Tuesday, 4 October 2022 | The Latest Buzz for the Appraisal Industry

What Appraisers Should Know About Collateral Underwriter

Another milestone in the appraisal industry is upon us. Fannie Mae’s Collateral Underwriter, known as “CU,” is set to change the appraisal review process at all levels. Many appraisers think that this is a step in the wrong direction and will make our jobs this much more difficult. In fact, CU will provide up to twenty alternate comps on a map along with your original comparables. This sounds a little terrifying at first glance, but if you chose the best comps available you should be fine. Fannie Mae states that these sales are for the lender’s review. And goes on to state that we should not expect to see revision requests asking appraisers to comment on the twenty potential comps. CU will not be providing an estimated value nor will they provide a range of value. Keep in mind, this is not a valuation product but rather a review product to assist the lender in making their final lending decisions.

Fannie Mae has collected information from fourteen million appraisals, amassing a vast amount of data. CU will compare information that other appraisers provide about other comps i.e. ‘The appraisers reported GLA for comp #1 is different than the GLA reported by other appraisers.’ Information such as this may be very helpful to lenders. On the other-hand this may be a cause for additional questions to the appraiser. If data within your appraisal contradicts public records information it is always a best practice to comment on where the information was obtained to avoid any additional questions from the client.

Fannie Mae will place a risk score on every appraisal ranging from 1-5. Appraisals with a score of 5 have the highest risk and 1 with the lowest amount of risk.
Risk Flags will also be associated with every appraisal. Three flags will be issued with every appraisal.

1.    Property eligibility/Policy compliance
2.    Overvaluation risk flag
3.    Appraisal Quality risk flag

We should keep in mind during this period of transition that this is a tool to help all of us work as a more cohesive unit. Collateral Underwriter is an additional tool for the lender to utilize when determining a risk factor for assets that they will be lending on. This is not another AVM or anything along those lines. I think if we as appraisers provide accurate data within our reports that is supported, we should experience a smooth transition to Fannie Mae’s new Collateral Underwriter.

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  1. That’s fine if the intent is not to have the appraiser comment on the additional sales (not comparable sales) however, what do you think a UW will do when they see this? Review them all themselves, or pass it onto the appraiser for comment? this is another huge waste of time for the industry and will cost the home owner, and the number of appraisers in the industry as many will leave. 2 of the most prominent appraisers just quit here locally within the last month.

  2. I don’t mind that they strive for consistency. Get the room count, GLA, basement, sale date, etc. correct every time. If the MLS GLA is wrong because they counted the basement, just state it in BOLD AND GIANT LETTERS in the addendum. But screw them if for every appraisal they ask you why didn’t you use this comp and why didn’t you use that comp, based on what a computer spits out.

  3. And another person has either attended the Fannie Mae webinar and/or
    read all the Fannie Mae info on their website. (which is designed to
    quiet all the concerns & questions and have us all go along)

    this is just “another milestone” and “this is a tool to help all of us
    work as a more cohesive unit.” And…”Collateral Underwriter is an
    additional tool for the lender to utilize
    when determining a risk factor for assets that they will be lending on.
    This is not another AVM or anything along those lines.” …..” I think
    if we as
    appraisers provide accurate data within our reports that is supported,
    we should experience a smooth transition to Fannie Mae’s new Collateral

    If all this is true……why are we as appraisers
    the ONLY ONES restricted access to this amazing data base? Especially
    since we are the ones who contributed ALL THE DATA as it was farmed off
    of our reports since the UAD was put in place? And wouldn’t it seem to
    make sense that appraisers are the ones most qualified to review /
    analyze / utilize this type of data?

