By request: UAD vs Cert #23

[George Hatch]

I shouldn't even have to flesh the premise of this discussion out - the thread title says it all. But because I'm a verbose gasbag I'll do it anyway.

A friend of mine called me up this morning to chat about this topic and asked me to post a thread here to submit the topic for your consideration.

On the one hand, Fannie/Freddie's infamous Cert #23 makes reference to the universe of off label uses that one of their reports "may" be used for, as well as noting, as an example, a couple some of these off-label intended users by groups. The GSEs never did us the courtesy of identifying the expectations of these different users or give us any assistance in complying with our requirements in identifying these parties and their needs or how to meet them. Fannie/Freddie apparently assumed (wrongly) that what's important to them as lenders is equally important to anyone else who might get their hands on one of these reports.

Silly Fannie.

We objected to this unilateral proclamation back during their exposure process and their answer was that "intended use" and "intended user" means what they say it means and that the Appraisal Standards Board (in particular) was in error in their explanation of what those terms mean as used in USPAP.

Silly Fannie.

Now we have the UAD, which uses a proprietary coding system for the descriptions and ratings that the GSEs will accept in their reports. The GSEs know what these codes mean and they expect the appraisers who write these reports to know what they mean. No problem so far, right?

The question at hand here is what it's going to take for the individual appraiser to meet the overarching requirement for "...communicate their analyses, opinions, and conclusions to intended users of their services in a manner that is meaningful and not misleading".

As a concept, the idea of an appraisal and appraisal report that can be all things to all people is ridiculous from beginning to end. In that these other types of users have different priorities and different considerations is just the beginning. These other users also have different ways of reading an appraisal report and different ways of understanding them or developing their own opinions about the credibility of the appraiser's work. Some of those priorities are not only different from what the lenders do, but actually conflict with what the lenders do.

In the real world applications, the attempts by appraisers to produce the widget report that is all things to all people often leads to some pretty ineffective compromise solutions. On the one hand the results can look so minimal that nobody's needs are really being met. On the other hand the results can be packed with so much boilerplate and minutiae that the trees get lost in the forest.

I think most people would agree that the optimal appraisal and appraisal report would include everything their (real) intended users needs and nothing they don't.

This brings us back to our original topic - is it possible for an appraiser use the UAD formats in an appraisal report AND still render a report that they can be confident will meet the needs of ANY of these off-label users, let alone all of them? Or, has the time finally come for the GSEs to acknowledge that it was grossly unfair and unreasonable for them to stick the appraisers between the rock and the impossibly hard place that C#23 attempted to create?

Please disuss.

 

[Michigan CG]

.....This brings us back to our original topic - is it possible for an appraiser use the UAD formats in an appraisal report AND still render a report that they can be confident will meet the needs of ANY of these off-label users, let alone all of them?......

The competent appraiser will have to come up with a narrative template that describes the ratings and how they apply to the subject and the comparable properties.

The competent appraiser will then have to provide property specific narrative for the subject and the comparables. The UAD provides uniformity which was mot likely needed and forces an appraisal to be fully researched and verified (Standard 1-4) and to tell a story just as it was intended.

Residential appraising is not supposed to be box checking and canned comments; it is supposed to be research and analysis with a logical conclusion and SUPPORT for that conclusion.

To adhere to Cert 23 appraisers are going to have to polish up on their narrative skills or for some actually learn how to write property specific narrative.

 

[hastalavista]

The competent appraiser will have to come up with a narrative template that describes the ratings and how they apply to the subject and the comparable properties.

The competent appraiser will then have to provide property specific narrative for the subject and the comparables. The UAD provides uniformity which was mot likely needed and forces an appraisal to be fully researched and verified (Standard 1-4) and to tell a story just as it was intended.

Residential appraising is not supposed to be box checking and canned comments; it is supposed to be research and analysis with a logical conclusion and SUPPORT for that conclusion.

To adhere to Cert 23 appraisers are going to have to polish up on their narrative skills or for some actually learn how to write property specific narrative.

I agree.

I already have a major-lender client requiring a "glossary" in the report so that unintended users (borrowers) can understand the UAD Jargon.
It seems to me that as long as Cert#23 remains in the certification, lenders (in their motivation to provide transparent appraisals to their clients, the borrower) will probably come out with a requirement that the UAD codes are not substitutes for written commentary, and they will expect to see written commentary so parties like the borrower can understand the condition and quality ratings.

 

[JSmith43]

One or more of the appraisal associations should step up to the plate and offer a uniform translation (written to the level of a mass audience), and make it available to appraisers for use as a UAD "Key" of sorts, for the reader. Heck, Fannie should have had the courtesy of writing the key and shared it with appraisers.

In this instance, united, we stand is a best approach, kind of like fish forming schools in predator infested waters. The smart fish swim in the middle of the school

 

[Randolph Kinney]

Well, to start with, UAD is for Fannie Mae / Freddie Mac requirements to speed the report along their computer chain, from appraiser to lender, from lender to GSE. UAD is meant for a computer program to check the report for completeness as to the details of subject property and comparable properties. The analysis that computer performs for adjustments based upon the noted differences is not known (to me or others that are not privy to GSE computer programs).

Just looking at the grid, it needs a lot of explanations which I cover in a narrative addendum and supporting attachments.

Certification 23 along with the Dodd-Frank requirement gives the borrower a chance to review the appraisal report 3 days before closing so that he can rely on that document to make his decision to go through with the loan. In paper print out format?

So how is this new UAD format not misleading to reliers, other than the intended lender and GSE?

 

[DTB]

requirement gives the borrower a chance to review the appraisal report 3 days before closing so that he can rely on that document to make his decision to go through with the loan. In paper print out format?

So how is this new UAD format not misleading to reliers, other than the intended lender and GSE?

Therefore shouldn't the report also be written in the reliers' first language of choice?

 

[Randolph Kinney]

Therefore shouldn't the report also be written in the reliers' first language of choice?

And therein lies another problem, of course.

No fair using big words. Write to the third-grade dropout level.

 

[Kevin Mc]

This brings us back to our original topic - is it possible for an appraiser use the UAD formats in an appraisal report AND still render a report that they can be confident will meet the needs of ANY of these off-label users, let alone all of them?

In a word,NO. Given the borrower is entitled to the appraisal report I feel for those who will be spending hours on the phone defending their classification of a particular home after spending half an hour (if they are lucky) explaining the classification system to the homeowner. UAD is lining up to be disastrous IMO.

 

[Randolph Kinney]

In a word,NO. Given the borrower is entitled to the appraisal report I feel for those who will be spending hours on the phone defending their classification of a particular home after spending half an hour (if they are lucky) explaining the classification system to the homeowner. UAD is lining up to be disastrous IMO.

Wait until they look at a cost part of the appraisal report. How does this jive with the sales comparison grid or the subject's UAD rating?

 

[TJSum]

The borrowers already have enough problems reading appraisal reports. A common example is the breakdown of above and below grade finish. To make it more difficult for them to read is a step in the wrong direction. Yes, we can explain it all perfectly in a well written addendum, but the underwriters still are missing many things written in the addendum, let alone a borrower who might try to read an appraisal once every decade or so. These UAD changes are all promoted as improving quality, but if the meat of the report now resides in the addendum, exactly how are the automated reviewers and AVM programs going to pick up the vital information now moved off the form itself. IMO the quality will move in the negative direction, opposite of the intent. The typical borrower may now have to hire a consultant to translate an appraisal report for them, oh well, just another form among hundreds they have to deal with when closing on a loan that they will not understand.