Fannie Mae: Collateral Underwriter not disrupting appraisals

It’s here.

Lenders are eager to start using Fannie Mae’s Collateral Underwriter, while appraisers raise concerns over the negative impact it could cause their businesses.

Nonetheless, the system’s creator said no harm was intended with today’s release of CU.

“From an appraiser perspective, one of the lender’s responsibilities has always been to review the quality of an appraiser, and they have been using various methods to do that forever,” said Marianne Sullivan, senior vice president of single-family business capability with Fannie Mae.  “I don’t think appraisers will find this tool to be disruptive.”

Sullivan explained that once appraisers have a chance to see this in action and in the market, they will realize it is just another tool that is reviewing appraisers just as other processes have all along.

Appraisers do quality work and have the evidence to support their evaluation, she said. This tool will help show that.

Fannie released CU to lenders to provide a consistent process and review of all the appraisals of the loans that Fannie is buying.

The enterprise has used CU since mid-2013,] and is rolling it out now to grow greater transparency.

“We include in our selling guide policies on how appraisers should go about selecting comparable properties for a sale,” said Sullivan. CU, in essence, is an electronic review similar to what a human would do.

However, she added that CU will adjust for the extra things and take into account the different characteristics of both the subject and comparable properties.

“It is a consistency of process. We do not expect that the appraiser would be exactly on top of the tool all the time,” she said.

Sullivan emphasized two areas for appraisers:

1. CU is not a decisioning engine. It doesn’t approve or deny an appraisal or loan.

2. The lender will have some level of review process.

While CU was released to lenders on Jan. 26, Fannie has been running pilots with lenders using this tool, and moving forward, it has a lot of educational tools in place to help lenders understand CU. “The lenders that have used it have appreciated it because it really helps them have a consistent review process,” said Sullivan.

Brad German, a spokesperson for Freddie Mac, said that Freddie is always looking for ways to use all of the data available to develop additional solutions for customers, which includes collateral options. But right now, they have no details to share.

However, not everyone is convinced that, even in time, CU will increase efficiencies. This, despite the claims from Appraisal Management Companies that the implementation of CU, in part, gets appraisers to put some skin in the game.

Here’s what one commentator, TOMKAT had to say on the above mentioned Appraisal Buzz blog.

They said CU, “will let appraisal orders and/or stip requests languish on their desks indefinitely because they don’t want to justify an adjustment to an underwriter in another city who is following the review template, which will allow loan locks or contract dates to fall through.”

Additionally it, “will raise appraisal fees to a much higher rate to account for all the extra time spent on time consuming report writing & nonsense stips. No longer the nice “flat rate fee” amount the homeowner & lender could depend on.”

HousingWire will be offering full coverage of the game-changer that is Collateral Underwriter. This will come both in more blogs later this week, plus an in-depth feature in the next issue of HousingWire magazine, available online to subscribers only.