In January 2015, Fannie Mae will release Collateral
Underwriter (CU), a statistical tool for lenders that assesses an individual
appraisal’s risk and quality using the uniformly coded data (known to
appraisers as Uniform Appraisal Dataset (UAD)) from other appraisals. If the CU program works as intended, it could
make appraisers more accountable, improve appraisal quality, and help lenders access
loan risk more effectively.
Appraisers are put off by the pending change because the
trend has been that increased oversight usually results in more work and liability
for appraisers without increased compensation.
With CU, appraisers will be compared to their peers and to statistical
models on every assignment. Both comparisons
could be wrong, but either could lead to an appraiser being asked for numerous
clarification revisions, being listed as high risk appraiser, being placed on a
do not use list without due process, and ultimately result in a loss of
Here is an example output from Collateral Underwriter
obtained from Fannie Mae’s online Introduction
to Collateral Underwriter Course and four issues that cause
appraisers anxiety. (Please excuse the
poor visual quality of the example; it is the best resolution of a screen
capture that we can manage.)
Appraisers often spend hours researching and commenting on lists of AVM comparables, without any additional compensation, because responding to lender stipulations is required when accepting the assignments. Admittedly, CU should have better comparable data than most AVMs, because the data comes from actual appraisals and includes things like condition, quality, basement finish, and view. However, the typical appraiser has had bad experiences with past AVM data making them nervous about CU’s implementation.
All of the above issues touch on the anxiety that appraisers currently feel about the implementation of Fannie Mae’s CU. These examples are based around the fact that data is being used by Fannie Mae and lender clients to judge an appraiser’s work, without the appraiser having access to similar information during the appraisal process. If Fannie Mae truly wants to improve appraisal quality, the agency should work to find a way to provide CU information or warnings to appraisers during the appraisal process so that appraisers can work to improve the quality of their work before submitting a finished product, and/or address issues that the automated system will flag.
Did I leave anything out or do you want to join in the conversation? Let me know in the comments below.
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