Mortgage Professionals Should be Optimistic About the Future

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Th e M Rep o RT | 25 Feature Th e M Rep o RT | 25 T his month, Fannie Mae makes the Collateral Underwriter analytic tool (CU), and its subsequent feedback, available to lenders and their agent appraisal management companies (AMCs). While CU is the most robust and intuitive appraisal data aggre- gator ever created, it is not a new application. But now overall col- lateral risk scores and insights into appraisal reports will be shared proactively during the under- writing process in an attempt at quality control. Essentially, lenders will now have access to the same appraisal analytics used in Fannie Mae's quality control process. CU works by accessing the Fannie Mae database that col- lects data from appraisal reports submitted through the Uniform Collateral Data Portal (UCDP). This comprehensive approach has been in the works for years. It got a very big boost when Fannie Mae required appraisal reports to be completed in the Uniform Appraisal Dataset (UAD), which standardized ap- praisal data reporting. Since this requirement went into effect, the UCDP has so far collected more than 12 million appraisals and almost 20 million transactions. Once the appraisal report has been uploaded by the lender or AMC, CU performs an automated risk assessment of the appraisal and provides a risk score, flags, and messages. While the use of CU is not mandatory for Fannie Mae sell- ers, the GSE strongly encourages it. Of course, lenders will want to reduce their risk of a buy- back for appraisal deficiencies, so widespread utilization of CU feedback is expected. According to Fannie Mae, the current requirements and expecta- tions for lenders are not fundamen- tally changing. The Fannie Mae Selling Guide specifies that the lender is responsible for (among other requirements): "ensuring the appraiser has utilized sound reasoning and provided evidence to support the methodology chosen to develop the value opinion, particu- larly in cases that are not covered by Fannie Mae policy. ..." In short, the lender is not off the hook just because they employ the new tool. Apparently, lenders and AMCs welcome the move to transpar- ency during the underwriting process and their inclusion into Fannie Mae's quality assurance practice. This change should further improve the overall quality of appraisals. Fannie's primary focus as it rolls out CU to UCDP users will be educating underwriters on its use. But not everyone in the indus- try is optimistic about this re- lease. Appraisers are particularly skeptical, given that Fannie Mae has no plans—either now or in the foreseeable future—to make the CU tool available to them. According to Fannie Mae, CU was originally developed as an appraisal-review tool for internal analysis. It's not an independent property database that allows users to enter an address and re- ceive associated data, the agency says. Therefore, the argument goes, appraisers don't need access to the tool. Despite Fannie Mae's willing- ness to educate appraisers how CU works from a high level, appraisers are naturally concerned with the extra pressure this could put on them, whether the future use of CU analysis will grow beyond its stated parameters, and what any unintended consequenc- es of both might wrought. Then there's a very real sense of exploitation, as the data that powers CU is supplied day in, day out by the thousands of ap- praisers who have no access to Fannie Mae's quality-control tool. Appraisers want to know how this will affect their past apprais- als and what it will mean for their future ones. Recently, the Illinois Coalition of Appraisal Professionals (ICAP) drafted an online petition to allow apprais- ers access to the data that they provided through UAD. It's one of many formal (and informal) requests for the CU transparency to reach all boots-on-the ground appraisers. One of the common concerns is the ranking system in which CU scores "the best 20" compa- rable properties. For an example, if an appraiser uses comparable No. 1, No. 3, and No. 5 on the list, does this automatically elicit a rejection from a lender back to the appraiser to inquire why comps No. 2 and No. 4 were not used? How deep will lenders in- terpret the data? Will lenders ask for clarification on all properties listed by CU? The fear of higher revision rates and bottlenecking the ap- praisal process—or to put it more bluntly, creating more work for the same pay—has appraisers legitimately concerned. Their fear is that clients who use the tool will exhaust minimal diligence on their own to determine if there is enough support with the sales already used in the appraisal and if there is validity with the other sales supplied by CU that will lend meaningful support to the ap- praisal assignment. If the approach by the lenders and AMCs is to simply dis- seminate to the appraiser the list of other properties they perceive to be comparable to add to reports, the already-low morale of your ev- eryday appraiser will sink further. While this concern is valid, there is already a vast amount of appraisal review tools in use by Collatoral Damage? Within weeks, Fannie Mae will allow lenders—but not appraisers—access to its Collateral Underwriter analytic tool. Should appraisers be nervous? Or will increasing transparency keep the quality of appraisals high? By Brandon Boudreau, COO of Metro-West Appraisal Co. LLC

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