Fannie Mae implemented Collateral Underwriter (CU), their free proprietary appraisal risk assessment tool was released on January 26, 2015. Lenders submitting appraisal reports to Fannie Mae through their Uniform Collateral Data Portal (UCDP) have begun receiving CU risk scores, flags and messages under the Findings tab in UCDP. Appraisals will be rated on a scale of 1.0 (lowest risk) to 5.0 (highest risk).
If an appraisal is unable to be scored, a “999” code will be returned and a message provided as to the specific reason why it could not be scored. Some examples of the type of messages that lenders will be obtaining (when applicable) are as follows:
- The appraiser has reported materially different Gross Livable Areas (GLAs) in one or more appraisal reports
- The reported comparable sales price is materially different from what was reported by other appraisers
- The reported lot size is materially different from what has been reported by other appraisers
- The sales price is significantly different from what has been reported by another appraiser
- The appraiser has reported a materially different quality in one or more appraisal reports
- The GLA adjustment is larger than peer and model adjustments and
- The condition adjustment is larger than peer and model adjustments, etc.
In addition to these types of messages, CU will also be returning more serious concerns that will entail a hard stop requiring a manual override or submission of a corrected appraisal in UCDP. Some examples are as follows:
- Less than three settled sales were used as comparables
- Appraiser license state does not match subject property state
- Present use is indicated as not highest and best use
- The subject property may be a hotel/motel or condo hotel
- Research of prior sale was not performed and
- Fannie Mae will not accept appraisals from this appraiser, etc.
So, the messaging has begun and the key question will be, “How do lenders address each and every one of these flags and messages as part of their appraisal review responsibilities?” Many lenders will continue to seek assistance from appraisal review vendors in the interpretation of these messages as well as how to best address the case specific concerns listed.
Also, reports will be provided to lenders by Fannie Mae on a monthly basis (based on the appraisals submitted to UCDP in the prior month) so that they can proactively monitor and track deficiencies as well as perform a trending analysis over time.
The game certainly has changed and lenders need to play differently.