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Appraisal Review Will Reach New Levels with Collateral Underwriter
February 6th, 2015 2:56 AM

 

Appraisal Review Will Reach New Levels with Collateral Underwriter

Chinese Version This last week, our president Michael Hobbs, was in Ft Lauderdale participating with other thought leaders at CRN to address Collateral Underwriter (CU), a revolutionary new technology initiative by Fannie Mae. Robert Murphy, Director, Property Valuation & Eligibility, Fannie Mae, explained how CU was developed for the benefit of lenders who sell their loans to Fannie Mae to know the quality of the appraisal in the loan file that is being submitted in an effort to help reduce loan re-purchase risk. Mr. Murphy noted that CU is data-driven tool for these lenders to score the appraisals. CU is at the forefront of the field we can describe as "the science of valuation." To assess risk, the tool analyzes large amounts of data from a variety of sources, including the UAD dataset” says Jeff Bradford, a nationally recognized expert in computer technology and analytics.


The CU program reviews every appraisal that is submitted, and verifies its accuracy and consistency. Once submitted, every appraisal will be scored 1-5 based off of level of risk. This system was established by Fannie Mae in order to maintain a high level of appraisal quality and provide more transparency in the process. According to Fannie Mae, “CU leverages an extensive database of property records, market data, and proprietary analytical models to analyze key components of the appraisal including data integrity, comparable selection, adjustments, and reconciliation.” Ultimately, this will be a great tool for lenders to utilize when assessing risk factors involved with the assets they are lending on.


The Collateral Underwriter is a massive milestone for Fannie Mae within the appraisal industry, and it will no doubt change the appraisal review process. There are some appraisers that are concerned about this initiative, and the change in process, but if everyone submits accurate data, then there should be no bumps in the road, and the industry will be better off for it. It will increase transparency, manage risk, & operate as a kind of quality control for appraisers nationwide. Michael Hobbs commented, "for those appraisers who only rely on their gut feelings and lack market-based support for financial adjustments in their appraisals, they are going to be rudely awakened to the possibility of low CU scores. Low scores will raise a lender's attention to a loan file as higher scores are perceived as better even though Bob Murphy of Fannie Mae reiterated several times that Fannie will buy a loan file whether it has an appraisal CU score of 1 as easily as it will buy a loan file with an appraisal CU score of 5." Clearly, those appraisers who research and analyze the market area should have no concerns as they are most likely to be producing appraisal reports that score 4 or higher.


Posted by Michael Hobbs on February 6th, 2015 2:56 AMPost a Comment

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