Fannie Mae has issued clarifications about the recently implemented use of Collateral Underwriter by approved mortgage lenders.
The Washington-based company last month began providing appraisal risk scores, flags and new messages from Collateral Underwriter through the Uniform Collateral Data Portal.
The move was intended to provide transparency and to help lenders more effectively and efficiently identify potential appraisal issues.
But it caused some anxiety in the appraisal industry.
So the secondary lender issued Lender Letter LL-2015-02 on Wednesday.
“There has been much discussion and anticipation in the industry since the October 2014 announcement regarding the 2015 release of CU to Fannie Mae lenders,” the letter stated. “As a result, Fannie Mae believes it is important to provide some facts related to CU in an effort to clarify some of the misstatements and misconceptions that exist.”
The notice indicated that the use of CU, which is only for Fannie Mae loans, is voluntary and costs the lender nothing.
Fannie explained that the system doesn’t accept or reject appraisal reports. It also doesn’t characterize reports as “good” or “bad.”
In addition, it gives no estimate of value.
Instead, it provides a numerical risk score between one and five, with one being the lowest risk.
It also issues messages that identify potential appraisal defects.
Lenders aren’t required to clear or override the messages.
“The messages are meant to be used as red flag messages that lenders should use to assist with their appraisal analysis and inform their decisions based on a complete analysis and understanding of the appraisal report,” Fannie stated.
The letter went into some detail about how comparable sales are selected by CU.
CU cannot be used by lenders to make credit decisions.
Appraisal management companies are prohibited from receiving copies of the CU reports.
“Also the CU license terms prohibit using it ‘in a manner that interferes with the independent judgment of an appraiser,'” the letter stated. “Fannie Mae expects the lender to use human due diligence in combination with the CU feedback, and will actively follow up with lenders who are reported to be asking appraisers to change their reports based on CU feedback without any further due diligence.”
