Axis has been following the developments regarding Collateral Underwriter (CU) very closely since its announcement at MBA this past fall. In short, we have attended all of the available trainings and read all of the announcements regarding CU and have a comprehensive understanding of how it is expected to work. Please understand, CU is a process that is currently a Fannie Mae initiative that is separate from and does not include Freddie Mac or FHA assignments.
As you probably already know, once a report is submitted to UCDP, CU will generate an automated risk score along with proprietary risk flags and messages. Per Fannie Mae, the purpose of CU is to identify appraisals with heightened risk of property eligibility, compliance violations, overvaluation, and quality issues. Based on this information, lenders will be able to create more efficient resource allocation, workflow, and collateral risk management.
The risk scores assigned with appraisals will range from 1 to 5 with a 1 score indicating low risk and a 5 score reflecting high risk. Fannie Mae is quick to point out that a high score does not necessarily mean an appraisal is “bad”, nor does a low score necessarily mean an appraisal is “good”. They also make it very clear that CU isn’t intended to replace the lender’s review process or due diligence and shouldn’t solely be used as the basis for making a lending decision. Instead, the score should be used to triage workflow and allocate appropriate resources.
Fannie Mae will be able to bump the data contained in an appraisal report against their own proprietary “Big” database. Every report submitted through UCDP adds to the database all information reported about the subject along with all the information provided about the comparable properties used. The availability of this appraiser verified “Big Data” is the game changer. Fannie Mae can now compare an appraiser’s analysis against their peers’ analysis in the same market. Fannie Mae also keeps track of how consistent an appraiser is within their own reporting and provides feedback if inconsistencies are noted.
Lenders will also have a User Interface (UI) that will allow them to compare the reasonableness of the comparable properties used in a report by comparing them to up to 20 other sales in the area. This accomplished by scoring all available properties to the subject based on physical similarity, time, and distance. In fact, it is very possible their database will be better than any other data source since all properties in their database are scrubbed and verified by other appraisers in the market. If, based on the CU model, other sales are identified as being better than the sales used in the appraisers report, this information will be provided to the lender for consideration to action as they see appropriate – do a deeper dive into these sales personally or send them to the appraiser to consider and comment.
If Axis submits to UCDP on a lenders behalf, we will receive, via the returned SSR, Fannie’s assigned risk score and a uniform thumbnail overview of each message and risk flag triggered. While the risk score is clear cut with a grade from 1 – 5, the messages and risk flags may not be that clear without access to the UI (available only to lenders) which is required in many cases to interpret the specifics of the message. For messages that are clear cut, Axis can immediately start working with the appraiser to correct or provide more information regarding the concern if it hasn’t already been addressed through our own AQI report. In addition, based on the information returned, Axis will continue to refine AQI to proactively address all concerns prior to delivery. However, since not all messages are understandable without the additional information provided by the lender only accessible UI, it might be better for us to wait on any additional request you might have for the appraiser before we request known revisions or additional information concerns. In short, this is a process we need to work out with our client to determine how we should proceed.