    There are 19 state
    appraiser organizations that have joined The Network of State Appraiser
    Organizations in order to speak with one voice on appraiser related
    issues. This is a big one. They have submitted a letter Jan 8, 2015 to
    The Honorable Melvin L. Watt, Director, Federal Housing Finance Agency
    in order to voice our concerns and ask for a meeting to address the CU.
    Here is the content of that letter;

    The Network of State Appraiser Organizations

    The Honorable Melvin L. Watt


    Federal Housing Finance Agency

    400 7th Street SW

    Washington, DC 20024
    Re: FannieMae Collateral Underwriter Program

    Dear Director Watt:

    On behalf of the independent state professional appraiser
    organizations signing below, I invite your attention to concerns
    expressed by the majority of real estate appraisers regarding
    FannieMae’s announcement making their Collateral Underwriter (CU)
    program available to lenders and their third party affiliates (but not
    to appraisers). We understand and appreciate the intent – to reduce the
    rejection rate of appraisal reports by FNMA through improved screening
    at the lender level.

    Our concern is that lenders and their appraisal
    management companies will take an overly conservative misunderstanding
    of the CU’s output and continue to implement processes that result in a
    degradation of the quality as well as the timeliness of residential
    appraisals. These misunderstandings contribute to actions such as FNMA’s
    recent elimination of some of their appraisal guidelines regarding net
    and gross adjustments. It can be difficult to convince lenders that
    these guidelines are not hard limits. The same is almost certain to
    occur with lenders’ employment of CU. The program’s identification of
    alternative property sales as possible better comparables for analysis
    will likely result in the rejection of reports and the requirement for
    appraisers to spend considerable additional time responding to questions
    as to why those other sales were not used – hence extending loan
    processing time and increasing fees. Since those alternative sales come
    from a database with information not presently accessible by appraisers,
    this is not a self-correcting situation.

    The solution that we recommend is to make the
    Collateral Underwriter program available to individual appraisers,
    including sales data, local market trends, imagery and other public
    records, that is being made available to lenders and their affiliates.
    The originating appraisers could then be alerted to the identification
    of the alternative sales as superior, and either utilize them or add
    appropriate explanatory commentary as to why they are not being
    included. This would improve the overall quality of appraisals by making
    selected property information from the FNMA database available to
    appraisers during initial appraisal development. It would also
    dramatically speed up loan processing time by eliminating delays caused
    by continuously growing requests for appraisers to reconsider the facts
    and conclusions in their reports. It is only logical for appraisers to
    have access to all the data possible. There is no apparent reason why
    this would not be possible, nor any potential downside or detriment to
    the process.

    Not providing FNMA’s Collateral Underwriter data to appraisers at the
    beginning of the valuation process not only disregards Appraiser
    Independence Requirements but also FNMA’s own guidance as noted in: FNMA Selling Guide (4/15/2014) B4-1.1-05 “Disclosure
    of Information: “Any and all information about the Subject property
    that the lender is aware of must be disclosed to the appraiser. The
    appraiser must determine if the information could affect either the
    marketability of the property or the opinion of the market value of the
    property.” Additionally, there is contradiction within the actual FNMA Uniform Residential Appraisal Report; as Appraiser’s Certification 12. “I
    am aware of, and have access to, the necessary and appropriate public
    and private data sources, such as multiple listing services, tax
    assessment records, public land records and other such data sources for
    the area in which the property is located.” Appraisers must have access to the data. Otherwise, it is not possible to certify what is unknown to be known.

    Providing the Collateral Underwriter to appraisers would
    significantly improve the residential mortgage process and further the
    satisfaction of FNMA’s own requirements of an appraiser.

    We would like to meet with a member of your staff to discuss this in
    greater detail. I am serving as the contact person for the state
    organizations signing below. Please advise me as to a proposed date and
    time for such a meeting. I can be reached at (704)752-6252 x101, or at peterg@homesightllc.com. Thank you for your consideration.

