Thursday , 1 October 2020

Defending Your Adjustments

The appraisal industry is changing…. again. Since the mortgage meltdown we’ve seen knee jerk legislation like HVCC and the massively opaque Dodd-Frank bill.

Just like the S&L crisis which brought us appraiser licensing and the USPAP, appraisers seem to always end up being on the wrong side of these issues.

As we know the biggest mortgage investor since the meltdown has been Fannie Mae. And since she and brother Freddie built UMDP with the MISMO platform we’ve seen some of these changes first hand. Categorical condition ratings, standardized language… round pegs in round holes effectively commoditizing and homogenizing real estate. Everything now is the same and if you waver from that you better write a novel why.

Last year Fannie made it well known that they were using their now massive database, thanks to UMDP and MISMO, to check comps. Then it was condition ratings… don’t waver from one report to the other or you might get an email.

This year they clearly stated that adjustments were now in their sights so you better have something to back up those adjustments and not just a 20 year old spreadsheet of component adjustments. Last week came the mother lode of potentially bad news for appraisers. Fannie is now giving access to their internal review tool called Collateral Underwriter to anyone who sells to them including AMC’s. This all gets turned on in January 2015. Now more scrutiny on the back end of the workflow. Submit your appraisals and cross your fingers and toes you don’t get a revision…. oh and yes, they in fact do have two lists – a “do not use” and “100% audit”. Nobody seems to want to say how you end up on these but they exist and they are active.

Careful examination of the Collateral Underwriter platform reveals a couple things. It will thoroughly review your appraisal comparing your appraisal to others, which realistically shouldn’t be a big deal since we have the round peg and round hole system in place. But the significant issue are those pesky adjustments.

Core Logic published an article in October titled “Channeling Deep Blue Versus Garry Kasparov in Home Valuations – It’s time to standardize how real estate appraisers make their adjustments.” Uh oh.

This is where the concept of appraiser independence gets blurry. On one end of the field you have an 800 lb gorilla, teamed with the loan originator getting assistance with big data analytics to back them up… and on the other end of the field is the appraiser. Guidance? USPAP and often times contradictory Fannie and Underwriting guidance.

Doesn’t seem very fair now does it?

Appraisers need the tools necessary to fight that unfair advantage on the other end of the field and be proactive instead of reactive through no fault of their own.

Big data analytics are available and it’s clearly time to fight fire with fire. Big data is here to stay and it’s become obvious that Fannie embraces it so let’s embrace it right back.

Have any comments or would you like to submit content of your own? Email comments@appraisalbuzz.com.

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About Anthony Roveda

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Anthony Roveda is EVP, Operations for Savvi Analytics. Savvi provides Hedonic Regression tools to all sectors of the real estate industry. The industry's only automated Hedonic Regression provider delivering adjustments through a deep Market Trend Analysis at 95%+ confidence levels and backed by a One Million Dollar guarantee.

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