Mercury Network: There’s no need to freak out about Collateral Underwriter

CU will streamline appraisal review

You’ve probably heard about the fear and confusion in the industry surrounding Fannie Mae’s new Collateral Underwriter tool. 

Basically, Fannie Mae has added new messages to their Uniform Collateral Data Portal appraisal submission platform that will address risks in the appraisal. 

If CU detects anything strange in the appraisal based on Fannie Mae’s data, you will see some new messages in your UCDP results. Naturally, there is some worry about these changes, but Fannie does not expect a great deal of disruption. And neither do we.

Here's why.

Yes, some lenders, AMCs, and appraisers are wary of the impact CU will have on appraisal pipelines, so I wanted to share Mercury Network’s firsthand experience with CU.

Even though CU was only officially released to lenders on Monday, Jan. 26, Mercury Network already powered the submission of thousands of appraisals through CU for the past several weeks. In addition, since more than 600 lenders and AMCs rely on Mercury Network to power more than 20,000 appraisal deliveries a day, you could say we’re at “ground zero” of these changes. 

From our firsthand experience, we can report: 

600 Lenders and AMCs using Mercury Network are ready for CU. Since we powered submissions to Fannie Mae’s CU pilot, Mercury Network was prepared months ago. In addition, since we power more than 20,000 appraisal deliveries a day outside the pilot, we had a large responsibility to make sure the 600 lenders and AMCs, and more than 27,000 appraiser vendors using us were ready for the official CU rollout.

All lenders and AMCs, no matter which vendor management platform they use, can handle CU, too. 

With the XML file (which they must have anyway), any lender or AMC can efficiently process warnings and add commentary where needed to streamline investor review and prove due diligence if faced with buybacks later. 

There are 95 CU messages that affect appraisers, and the majority are the same issues they’ve dealt with for years. As a matter of fact, the CU messages are based on better data than many of the traditional blanket QC checklists that appraisers receive from reviewers regularly. 

And yes, there will be an adjustment period as with any change, but we don’t think end times are near.

More than half of the 95 messages address very simple issues that appraisers are accustomed to addressing routinely already, like simple errors or oversights that are easy to avoid and to correct. Our quality management error-checking tools flag these issues already, so this isn’t really a change for anyone.

Appraisers have voiced concern about the CU messages related to consistency with their peers on data points since the appraiser doesn’t have access to the peer data Fannie Mae is using.

However, it looks like Uniform Appraisal Dataset guidelines on condition and quality ratings can largely prevent triggering the peer consistency messages.  Even in situations where your appraiser’s data is different enough to trigger these messages, your appraiser may be right and can explain the variance up front. Again, appraisers are already handling similar questions routinely. 

Appraisal software companies have already pledged to help appraisers efficiently adapt to CU, which will help lenders and AMCs, too. 

The industry can rest assured that at the bare minimum, the vast majority of appraisers will have more and more powerful tools to help further streamline appraisal review.

The bottom line from our experience is this: There’s no need for alarm. Technology already exists that will help you streamline the new quality control requirements to minimize any impact on your pipelines. 

Pre-funding appraisal QC is already required by pretty much every regulator and investor, so many lenders and AMCs are already set up to process these messages quickly.

As more reports are processed with the new CU rules, we’ll keep you updated with the solutions for any challenges lenders, AMCs, and appraisers report with CU. 

For now, though, we think the industry’s ready for this, and we’re not alone. 

Click here to download a free collection of opinions and best practices for CU from industry experts.

[Editor's Note: Clicking the above link will take you away from HousingWire to a third-party site where you'll be asked to provide contact details in order to recieve the collection. HousingWire editorial staff did not review the contents of the collection and is not connected to the findings.]

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