Fannie Mae’s New Appraisal Risk Assessment Tool – it is free but should result in higher expectations.
The Underwriter’s review of an Appraisal Report is an essential part of the underwriting of a loan transaction – whether it involves the purchase or refinance of a property. Many underwriters have often expressed concerns with their own ability to perform a substantive review of these reports and seldom question the data integrity or conclusions arrived at by the appraiser.
To date, there have been a number of tools available to Underwriters that are designed to augment their review of appraisal reports. Some examples are: Automated Valuation Models (AVMs), Risk Assessment Scorecards, the use of Third Party Vendors to perform desk reviews and free Internet sites such as Zillow and Trulia.
Now, however, Fannie Mae has introduced its “Collateral Underwriter” (CU) appraisal risk assessment application that should greatly enhance an Underwriter’s ability to review appraisal reports. This new application, which is targeted to be available in mid-January 2015, will give users access to the same appraisal analytics used in Fannie Mae’s quality control process. A Risk Score will be generated with appropriate red flags and messages. Best of all – the use of “Collateral Underwriter” will be made available to lenders at no charge!
Lenders Beware! If such tools are readily available to lenders the expectations will be very high with respect to the Underwriter’s appraisal review results. Red flags, case specific messages and/or certain inconsistencies and inaccuracies observed in an appraisal report will be expected to be adequately addressed by the Underwriter before the loan closes. So – going forward Underwriters can no longer be complacent in their review of appraisal reports (I have heard some actually say that such reports are completed by Licensed Appraisers & who are they to question them?) and must be more proactive in their management of appraisal quality. Tools such as CU should bolster their ability to do so.
The game has changed – so you must play different!