Collateral Underwriter "suggested Comparables"

[Murray Bloom]

I received a revision request today, based mostly on comparable sales which CU said were proximate to my subject. CU listed 35 properties that were claimed to be comparable sales. The subject is an older (115 y.o.) end-unit row house, a one unit rental property, minimally updated. Of the 35 'suggested' properties, all but one were newer detached single family homes, multi-family detached properties, or dwellings in less than market condition (32 detached) needing undisclosed repairs. The one remaining sale was 23.6% smaller than the subject, a fresh high quality renovation, and more suited to owner occupancy than as an income property.

Based on this, my report was given a "5" risk rating. If this keeps happening, I worry that I could make the blacklist. Do I have any recourse other than noting the CU failure in my addendum? I suspect that this will happen a lot throughout the industry.

 

[Randolph Kinney]

Ever hear of stimulus-response conditioning?

Basically you are given a high voltage electric shock (5 risk rating). Your lender can't afford that. So, in order not to continue with high voltage electric shock, you will alter your appraisal methods to achieve a rating that is acceptable to both your lender and to Fannie.

 

[Murray Bloom]

Not such a good idea if they want accurate, supportable, appraisals.

 

[Randolph Kinney]

No, they don't want accurate well supported appraisals. They want low risk crappy appraisals.

Appraisers that don't comply will get the treatment below:

 

[Mr Rex]

As per usual, Skippy will game the system once the CU is revealed. Obviously large fee shops will see volumes of data first and can begin to bend. Same as it ever was.

 

[timd354]

I received a revision request today, based mostly on comparable sales which CU said were proximate to my subject. CU listed 35 properties that were claimed to be comparable sales. The subject is an older (115 y.o.) end-unit row house, a one unit rental property, minimally updated. Of the 35 'suggested' properties, all but one were newer detached single family homes, multi-family detached properties, or dwellings in less than market condition (32 detached) needing undisclosed repairs. The one remaining sale was 23.6% smaller than the subject and a fresh high quality renovation, and more suited to owner occupancy than as an income property.

Based on this, my report was given a "5" risk rating. If this keeps happening, I worry that I could make the blacklist. Do I have any recourse other than noting the CU failure in my addendum? I suspect that this will happen a lot throughout the industry.

Collateral Underwriter did not give you 35 claimed comparable sales because CU provides no more than 20 additional potential comps. Additionally, CU most likely would have been able to distinguish that those comps were detached as opposed to attached homes since those data points are being collected in the UCDP. Thus, those potential comps undoubtedly came from some other tool utilized by the lender such as an AVM. Additionally, if the lender simply sent you a list of those sales without vetting them to see if they are like kind properties or are objectively potentially superior to the appraisal comps in some way (i.e., more recent, in closer proximity, and/or more similar in size, age, etc.), then they are not correctly using whatever tools that they are leveraging during the appraisal underwriting process (IMO). CU and other tools are very useful for assessing collateral risk as long as the underwriter/appraisal reviewer understands the limitations of such tools. However, like any other tool, CU will be utilized by some who are completely clueless. However, ignorance on the part of the user is not the fault of the tool.

FYI, lenders who only access CU through the Uniform Collateral Data Portal do not receive any potential comparable sales data back from CU. In order to receive that data, a lender must utilize an interactive web-based interface that is not even available yet to most lenders (it is being rolled out in phases and lenders who are not direct Fannie sellers (i.e., correspondent lenders) will not have access to the CU web-based interface prior to April, 2015.

 

[Meandering]

Fannie says:

The lender must not make demands or provide instructions to the appraiser based solely on automated feedback. Also the CU license terms prohibit using it "in a manner that interferes with the independent judgment of an appraiser." 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.

 Fannie Mae does not instruct or suggest to lenders that they ask the appraiser to address all or any of the 20 comparables that are provided by CU for most appraisals. It is also not Fannie Mae’s expectation that appraisals should contain only CU’s top-ranked comparable sales. In the majority of cases, there may be no material difference between comparable sales utilized by the appraiser and those identified by CU. Before asking the appraiser to consider any alternative sales, it is imperative that the lender analyze the relevance of the sale and determine if the use of such sale would result in any material change to the appraisal report. If the lender determines that there would be no material change, then they should not ask the appraiser to make revisions. Fannie Mae expects CU to enable lenders to accept appraisals "as is" with greater confidence.
https://www.fanniemae.com/content/announcement/ll1502.pdf

Ask them for their due diligence on how those sales are comparable and in line with Lender Letter LL-2015-02

Thanks Tim.

 

[Murray Bloom]

Now that's interesting. You could be right. There is no attribution to the list of sales. The AMC (with whom I have a very good relationship) believes that the comp list came from CU.

Whet's even more distressing, then, is that the risk rating was based on the following:

One lot size adjustment materially different from peer and model adjustments
Net adjustments materially different from model adjustments
Comparables different from model-selected comparables
An age adjustment in the wrong direction

This constitutes a maximum risk rating???

 

[djd09]

well someone is misinformed. who is it? murray saying 35 additional sales or tim saying they only provide 20? again too bad there is no transparency on the CU process so we could make rationale opinions on CU.

 

[Mr Rex]

Collateral Underwriter did not give you 35 claimed comparable sales because CU provides no more than 20 additional potential comps. Additionally, CU most likely would have been able to distinguish that those comps were detached as opposed to attached homes since those data points are being collected in the UCDP. Thus, those potential comps undoubtedly came from some other tool utilized by the lender such as an AVM. Additionally, if the lender simply sent you a list of those sales without vetting them to see if they are like kind properties or are objectively potentially superior to the appraisal comps in some way (i.e., more recent, in closer proximity, and/or more similar in size, age, etc.), then they are not correctly using whatever tools that they are leveraging during the appraisal underwriting process (IMO). CU and other tools are very useful for assessing collateral risk as long as the underwriter/appraisal reviewer understands the limitations of such tools. However, like any other tool, CU will be utilized by some who are completely clueless. However, ignorance on the part of the user is not the fault of the tool.

FYI, lenders who only access CU through the Uniform Collateral Data Portal do not receive any potential comparable sales data back from CU. In order to receive that data, a lender must utilize an interactive web-based interface that is not even available yet to most lenders (it is being rolled out in phases and lenders who are not direct Fannie sellers (i.e., correspondent lenders) will not have access to the CU web-based interface prior to April, 2015.

So CU and FNMA doesn't vet the "comps" prior to issuing CU warnings?