Fannie Mae’s Collateral Underwriter (CU) program is intended to give lenders access to the same appraisal analytics that Fannie Mae uses in its quality control process. It performs an automated risk assessment of appraisals submitted to the Uniform Collateral Data Portal (UCDP) and returns a Risk Score and flags and messages to the lender. Lenders can use the CU Risk Score to identify high-risk appraisals and then perform field reviews on them as needed.
Fannie Mae has issued a Collateral Underwriter FAQ document. Below, we cover some of the most relevant FAQs to appraisers.
How does Collateral Underwriter handle properties in rural locations?
This is a big issue for appraisers who do a lot of work in rural areas. Let’s face it—when you’re appraising in rural locations, often you have to go further away for your comparables and further back in time, there is less homogeneity among the properties, and sometimes the appraisal report looks unattractive. With the comps being so far away and dated, you have to provide a lot of explanation.
Fannie Mae says that CU will not provide a higher Risk Score solely because the comparables are dated, located several miles away, or require significant adjustments. CU has a comp selection model, and if that model finds that the appraiser provided the best available comps, then the appraisal will likely receive a low Risk Score, assuming no other potential issues are detected.
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Are appraisals re-scored when submitted to UCDP with corrections?
Yes. Let’s say an appraisal report was submitted, and it receives a high Risk Score. That Risk Score goes back to the lender, and the lender then goes back to the appraiser and asks for additional information. The appraiser then provides some new comparables or some new information in the report and resubmits it. Upon resubmission, Collateral Underwriter analyzes the revised appraisal as if it were a new appraisal. The Risk Score may or may not change. The flags and messages may or may not change. But a new score is provided.
Is Fannie Mae providing info about CU to appraisers and AMCs?
The answer is yes, they are. And they’ve been trying to get the word out about CU. There have been many webinars and seminars. There is a lot of information on Fannie Mae’s website. They even have training resources—PowerPoint presentations, etc.—on the site where you can learn a lot more about CU.
Will the use of CU by Fannie Mae lenders result in more work for appraisers?
Fannie Mae says their current requirements and expectations for lenders have not changed. CU is an appraisal review tool that is used by the lender. When a lender submits an appraisal and gets the CU Risk Score, they are not supposed to automatically call the appraiser and ask him or her to make changes based on CU feedback. Instead, the lender is supposed to go back through the appraisal report and see if the issues that CU red-flagged are addressed in the appraisal report.
For example, if the comps are further away and there are closer comps available, but the appraiser had a valid reason for using the further comps, that’s going to create a red flag. But the lender is supposed to look at the appraisal report to see if there is an explanation in there before they automatically go back to the appraiser with an addendum request.
If the appraiser has done his or her job properly, the lender is not supposed to come back to them with these additional requests. However, in real life, some lenders don’t have the time to read over the appraisal report in great detail. When a red flag comes up in the analysis, often the lender’s initial reaction is to call the appraiser and get more information when they really should be reading and reviewing the appraisal report. The information, analysis, or explanation that they need might actually be in the report.
If that information, analysis, and explanation that the lender needs is not in the appraisal report, then yes, the lender is supposed to go back to the appraiser and ask for it.
According to Fannie Mae, “Appraisers that make a good faith effort to use the most similar comparables and to provide accurate and consistent data, and support their adjustments with market data and analysis can generally expect a minimum of CU feedback.”
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