Collateral Underwriter is Fannie Mae’s (and Freddie MAC) new proprietary ‘risk management’ software tool they are releasing to lenders and their business partners, Appraisal Management Companies (AMCs), on January 26, 2015. Fannie Mae claims it is NOT an AVM (Automated Valuation Model) because it does not produce a proscribed value.
However, I just sat through the ‘Introduction to Collateral Underwriter” webinar publicly available at: https://www.fanniemae.com/singlefamily/collateral-underwriter
Apparently CU will now supply “up to 20 comparables” that are “ranked by risk” to the lender and/or AMC partner based on Fannie Mae’s proprietary algorithms. They will include the appraiser’s comparables (that have each been assigned a risk rank) along with Fannie Mae’s computer generated comparables.
Any Realtors or Appraisers work with a lender/AMC that has a process for ‘value reconsideration’ in place already? Most of you? I thought so… Now consider that not only are appraisers required to respond to these additional comparable requests but will also be expected to respond to reviewer supplied CU risk rated comparables. Most lenders and their AMC partners currently do not have ready access to local data. As of January 26, 2015 they both will as a routine course of business. It is a sure bet that many cost conscious AMCs will use low cost unlicensed staff to ‘review’ these computer generated comparables and ask for the originating appraiser to respond to any that have a lower ‘risk rank’ than the comparables selected by the appraiser.
That’s just the tip of the iceberg. In the webinar the trainer specifically states that there is no standardized way for CU to determine neighborhood boundaries. So Fannie Mae’s solution is to break down market areas by what the US Government calls ‘Census Block Groups’. They abbreviate this as “CBG”. Watch out for this acronym. It’s an arbitrary and silent killer. Why? Because in many cases CBGs do not align well with actual neighborhood boundaries. Further, the trainer specifically states that Market Conditions and trends will also be calculated using, in part, CBGs. This is in stark contrast to Fannie Mae’s own Market Conditions Addenda. This is a form that appraisers are required to fill out (and submit as part of the report) using only neighborhood data. Appraisers will most likely be expected to reconcile any market trend differences between Fannie Mae’s somewhat arbitrary CBG based ‘trends’ and the neighborhood trends as defined by the appraiser in the Market Conditions addenda.
What do you think? Am I jumping to conclusions? Any chance appraisers get to raise fees to cover the extra work involved in reconciling Fannie Mae’s computer generated comparables with their own? Anyone think NAR will be up in arms once they find out that Fannie Mae’s computer generated ‘low risk’ comparables are killing Realtor’s deals?
Turner’s Appraisal Services helps people make informed property valuation decisions by providing easy to understand yet comprehensive real estate appraisal reports. I am IRS Qualified and a California State Certified Real Estate Appraiser with local expertise in the Los Angeles neighborhoods. To discuss Los Angeles Area property values please feel free to call me anytime.
appraisal > Collateral Underwriter > Fannine MAE > Freddie MAC > Home Appraisal > Los Angeles Appraiser > Real Estate Appraiser > Realtors