appraisal Archives

Newz Flash: Fannie Mae’s Collateral Underwriter Hacked!!!

By Ann O'Rourke on April 1, 2015 / Collateral Underwriter, Fannie, lender appraisals / 11 Comments

Tags: appraisal, collateral underwriter, Fannie, lenders

A disgruntled man who lost his home to foreclosure did it!! The CU system is completely shut down. No details were available on when, or if, it will be fixed. The un-named man was not available for comment as he is reportedly hiding out in a remote cabin in the woods in a very rural upper Michigan or Canadian location.

He, his wife, and 4 children are now living in a Tiny House on his brother in law’s rural property in Michigan. They lost their suburban 4 bedroom home they had owned for over 20 years to foreclosure. The family has an outhouse, a hand pumped well and wood heat. A small solar power array is used for a computer and Internet connection with a few hours of electricity daily.

Who is in an uproar about this?

– Not appraisers who don’t like a system that evaluates their appraisals but they don’t know the criteria.
– Not underwriters who are required to learn a new system and do manual reviews of appraisals before sending warnings to appraisers.
– Not loan officers whose deals are taking longer to close. Not borrowers who have to wait longer to get their loans approved.
– Not law enforcement, who don’t think he is a terrorist or a nut holed up with a lot of guns.

FYI, it is April 1 today. You know what that means ;>

Statistics and Appraisal Data

By Ann O'Rourke on March 31, 2015 / adjustments, appraisal, Collateral Underwriter, zillow / 2 Comments

Tags: adjustments, appraisal, collateral underwriter, Fannie, lenders, mortgage lending

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Statistics and Appraisal Data

The key to any statistical analysis is DATA, DATA, DATA!! Single family real estate data is not very reliable or consistent, and not enough is available in many areas, as we all know.

CU is the most significant attempt to get more useful data by requiring appraisers do use specific coding and criteria. However, real estate is local, local, local. Even the number of bedrooms varies a lot as there are different criteria for determining what is a bedroom, even in the same city. Three appraisers measuring the same house will probably not have the same square footage, as I learned doing relocation appraisals.

9/20 Update. CU (Collateral Underwriter) has let Fannie obtain lots of data from appraisals. Unfortunately, the data is not available to appraisers. Fannie uses the data to analyze report reliability.

With CU, this is becoming more obvious as there are sometimes wide variations in how appraisers code factors. For example, why do condition ratings vary? How accurate is MLS? Is public records accurate? What is the best source?

Now that regression software is popular with appraisers for getting adjustments, I have been thinking about why it is often not very reliable. To understand even simple regression requires knowledge.

My first statistics class was in 1963. The first time I used multiple regression was in graduate business school in 1979, when I did a mini-thesis on factors in REIT stock volatility using SPSS.I used a remote university mainframe that kept blowing up and erasing my data. There were no data issues. Doing multiple regression analysis on real estate housing data was not possible. Way too much lack of usable data.

Since I started my Appraisal Today newsletter in 1992, I have been writing about AVMs. The less data that is available, the less reliable the value.

As we all know, AVMs work well in a conforming home in a large tract of similar homes, built in the past 10 years. After that, the accuracy and reliability goes down fast. Just check what Zillow’s Zestimate against your appraised value.

Fannie warning letters – GLA adjustments and lots more coming(Opens in a new browser tab)

House for sale set to explode when light switch is turned on

By Ann O'Rourke on March 25, 2015 / appraisal, unusual home / Leave a comment

Tags: appraisal, strange house

House for sale set to explode when light switch is turned on

Excerpts:

Investigators in two Massachusetts cities were seeking the renters of a house for sale that was intricately wired to explode and cause “significant destruction” if someone had simply flipped a light switch, police said Tuesday night.

“It took some work to put it in there,” said Wells, who described the mechanism as involving wires meticulously snaking through several rooms from a gallon container of an incendiary substance, which was “secreted inside the house,” to a particular light switch.

“We believe the intention was that if someone had flipped the light switch on where it ended, the device would have exploded,” he said.

