Fannie Mae's Appraisal Review Changes
Debuted January 26, 2015
Fannie Mae rolled out a new safeguard for Lenders and Underwriters, as they continue to strive for Appraisal integrity and accuracy ...
This new Lender's tool became available on January 26, 2015 ... the very same day that FHA instituted their new Mortgage Insurance Reduction. (See my recent post, "January 26, 2015: Changes Ahead for Mortgage Financing" for details regarding FHA's changes.)
The development of this new "Appraisal Review" tool was intended to help alert Underwriters and Lenders of inconsistencies of Appraisal data submitted through the processes "already in place".
To better understand what impact these changes have on the Mortgage Process, I start by explaining what steps a Lender takes regarding Appraisals ... from the initial ordering, submission, processing, and on through review.
Please remember: Not all Lenders (Banks, Mortgage Companies, etc.) handle the ordering of an Appraisal in the same manner. What follows below is a breakdown of the standard process for the handling of an Appraisal for a Conventional Mortgage ... and the process I myself use as a Chicago-area Mortgage Originator:
The process typically follows this course:
- Mortgage Application taken
- Appraisal ordered by Mortgage Lender's appointed staff-member (NOT the LO themselves)
- Appraisal Management Company of Lender's choice, designates the Appraisal assignment to a specific Appraiser
- Appraiser inspects property, completes the Report, and electronically sends it to the Lender
- Lender submits the final Appraisal version through an automated system
- The system makes the Report available to the Lender, Fannie Mae, and Freddie Mac simultaneously in receipt
- The Loan Processor logs the Report into the Lender's Automated/Loan Operating System. It's then prepared for Underwriter's Review
- The Loan Officer and their Processing Team reviews the Appraisal for:
2. Repairs needed
3. Conditions of Value
6. Flood Hazard Zones
7. Consistency with the Title Insurance Policy
- Underwriter reviews the Appraisal Report for:
3. Use of the most similar Comparables available
4. Reasonability of Value Estimate
5. Suitability of the collateral for Fannie Mae/Freddie Mac lending standards, among other things
Note: Some Lenders may have an Appraisal Review Division that adds an additional layer of protection and set-of-eyes to determine the overall reliability of the Appraisal Report.
As of January 26, 2015, one more layer of Appraisal Review was added. Fannie Mae's CU (Collateral Underwriter) was introduced to help screen "risky" Appraisals and any inadequacies and inconsistencies that might be found within them.
How Lenders' Underwriters utilize this new tool is still being revealed. But it certainly puts more pressure on Appraisers to provide accurate, consistent, well-documented, well-explained Reports ...
* Hoping to Buy, Build, or Refinance within the Chicagoland area? Or have a client in need of Mortgage answers or service? Contact Me today! I'll put my 37 years of Mortgage experience and expertise hard to work on your behalf.
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Gene Mundt, Mortgage Originator, an Originator with 37 years of mortgage experience, will offer you exemplary mortgage service and advice when seeking: Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago and the greater Chicagoland region, including: The Lincoln-Way Area, Will County, (New Lenox, Frankfort, Mokena, Manhattan, Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook, Romeoville, Naperville, etc.), DuPage County, the City of Chicago, Cook County, and elsewhere within IL & WI.
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