Friday , 25 September 2020

Early Warning System?

In the midst of the Mortgage Bankers Association Annual Conference, Fannie Mae announced on October 20th it will make available to sellers its proprietary appraisal review tool, Collateral Underwriter™ (CU). According to the press release, the tool will be available on appraisals submitted to the Uniform Collateral Data Portal (UCDP) and its results will be included in the response from UCDP beginning in early 2015. The release describes the move as “allowing lenders to compare appraisals against Fannie Mae’s database of appraisal and market data. Collateral Underwriter will help lenders expand access to mortgage credit by providing increased certainty around repurchase risk.

While it will provide no immediate waivers to sellers with regard to the optional use of the tool, the press release does shed some light on their ultimate vision. “Our goal is to provide relief on appraisal representations and warranties in the future, and we will work with FHFA to do so,” said Andrew Bon Salle, Executive Vice President, Single-Family Underwriting, Pricing, and Capital Markets. “We want to be the business partner of choice for lenders by providing the tools and products lenders need. Collateral Underwriter will help lenders build their businesses safely and strongly.”

The FAQs go in to a little more detail beyond the original Fact Sheet. Here are some things to be aware of:

  1. CU will have a standalone website for lenders Fannie Mae sellers (only) to perform deeper analysis, however, the appraisal must be submitted to UCDP first in order to access the review. Correspondents will have access to the standalone tool some time in 2015.
  2. Vendors who provide UCDP integrations are updating their interfaces to UCDP to transport the new CU feedback back to the submitter along with existing reports and messages. Appraisal Management Companies (AMCs) that submit to UCDP on behalf of lenders will be able to receive the CU feedback associated with their submissions.
  3. CU does not replace the messages from UCDP regarding data completeness or reasonability. However, CU provides additional information including warnings on areas of the appraisal that may need additional review, and a risk score. The new data will also be available on the UCDP website for authorized users.
  4. The CU risk score is presented on a scale of 1.0 to 5.0, with 1 indicating the lowest risk and 5 indicating the highest risk, according to Fannie Mae’s model and data.

It’s too bad that these tools continue to be applied at the end of the workflow after the appraisal is delivered to the client. Appraisers are forced to operate in the fear of the “gotcha” after the appraisal is completed. If Fannie Mae truly wanted to improve appraisal quality, they would make CU publicly available so that appraisers could interact with it. It should be noted that appraisers cannot submit their reports to the UCDP directly. They must deliver to their lender client. And that makes sense from a USPAP perspective. But, making a tool like CU available to the entire market, including appraisers, for the review and improvement of the appraisal before delivery would benefit everyone.

At a time when the mortgage industry is faced with a shrinking timeline between loan estimate and closing disclosure due the most recent round of new regulations from the Consumer Financial Protection Bureau, opening more windows for investigation and potential revisions in the appraisal report will most certainly cause a time delay. Appraisers can expect to see more aggressive due dates in their engagement letters from lenders and AMCs to buffer for the potential of more revision requests. Sadly, appraisers should also be aware that this game of gotcha can result in losing business when Fannie Mae begins to tighten their tolerance for revisions which could mean blacklisting “problem” appraisers.

Reprinted with permission from Ms. Green’s blog at www.rel-e-vant.com.

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About Elizabeth Green

Elizabeth Green
Elizabeth Green is Chief Data and Product Solutions Officer at LoanLogics. In this role, she is responsible for the development of the company’s solutions and data strategy, as well as expansion of products, including in the area of collateral risk assessment. Elizabeth is a strategist, solutions architect, speaker and valuation advocate. As a recognized mortgage technology veteran in software product leadership for solutions in residential property valuation, loan origination, mortgage servicing and secondary marketing, she has helped to foster a new level of understanding in credit and collateral risk assessment through the application of digital intelligence. Elizabeth is a 25-year veteran leader in the mortgage software and valuation sectors. She has been a leader in several standards organizations including MISMO and has a deep history of defining and applying data standards in practical use.  She is the Chairperson of the new Standards Committee for the Collateral Risk Network (CRN).

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