Fannie Mae’s New Appraisal Tool: Collateral Underwriter

January 2015 Release – Frequently Asked Questions (FAQ)

AppraisalAustinYou may have read blogs saying an “Appraisal Time Bomb” is ticking due to Collateral Underwriter (CU), Fannie Mae’s new, automated application for appraisal risk assessment. The Leaman Team assures you there is no reason to panic and we are working diligently to implement the tool so you and your clients feel minimal or no impact. In fact, our hope is the appraisal tool will be an opportunity to improve processes for all parties: clients, REALTORS®, lenders and Fannie Mae (FNMA).

When will the tool be available?
January 26, 2015, The Leaman Team will use Collateral Underwriter (CU) for conventional appraisals.

Is Collateral Underwriter (CU) a surprise to lenders?
Since 2011, Fannie Mae and Freddie Mac (FNMA/FHLMC) have been collecting raw data on every appraisal; thus, The Leaman Team has been aware FNMA/FHLMC were planning to implement some kind of appraisal evaluation tool. The Leaman Team is not alarmed by the coming changes. To put this change in perspective, in the past, the real estate industry worried when FNMA released Desktop Underwriter (DU). Today, the mortgage industry widely regards Desktop Underwriter (DU) as a tool that improves lending processes. The Leaman Team anticipates similar improvement to lending processes as a result of Collateral Underwriter (CU).

Is Collateral Underwriter (CU) going to make closing loans more difficult?
No, The Leaman Team anticipates Collateral Underwriter (CU) will allow lenders to close loans faster. We anticipate Fannie Mae (FNMA) will accept appraisals with more speed. On difficult appraisals, Collateral Underwriter (CU) will provide lenders more information, thus reducing the need for a review appraisal and/or additional appraisals later in the loan process.

What is the need for Collateral Underwriter (CU)?
Fannie Mae (FNMA) believes addressing appraisal concerns early on is much easier and cheaper than addressing issues late in the loan process. The Leaman Team agrees!

What pros and cons do lenders predict for Collateral Underwriter (CU)?
No one knows for sure how Collateral Underwriter (CU) will impact the mortgage industry; however, based on past experience with changes from Fannie Mae (FNMA), The Leaman Team anticipates:

  • Appraisers will still need to do their job thoroughly and responsibly;
  • There may be “comps” Collateral Underwriter (CU) identifies as more appropriate than the ones used in an appraisal;
  • Sometimes Collateral Underwriter (CU) may identify “comps” that show an appraiser undervalued a property (that’s great news for clients, lenders and real estate agents!)
  • There may be reason for an appraiser, on occasion, to provide more commentary than normal;
  • Because Collateral Underwriter (CU) provides a risk score, but does not determine an appraisal value, regulations do not require the lender to disclose Collateral Underwriter (CU) findings to the borrower;
  • Most likely, Fannie Mae (FNMA) will still buy loans with a high risk score; however, as always, the lender is responsible for performing the appropriate due diligence to ensure the appraisal is good quality and the appraisal value is supported.

What is The Leaman Team doing to prepare for Collateral Underwriter (CU)?
Prior to the January 26 release date, The Leaman Team attended training for Collateral Underwriter (CU). We are prepared to interpret the application’s feedback: risk scores, flags and messages. As always, The Leaman Team works though whatever new challenges and opportunities come our way and Collateral Underwriter (CU) is no different.

In conclusion, we are optimistic Collateral Underwriter (CU) will be an efficient tool for all parties involved. If there are appraisal concerns, we can get them addressed early on and avoid problems late in the loan process.

We will keep business partners updated as we learn more about Collateral Underwriter (CU). In the meantime, please contact The Leaman Team if you have questions or concerns: Toll-Free: (800) 301-3405 or email Team@MaxLeaman.com.