    Sincerely yours,

    Peter Gallo

    Appraiser’s Coalition of Washington

    Arizona Association of Real Estate Appraisers

    California Coalition of Appraisal Professionals

    Delaware Association of Appraisers

    Georgia Coalition of Appraisal Professionals

    Idaho Coalition of Appraisal Professionals

    Illinois Coalition of Appraisal Professionals

    Louisiana Real Estate Appraisers Coalition

    Maryland Association of Appraisers

    Mississippi Coalition of Appraisers

    North Carolina Real Estate Appraiser Association

    Ohio Coalition of Appraisal Professionals

    Oklahoma Professional Appraisers’ Coalition

    Real Estate Appraisers Association (CA)

    South Carolina Professional Appraisers Coalition

    Tennessee Appraiser Coalition

    United Appraisers of Utah

    Virginia Coalition of Appraisal Professionals

    West Virginia Council of Appraiser Professionals

    If you don’t see your state appraiser organization listed as a signer to
    the Fannie Mae letter, contact them and provide them the network
    organizer’s info; Peter Gallo, at (704)752-6252 x101, or at

    The more states we have in cooperation on this Collateral Underwriter issue…the better.

    We need your voice!
    Note: We had Kentucky join us yesterday!!

    1. We need more power on The Hill/In DC. Seems all who are in our best interest, just get steamrolled over by the Feds. Maybe NAR or MBA can jump on board. Appraisal Institute doesn’t do squat! I’m in a ‘can’t fight city hall’ mindset. We loose, things are only gonna get worse (and we can’t stop it). To bad, I like what I do too…..

      1. DA…..the NAR has (so far) not seen the CU as anything to worry about. They have sent out emails to that effect. They were in talks with FannieMae last November. (again….appraisers are always the ones left out of the conversation) But they have a conference call scheduled between FannieMae and the NAR Valuation Section Committee next week. Maybe one more chance to have input by contacting the NAR, if you are a member.

  4. I hope the ‘intent’ is for lending purposes only. I thought the red flags translated into a score card. Enough red and one gets blackballed. I misunderstood. I hear what Luke is saying, but it’s *all* still ‘overkill’ (yet the admin lowers the minimal down payment…WTF). If the UW does like a given report, just order a 2nd appraisal (field review etc) and be done with it! You get what you pay for. Pay the appraiser sh%# and get that result. Field reviews the same. $250-275 for the work involved….to low. Wonder why apps for new licenses are down. And of course none of the prior crisis would be because of the actual homeowner! Multiple HELOCS, lets go buy 2 cars….oops my adjustable just went up!! Good luck to all in twenty fifteen…

    1. DA……blacklisted is a possibility. THE CU will track your “score” as an appraiser and it can result in your being removed from “approved appraiser lists”.

      1. Tx for the 411. Cool, it’s like working for TSI/Quicken every day, every deal. The American way baby….blame the housing crisis on someone else. Kick the guy/gal who makes the least. 25 Yrs in this….lemme just get 10 more. I take the article with a grain of salt. Ole Luke works for an AMC I take it? Prob hardly ever gets out in the ‘field’. So to him, a piece of cake.

        1. I love cracker jack AMC writers, WTF are they writing articals for they steal money from the appraisers and sleep well at night while the real appraisers WORK to make there asses look great

  5. This industry is a Joke! If anyone out there is thinking of becoming a appraiser think again! I don’t know any job in America that has to deal with this kinda paranoia,cut fees, higher cost, more work and worrying if you make a mistake you are blacklisted and your livelihood gone after years of hard work!

  6. This is funny… I think the author should take a USPAP class. “This is not another AVM or anything along those lines.” If the intended user provides 2 or 20 comparables they deem “comparable” is this not a range of value, which is by definition an opinion of value (appraisal)? So in essence you have an intended user guiding the appraisal process including comparable selection. I guess Luke is right it’s not another AVM or anything along those lines it is FAR worse. Furthermore, the intellectual property of those fields mined is the Appraiser’s proprietary work product.