My comment: Wow!! Be careful out there… especially with disgruntled tenants on a sale!!

Thanks to Douglas R. Doudna for posting this online!!

http://www.nbcnews.com/news/us-news/massachusetts-house-sale-was-rigged-explode-police-say-n329601

New FHA 4000.1 handbook – effective 6/15/15

By Ann O'Rourke on March 25, 2015 / FHA, lender appraisals / 1 Comment

Tags: appraisal, FHA

New FHA 4000.1 handbook tidbits –

Publish Date: 03/18/2015 | Effective Date: 06/15/2015

The bulk of the appraisal section starts on pdf page 441 and runs through pdf page 507.

Here are a few tidbits posted online from appraisers who spent the weekend reading it ;>

– The Appraiser must obtain all of the following from the Mortgagee before beginning an appraisal: Any other legal documents contained in the loan file…

– Page 454 on Photos. Front and angle shots of the comps. Hallways on 2-4 units

– Handbook replaces all previous documents, including most Mortgagee Letters.

– Page 447 ii, methamphetamine (meth) contamination

– Page 441: The Appraiser must treat room additions and garage conversions as part of the GLA of the dwelling, provided that the addition or conversion space: …

– Provide 3 year prior sales history for the comps

Will this mean increased time for FHA appraisals? Depends on how much you are doing now. Remember the old VC sheets? They were a hassle!!

My comment: It is not effective until 6/15/15. There will be some webinars, online articles, etc. before that date. I will let you know.

Link to new handbook 4000.1

http://portal.hud.gov/hudportal/documents/huddoc?id=40001HSGH.pdf

For more details from FHA, see last week’s Appraisal Today email newsletter, in the archives, at:

http://archive.constantcontact.com/fs124/1101648677253/archive/1120449851537.html

For more details from FHA, see last week’s Appraisal Today email newsletter, in the archives, at:

http://archive.constantcontact.com/fs124/1101648677253/archive/1120449851537.html

Collateral Underwriter and price per sq.ft. adjustments

By Ann O'Rourke on March 4, 2015 / 1004MC, AMCs, appraisal management company, Collateral Underwriter, forecast, lender appraisals / 7 Comments

Tags: AMC, appraisal, appraisal fees, collateral underwriter, Fannie, lenders

From March, 2015 when CU first started
Fannie is using this to show that appraisers have been using adjustments that are too low, resulting in less reliable values. They are often low “legacy” adjustments. Also, GLA adjustment is one of the few factors that work well in regression.

I suggest using replacement cost new less depreciation. For replacement cost you can use local builders or cost service such as Marshall & Swift, whichever is more accurate in your area. Then take off depreciation. The result is depreciated cost. Divide by GLA. The result is depreciated cost per sq.ft.

Fannie uses price divided by sq.ft. which does not consider land value or depreciation, information which Fannie does not have available.

For example, builders cost on a property is $100 per sq.ft. Your estimated physical depreciation is 30%. Obviously, $25 per sq.ft. adjustment is not correct. There may be functional or external depreciation, which you can include. Be sure to include how you determined your GLA adjustment in your appraisal.

Market based GLA adjustments are better, such as matched paired sales but the method above will work as a guideline.

Why are adjustments low? To comply with the 15/25% adjustment guideline, which Fannie has removed. It was never a requirement. Fannie has never had a 10% per line adjustment guideline. Of course lenders and AMCs can still require the use of the 15/25% adjustment which could be a big problem for appraisers which can result in less reliable values. I never considered the 15/25 guideline in any of my appraisals, but I never worked for lenders or AMCs who required that appraisals conform to it.

Check out the graphs on GLA and 15%/25% adjustments in the FAQ document below. I included 4 of them in this month’s paid Appraisal Today newsletter.

Get the facts about what Fannie is saying, not just rumor and speculation. Subscribe to the paid Appraisal Today!!

https://www.fanniemae.com/content/announcement/ll1502.pdf

Appraisal Humor

Appraisal business tips

A very, very funny appraiser video!

