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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