Collateral Underwriter Update

When Fannie Mae unveiled Collateral Underwriter® there was a lot of talk regarding how the program would work. The Buzz staff recently asked Zach Dawson, Director of Collateral Policy and Strategy, Fannie Mae, to provide appraisers with an update on the development of Collateral Underwriter.

Buzz: Can you bring us up to date on CU? What have you learned from this data initiative?

Dawson: Development and roll-out of Collateral Underwriter® has been a fantastic experience for Fannie Mae and we have received an overwhelmingly positive response from our customers.  With over 18 million appraisals captured to-date through UCDP®, we continue to find great insights on appraisal performance and market trends that help us manage risk more effectively.  We are now able to share the same data and analytics we use internally with our customers to provide them greater certainty and much-needed time and cost savings in their origination process.  What we’re hearing from many of our lenders is that use of CU is helping to improve appraisal quality and reduce appraisal defects while making their underwriting process more efficient at the same time.  As of today, we have over 14,000 individual users from nearly 1,600 lenders registered for CU.  Just a few weeks ago we surpassed 1 million appraisals reviewed by lenders in the CU web application since its launch in January 2015.  While this is a great milestone, we will continue to engage with our customers to support implementation and identify opportunities to make the tool even better.

Buzz: Can you tell us more about AQM and the objectives of that project?

Dawson: Appraiser Quality Monitoring is another initiative made possible by electronic capture of standardized appraisal data.  We can now use automated methods to identify appraisers whose reports exhibit patterns of inaccuracies, inconsistencies, or other potential appraisal quality issues and then manually analyze a targeted sample of that appraiser’s files.  The purpose is to communicate these issues directly to appraisers for educational purposes and provide them with an opportunity to improve their work.  Our objective is not to put appraisers on the AQM list, but to do everything possible to keep them off the list.  Some of the specific issues we’ve been able to identify include appraisers performing unrealistic amounts of assignments, appraisers with unusually high data discrepancy rates, lack of time adjustments in appreciating and depreciating markets, and use of identical GLA adjustments across all property types, sizes, price tiers, and locations.  Recently, we have been exploring ways to identify appraisers who appear to be targeting predetermined values.

Buzz: How many appraisers does Fannie Mae refuse to accept appraisals from?

Dawson: On a monthly basis we share with our customers a list of appraisers that are subject to 100% post-acquisition review or whose appraisals are no longer accepted by Fannie Mae.  We do not make the size of this list public and that is not how we measure success of the program.  Our objective is to drive overall improvements in appraisal quality.  Based on the data we’ve seen since implementing the program we believe we are achieving this goal.  We have sent hundreds of educational letters to appraisers and we’ve seen improvement rates in excess of 90% upon analysis of subsequent appraisals.  As a result, we’ve had to move very few appraisers to 100% post-acquisition review or beyond, which is our last resort.  We are encouraged by these results and pleased to have found an effective way to move the needle on appraisal quality.

Buzz: What type of violations result in Fannie Mae refusing to accept an appraiser’s work?

Dawson: We don’t have a predetermined list of violations that lead to specific actions. However, the violations resulting in Fannie Mae not accepting an appraiser’s work are the type of issues that would require reporting the appraiser to a state regulatory board. It is important to note that we’re looking for persistent patterns of behavior, not one-off situations, and we perform a significant amount of human due diligence before any communication is sent to the appraiser.

Buzz: Are there intermediate steps before you resort to 100% review or refusal to accept assignments?

Dawson: Absolutely.  We have a robust review and governance process in place around AQM that we take very seriously.  Appraisers are first sent letters that specifically identify issues we are seeing and they are given an opportunity to improve their performance or, where more significant issues are identified, provide a rebuttal.  Communication is strictly between Fannie Mae and the appraiser, and the appraiser has an opportunity to provide an explanation for the issues we’ve identified before the situation progresses to the point of 100% post-acquisition review or our refusal to accept assignments from that appraiser.

Buzz: Can you share with us some basic overview of CU?

Dawson: CU is Fannie Mae’s proprietary, industry-leading appraisal assessment tool that we’ve been using internally for several years and just launched to lenders in January of 2015.  It is built from Uniform Appraisal Dataset (UAD) appraisal data captured through UCDP® which provides unparalleled depth of data and nationwide coverage.  CU provides real-time feedback including a Risk Score, Risk Flags, and detailed messaging to highlight specific aspects of the appraisal that may require further attention from the lenders.  This feedback helps lenders easily identify appraisals that have heightened risk of quality issues, overvaluation, or eligibility violations so they can be address proactively before delivery to Fannie Mae.  With greater transparency and certainty from Fannie Mae, lenders may also choose to perform more streamlined review of low risk files which reduces operational burden on their underwriting staff as well as AMCs and appraisers.  The web application contains dynamic and interactive functionality including comparable sales data, mapping, local market trends, aerial and street-view imagery, public records, building permit data, and more at the click-of-a-button.  Results are model-derived and market-specific unlike other less effective rules-based tools.  Fannie Mae spent years researching and analyzing appraisal data so we could bring something truly different and better to the market.

Buzz: How many appraisals do you accept at the UCDP portal?

Dawson: In addition to providing us nationwide coverage and in-depth data, the data captured through UCDP® gives us access to the most up-to date view of the market.  We receive approximately 20,000 appraisals per business day so our database is constantly growing.  This gives us great insight to current market trends across the country.

