!


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The New & Improved Fannie Mae “FRAUDULATOR 2.0”

by Michael Ford time to read: 14 min