Southeastern Evaluation Blog

Fannie Mae Answers Appraisers Questions
Southeastern Evaluation Team

These past several years, Fannie Mae has engaged in countless hours of conversation with lenders about appraisal quality. Its analysis of the date – collected through its Uniform Collateral Data Portal (UCDP) – informs a variety of policy changes and was instrumental in the development of Collateral Underwriter (CU), a proprietary appraisal review application.

Collateral Underwriter has 2, 340 registered lenders with 20,537 unique users and has processed more than 27 million appraisals. This provides an extensive database of market data.

To share these finding with the broader appraisal industry, SEE recently joined with Fannie Mae to offer the Collateral Policy Update & Technology Guidance for Appraisers Webinar.

Hosted by SEE’s own Mark Chapman and Gaby Arena and presented by Fannie Mae credit analysts Julia Jones and Jeremy Staudenmaier, the webinar directly addressed appraiser questions concerning the importance of appraisal quality, and offered insight into how appraiser reports are part of the greater lending environment.

Through this webinar, Fannie Mae explained how it measures appraisal quality and why it is important to Fannie Mae. It also provided insights into how lenders use CU and highlighted recent policy changes and gave practical suggestions for how to navigate the new datacentric landscape.

For all of you unable to join us, SEE would like to share some of the webinar highlights:

The Great Recession of 2008 changed the lending landscape in profound ways. One result is that appraisal quality is now seen in relation to the overall financial transaction.

Why is Appraiser Quality Important? To answer that question, Fannie Mae pointed to five main reasons:

  • Correct and complete data is essential to establishing an accurate value.
  • A misleading appraisal impedes the underwriter’s ability to make a sound decision.
  • Poor quality undermines the appraiser’s credibility, casting doubt on his/her body of work.
  • Current market conditions mask collateral risk.
  • Analysis of historical data suggestions correlation between overvaluation and risk of default.

What are the most common unacceptable appraisal practices that Fannie Mae sees:

  • Development of or reporting an opinion of market value that is not supported by market data or is misleading;
  • Misrepresentation of the physical characteristics of the subject property, improvements, or comparable sales;
  • Failure to comment on negative factors with respect to the subject neighborhood, the subject property, or proximity of the subject property to adverse influences;
  • Selection and use of inappropriate comparable sales;
  • And, failure to use comparable sales that are the most locationally and physically similar to the subject property.

To address these issues and ensure overall appraisal quality, Fannie Mae has taken the following actions:

  • Fannie Mae began communication externally to appraisers in December 2013;
  • Since December of 2013, more than 4,200 education and training letters have been sent directly to appraisers;
  • After a six-month monitoring window approximately 90% of appraisers have improved their performance on the issue noted in the training letter they received;
  • And, approximately 10% of appraisers contacted have reported via email or snail mail with comments, questions, or concerns. Most of the responses to the training letters have been neutral or positive.

The webinar then went into greater details about these issues and exploited certain facts and myths that surround appraisal quality and how Fannie Mae accesses these issues.

This webinar is part of Southeaster Evaluation’s ongoing efforts to provide better customer service. With turnout high for this event., SEE hopes to continue to sponsor events of importance to the appraisal industry.

If you have any questions or suggestions for future webinars, please let us know.