Buzz: We would like to thank Zach Dawson for taking the time out and providing us with this update on Collateral Underwriter. For additional information regarding Collateral Underwriter, visit FannieMae.comJoin us at Valuation Expo in Baltimore, MD July 11-13th and hear an update first hand from Zach Dawson, who will be on the Regulatory Update panel. This continuing education session will be providing details on the specifics of new legislation both enacted and pending in the industry. 

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20 comments

  1. Appraisal Buzz

    Hear an update first hand from Zach Dawson at Valuation Expo in Baltimore, MD July 11-13th. Zach will be on the Regulatory Update panel, earn 14 hrs of CE and network with your peers. Visit valuationexpo.com to register.

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      Sorry Buzz – we “appraisers” are too busy answering inane questions about CU and AMC “revisions” requests to visit your Expo.. we are also too BROKE from splitting our fee 3 ways while the borrower is being overcharged for the process to be “managed”. Thanks for all you do to keep bleeding the “appraisal’ industry of resources and mostly our “time” – which is all we really had… .

  2. Avatar

    I will not accept CU assignments. Most appraiser’s I know have a general disdain for this system and it’s implications.
    It increases our liability, potential for exclusionary lists, unnecessary revisions (hours of unneeded work) and pits appraiser against appraiser. What a great new world we live in!

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    Insert my 1,000 word rebuttal here.

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    I love the way he never answers the questions about how many are on the list and what will get you put on the. Very vague answers, typical politician. Can we please stop over using the word “robust”. That is the most ridiculous use of that word in history. It is not applicable to the data or appraisal. LOL robust describes a cup of coffee, not data.

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    Its kind of telling and sad at the same time how proud he is of the “Robust” ability Fannie has to data-mine our proprietary work product to lower risk scores. Or as its more commonly referred to, Shape the style and direction of our work product. Its almost as if in lieu of predetermined values we now have predetermined acceptable comparables and adjustments for each assignment. I imagine in a few years we will just be doing desk reviews of the AVM appraisals they will be using to make lending decisions. What could go wrong?

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    Does it bother anyone else that Appraisal Buzz has turned into a propaganda machine?

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    Christopher A Goodwin

    You can sum this article up in 2 words. Bull Sh*t.

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    You notice that they have had an overwhelming positive response from their customers. The lenders and AMCs love it. However, you notice that he doesn’t mention the overwhelming negative response from the appraisers who aren’t even allowed access to the CU!

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      EXACTLY Matt! Until appraisers are given equal access to CU, how can FNMA continue to blacklist appraisers?

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    They also refuse to realize that their “data” is FULL of data that was manipulated to bypass all those AMC automated “reviewers”. NOBODY is checking the credibility of the data… only that it “looks” good. But just like Mortgage Backed Securities and Credit Default Swaps.. if they can make it sound important while nobody really understands any of it… they can get away with it and leave the middle class taxpayers bailing them out… again… “There is NO REALity in REAL Estate”

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    Got a note back from a client (CU) , saying my Condition rating is different from another appraiser using the same comp- what am I supposed to do? , guess what their C rating is? change mine because someone else used it first? Why don’t you question the 1st persons condition rating? – guess I will go into someone’s super secret file because I told them I was not changing.

  11. Avatar

    Looks like regression analysis completely bombed out, and is long forgotten. Good riddance to bad rubbish.

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    I’m happy to hear that FNMA is pleased with CU. Maybe it really will improve appraisal accuracy, but so far we haven’t seen it in our practice. In fact it has changed our target from appraisal accuracy to a search for what their analytics want to see. We think twice before going “out of the box” on unusual properties – it just provokes a lot of hassle and lowers our CU scores. In some cases, it inhibits appraisal accuracy rather than promotes it. I keep having a feeling that the whole system will lead FNMA to go wrong, but with confidence.

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      The CU is FULL of manipulated data to bypass “reviews” from appraisers selected with the only criteria of “lowest fee quoted”. There is NO REALITY in this data or in the US Economy.

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    “Recently, we have been exploring ways to identify appraisers who appear to be targeting predetermined values.” In other words, we don’t think buyers are paying fair market value don’t think appraisals should be so close to the price actually paid.

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    The CU is worthless. So what if my adjustment of comparable #2 is materially different than adjustments made by other appraisers. I call the agent and get the full story on a comp, I don’t just look at the listing and think I know everything about the comp. Most of my appraiser friends don’t bother. So again, another flaw in the system. CU is just another step to try to whip us into line so that every appraisal is as cookie cutter as possible. Does it bother anyone else that we’re getting all of this regulation, yet as a Realtor (I also carry a sales license), there is minimal continuing ed, you can be a high school graduate, AND your deals involve many times the money that may be lost if an appraisal is faulty? Where’s the regulation for the agent that prices a home 15% above market value and then yells at the appraiser when he can’t make it work?

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    20,000 appraisals per day going through CU??? And the APPRAISERS who are being forced to contribute to this “database” by having their data farmed from their reports WITHOUT COMPENSATION are the ONLY PARTIES INVOLVED WHO ARE DENIED ACCESS TO CU!! But appraisers are the ONLY PARTY involved in the transaction who are unbiased and not an advocate for anyone. Appraisers carry the burden of being in a position to protect the public trust. Please tell me how the fox was given the key to the henhouse. Anyone else see what is wrong with this picture??

  16. Avatar
    Greers Ferry Girl

    The appraiser is the only one that is required to have a college BA now. Have the least say in how appraising should be addressed. Please ignor the only person that has more education and life experiance.

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