Fannie warning letters – GLA adjustments and lots more coming(Opens in a new browser tab)

Collateral Underwriter warning messages and Every Increasing Scope Creep from all sources

By Ann O'Rourke on March 4, 2015 / AMCs, appraisal management company, Collateral Underwriter, forecast, lender appraisals / Leave a comment

Tags: AMC, appraisal, appraisal fees, collateral underwriter, Fannie, lenders

My latest opinions and observations, as of today

Fannie does not want appraisers to receive warning messages unless a “human” has reviewed the appraisal report. They want to reassure real estate agents mostly that appraisals will not be delayed. Of course, I have no idea how many underwriters have the time to read the 30+ page report. Maybe they can search the report for what they are looking. I am sure this is/will be slowing down loans.

But, I keep thinking that even if appraisers received a few CU warning messages, it is a small, small percent of all the stips from all the review software that AMCs use. No one seems to notice that appraisals take longer the more stips that appraisers receive. Particularly, when all the stips are not sent at the same time. No one seems to notice this, or care about it, except appraisers!!

These non-CU stips are mostly from arbitrary “rules” which CU does not use. Such as: picky UAD stips, “add 2 more comps”, or please review the list of “comps” from the real estate agent or borrower. Some are still using the 15%/25% adjustment rule.

CU – subject vs. comp data. I want the subject data!!

By Ann O'Rourke on February 25, 2015 / Collateral Underwriter, Fannie, lender appraisals, Reviews / 3 Comments

Tags: appraisal, collateral underwriter, Fannie, lenders

Fannie says that typically there are around 7 UAD records per property. However, most of them must be from appraisers who used it as a comp. Why should we be compared with appraisers who used the property as a comp?

I want access to CU property data from appraisers who did an appraisal on the subject property, not from appraisers who used it as a comp. I want CU to use this data to compare my appraisal data with “peers”. Comp data is not very reliable as it usually comes from MLS and public records. Fannie says that MLS and public records are not as reliable as data from the appraiser who appraised the property for the sale.
Maybe the appraiser had seen the interior of the comp recently, but this is very unlikely. Also, I go on the MLS tour/caravan almost ever week, but I don’t spend a lot of time at each open house. Well..I do spend more time if there is good food ;> MLS photos are subject to interpretation as they are done for sales purposes. I make brief notes on the flyers and file them in binders, going back to 1990.

Fannie’s new Collateral Underwriter (CU) FAQs updated

By Ann O'Rourke on February 25, 2015 / appraisers, Collateral Underwriter, Fannie, lender appraisals / 2 Comments

Tags: appraisal, collateral underwriter, Fannie

Fannie’s new Collateral Underwriter (CU) FAQs updated – not dated but available on Feb. 25

Why does Fannie keep saying appraisals there will be minimal, or no effect, on appraisal turn times? The real estate agents are worried about delaying closings.

For now, since few appraisers are receiving warnings, the underwriters appear to be slowing down the processing as they are responsible for decided which, if any, warnings to send to appraisers, after reading the 30+ page appraisal reports.

These FAQs mostly clarify what they have said before, but there is some interesting new information.

The first two pages has the new FAQs updates,

Here is some of the new info:

– 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.

– (Underwriters) Carefully review the appraisal report before seeking additional clarification from the appraiser based on CU findings.

– Fannie Mae expects lenders to use human due diligence in combination with the CU findings, and will actively follow up with lenders who are reported to be asking appraisers to change their reports based on CU findings without any further due diligence by the lender.

– Fannie Mae encourages lenders to carefully review the appraisal report – including all commentary – before seeking clarification from the appraiser. Don’t assume the appraiser is wrong just because you see a CU message. Taking messages or alternative sales at face value and simply asking your appraiser to address them is neither effective nor efficient. CU is intended to supplement a lender’s human due diligence. After completing a thorough review, lenders should be able to have constructive dialogue with appraisers to resolve specific appraisal questions or concerns. Lenders should not, however, make demands or provide

instructions to the appraiser based solely on automated feedback.

