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CU: We are Fannie Mae and we are here to help.

We are here to help

 

cu

We are Fannie Mae and we are here to help….

Collateral Underwriter is Fannie Mae’s proprietary ‘risk management’ software tool they released to lenders and their business partners (AMCs) on January 26, 2015. They claim it is NOT an AVM (Automated Valuation Model) because it does not produce a prescribed value.

Fannie Mae claims this will ‘help’ by providing additional transparency and certainty to lenders by giving them access to the same appraisal data and analytics that they use in their own internal quality control framework.

However, there is a good chance this new process will delay, and in some cases kill, real estate purchase and refinance transactions.

CU is already here! And what I suspected would happen has happened. In case you were thinking there would be a grace or ramp-up period – there are revisions requests from the very first day CU went live (01/26/2015). The lender’s underwriter submitted the appraisal report to CU which produced automated flags that were passed along (literally copy-and-paste) to the AMC clerk who passed them along to the appraiser with a demand for an immediate response:

****UNDERWRITER REVISIONS****

Message – Comparable 3 (Collateral Underwriter)

The condition rating for comparable #3 is materially different than what has been reported by other appraisers. Please provide supporting commentary for your data on this condition.

Message – Comparable 3 (Collateral Underwriter)

The quality rating for comparable #3 is materially different than what has been reported by other appraisers. Please provide supporting commentary for your data on this condition.

Message – Comparable 2 (Collateral Underwriter)

The quality rating for comparable #2 is materially different than what has been reported by other appraisers. Please provide supporting commentary for your data on this condition.

How would you respond? Keep in mind that this is the ONLY data from CU that the appraiser has access to. They have no idea if it is valid and do not know if their rating was flagged as high or low.

It appears that the lender’s staff (underwriter) has opted to bypass Fannie Mae’s publicly published guidelines of routing automated feedback to the appropriate qualified staff appraiser for triage before passing them along to the lender’s designated appraisal management company.

Here are the guidelines from Fannie Mae’s implementation seminar:
Collateral Underwriter Considerations

Collateral Underwriter Considerations

The AMC has also opted to pass along this automated feedback without a review process by a qualified staff appraiser:
AMC passes along CU automated feedback

AMC has also opted to pass along this automated feedback without a review process.

Had either party followed Fannie Mae’s publicly published process the qualified review appraiser would have had the opportunity to read the comments in the existing report which addresses the issues raised by the CU automated feedback. Yes, you read that right. CU cannot read the existing comments in the report which often time adequately addresses this automated feedback, yet lenders and underwriters are choosing NOT to actually read the appraisal report.

There are similar copy and paste CU revision requests posted on several appraiser forums. Here is another sample:

Reason for Revision Message – Appraisal (Collateral Underwriter) The appraiser-provided comparables are materially different than the model-selected comparables.  2. Please comment on the yellow highlighted sales or consider if warranted. The list of sales has been made available for your review:

CU generated comparables

CU generated comparables

So you’re a Realtor or a homeowner and might be thinking “well OK, so what has this got to do with me?”
  • Higher costs: One appraiser this past week that noted it took him 7 hours to research and respond to all of the comparables generated by the automated CU model. He can’t work for free so he plans to raise fees. Consumers will certainly start to feel that in the pocketbook.
  • Delays in closings: As you can see from the examples above there is a high volume of false positives generated by the automated CU model. It takes time for the appraiser to respond. Since there is currently no pay for this additional work it is not a priority.
  • Dead deals: As appraisers get hammered by more and more of these automated CU requests they will tend to get more conservative in their ratings and opinions of market value. It is only natural to want to avoid the flags and automated revision requests.
Stay tuned! More developments are coming in the next few weeks as the industry sorts out this debacle.
Or, if you are a Realtor in Southern California please pass this information to your managing Broker or Office Manager. I am available for speaking engagements.
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One Response to CU: We are Fannie Mae and we are here to help.

  1. Retired Appraiser says:

    How would I respond? In the event that I was dumb enough to still be in the business I would forward the following response:

    “I was assigned this appraisal with the understanding that I was being paid for MY OPINION OF VALUE based on the best comparable sales available to me. I will be happy to review the work of other appraisers that you provide to me or analyze other sales as an additional assignment. My billing rate is $75 per hour. Feel forward to forward a request for your new assignment to our office and please be specific about your requirements upfront to save on billing time.”

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