On January 26th, FNMA launches their new appraisal review system, CU (Collateral Underwriter).
Lenders are highly encouraged to use this engine in conjunction with DU to assess risk. As a matter of fact, CU will be merged with DU possibly as early as Q1 in 2015. That is the end goal here. FNMA envisions a holistic engine that assesses not only the capacity and credit worthiness of the borrower as DU does today, but also assesses the value of the collateral.
CU is just one of several steps FNMA has been making to achieve this vision. It started in 2011 with the implementation of UAD (Uniform Appraisal Dataset). UAD standardized the appraisal report so that the data could be most effectively used for automated appraisals. Once the data on the appraisal report was standardized, lenders started uploading all appraisals to the UCDP (Uniform Collateral Data Portal).
FNMA has now collected more than 14 million appraisals and more then 20 million unique sales transactions. Thus, they are not launching the next phase which is CU.
CU will afford lenders many benefits:
- CU provides additional certainty by giving lenders access to the same appraisal analytics used in FNMA's quality control process.
- CU performs an automated risk assessment of appraisals and returns a risk score (1-5 with 5 highest risk), flags, and messages to the submitting lender.
- CU is available at no charge to lenders.
Benefits to the Loan Originator in the field:
- Lenders will feel better about values when they receive a low risk score on the property which may allay any concerns they may have had.
- CU utilizes data immediately as appraisals are uploaded to the portal. If values are moving up quickly, this can aid in bringing in higher values sooner.
- Lenders will likely focus their attention to appraisals with higher risks freeing them up to spend less time and focus on the lower risked appraisals. This should assist in-house review appraisers as well.
What does this mean to the appraisal community?
FNMA indicates in their literature that CU is an additional risk assessment tool to be used in conjunction with
extensive human due diligence
DU didn't replace human underwriters and CU will not replace human appraisers.
At least not in our lifetime. I make this statement confidently knowing that my readership is peering over their progressive lens to read this. FNMA offers FAQs, training webinars and more on CU here.