https://www.fanniemae.com/content/faq/collateral-underwriter-faqs.pdf

It is also available on the main CU link at www.fanniemae.com/singlefamily/collateral-underwriter

Collateral Underwriter – appraisal access to data and CU

By Ann O'Rourke on February 18, 2015 / Collateral Underwriter, Fannie / 4 Comments

Tags: appraisal, appraisal fees, collateral underwriter, Fannie, forecast, future

Should CU be transparent? Poll results

Poll results from ICAP poll – Illinois Coaltion of Appraisal Professionals, a very active appraisal political action group. www.icap.com

—————————–

Excerpt:

A few of the results of the 10 questions:

Q1 Should Fannie Mae make CU transparent?

Yes – 89%

No – 6%

Uncertain – 5%

Q3 Will CU risk scores cause Lenders and AMC clients to request appraisers to fit comps to the CU model?

Yes – 69%

No – 5%

Uncertain – 26%

Q5 Do you think the intent of CU is to

replace the appraiser?

Yes – 53%

No – 25%

Undecided – 22%

Download the results

http://icapweb.com/uploads/Should%20CU%20be%20Transparent_1423867852.pdf

—————-

Online petition to allow appraisers access to CU UAD data

ICAP also has a petition to Fannie Mae that created 11/10/14. “Online Petition to allow appraiser access to data they provided through the Uniform Appraisal Dataset (UAD).”

Excerpt:

The GSE’s have mandated that all appraisals be submitted in the UAD format; however, currently there are no plans to provide appraisers access to this data.

This data needs to be provided to appraisers at the beginning of the appraisal process; ensuring transparency, and improving the process by reducing risk to lenders and the general public.

Sign the petition at http://icapweb.com/petition.php Plus read the very interesting comments from appraisers!!

————————–

My opinion: I support the petition asking Fannie to let appraisers get the data that we submitted!! CU transparency is more difficult, for various reasons.

CU warning messages – grrrr

By Ann O'Rourke on January 27, 2015 / adjustments, AMCs, appraisal, Appraisal fees, appraisal management company, appraisers, Collateral Underwriter, Fannie, future / 5 Comments

Tags: adjustments, AMC, appraisal, appraisal fees, appraisal management company, appraisers, collateral underwriter, Fannie, Fannie forms, future, square footage

A few appraisers are reporting getting CU appraisal warning messages from AMCs. Some AMCs get the messages and and some don’t, depending on the agreement with their lender client.

I sorta believed all the “experts” who said CU would not affect appraisers much, except the many us who do not have market based adjustment support in our work files (which we should have always had). “They” said appraisers’ time for responding to AMC questions will not change. Fannie’s reviewers have been using CU for about two years. Some lenders beta tested it. They all liked it. But, I wonder if it was tested with “boots on the ground” appraisers who actually had to respond to the warnings??

In January I wrote up a long CU article for my paid Appraisal Today newsletter. In the February issue I will have another long article, focusing on the differences between the old and new CU warning messages. They are very different. AMCs with access to lender’s warning messages are sending them to appraisers, such as:

Old message (pre-CU): Condition adjustment for comparable property #<comparable number> appears excessive.
New message(CU): The condition adjustment [for comp #X] is smaller than peer and model adjustments
New (CU): The condition adjustment [for comp #X] is larger than peer and model adjustments.

There are other messages about condition ratings different that peers and model.

I don’t know how our “peers” and The Model made their adjustments or ratings and what they are. I don’t know how to respond as to why mine differ.

Now that appraisers are getting the warnings, they are asking how to respond to them. Who are these peers? What is the model? I have no idea how to respond, except to say “I don’t know who the peers are and how they determined condition or what method they used for their adjustment. I am unable to respond.” How do you know what the condition is really like for comps? There are lots of ways to estimate an adjustment for condition. You can explain what you did. But, who is right? You, peers, or model?

MLS is soo reliable (Not) for estimating comp condition. I don’t think they will like “matched paired sales” on all of your responses for the method you used for adjustments.

Looks like maybe there will have to be some webinars for appraisers, not just underwriters, explaining how to respond.

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Statistics and Appraisal Data