  7. The government will send 2-20 “alternative comparables” to the client. Who will then pass them onto the appraiser and say: “Why didn’t you use these comparables?” Please comment.
    The appraiser utilized the best available comparables to estimate the most probable sales price for the subject property. Why do you think these comparables are “better, or should
    have been considered based on data that the appraiser has no access to”? The appraiser will not comment on “alternate comparables” as the appraiser already provided the best available. Should the client believe that the appraiser didn’t provide the best available comparables for the subject property; the client needs to have the appraisal reviewed by an appraiser who has geographical knowledge of the area in accordance with USPAP, Federal and State Laws governing the review process.

  8. I started charging the AMC’s for my data in addition to my regular appraisal fee. I was keenly aware the data Fannie was hording was going to eventually strangle the residential appraisal business. Virtually all residential appraisals will be completed with statistical modeling in the near future. They will by-pass the appraiser all together. And this will be accomplished with data WE have provided. That being the case, I began charging $50 per comp above my usual fee. As you might expect, I no longer work for any AMC’s. My income is down, but so is my stress level.

  9. Did you ever stop to think that everyone in this new “cohesive unit” is on salary except the appraiser who is at the center of everything and will be paid NOTHING extra while all of this is being worked out? Those who make it through the process will have the privilege of continuing to be paid NOTHING extra in the future, despite the extra work required.
    This may be an exciting brave new world for FNMA, lenders and AMCs, but it is about survival for individual appraisers. I can’t see any way to survive without giving them exactly what they want: appraisals that won’t trigger requests for additional data and comments. The only way to do that is to stay within the guidelines, regardless of the facts about the subject property and regardless of the data available.
    For those appraisers who care about presenting their fair and honest analysis to show how they accurately valued the subject property, it looks like you’ll have to wrestle an 800 lb. gorilla each and every time you want to do it. Good luck with that. So far, it seems to me there will be only two choices: become a hack or get out. As for this new system resulting in more accurate valuations and getting the hacks out of the business: lol.

  10. my biggest issue is this one

    I inspect a property for a sale. I
    walk through it, around it, look under it and in the scuttle. I see
    many things that no one else sees. I write a report and call it C4.

    it sells 6 other appraisers use it as a comparable. They have not seen
    it up close. All they see is what the Agent puts in the MLS and what
    they can see from the street. The Agent is NOT an unbiased source of
    data and calls out every thing as great and wonderful. The other
    appraisers all rate the house as C3, but none have truly seen the house.

    CU flags me as being out of line with other appraisers in my area and I get a letter and maybe put on the watch list.

    If the facts be known, it is the other 6 appraisers that should get a letter.

    take it one step more, it is the Agent that should have his/her license
    reviewed for NOT reporting the true condition of the subject in the
    first place.


    Easy, we get the MLS (or
    force it) to provide data fields on the MLS that ONLY appraisers can put
    data in. ONLY the appraiser that does the inspection and report for the
    property. He updates the MLS with Q and C ratings, Taped off Sq Ft and
    has an area to add in any notes from the inspection
    This area can ONLY be seen by other appraisers as part of a new custom printout and should then be part of the work file.

    Not rocket science, just a simple fix for the system

    But until Fannie Mae can put a thumb on the Agents that junky house will always be reports as a creampuff

  11. A big problem I have with CU is that sometimes an appraiser will run into a fairly unique property. Maybe it has an extra large lot, or a spectacular view, or a huge amount of upgrades. Let’s say a property like that is listed for sale at $500,000, and within a few days there are 6 or 7 offers on the property around the list price or higher, and an offer is accepted at $510,000.
    Now when the appraiser comes out the next week, he or she will find that it may be difficult to appraise the property for $500,000 or higher, and maybe he/she comes up with a value of $485,000, by using several comps from a mile or two away in a different neighborhood, as well as several comps from the immediate neighborhood. Then the appraisal is run through CU, and all kinds of red flags are raised, and CU says that the property is over-valued at $485,000. But what is the real market value? It’s probably $500,000 or higher, because the market has spoken. But the appraiser is still going to have mud on their face as far as Fannie Mae is concerned.


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