Overview of the Uniform Appraisal Dataset (UAD) requirements under the Uniform Mortgage Data Program (UMDP).
The GSEs have been working towards standardization over the past couple of years. The UAD is only a small part of the UMDP, but one of the most important.
The goal of the UAD is to obtain superior quality data from appraisals that have been historically written with varying terminology. What does average condition really mean? Does DW stand for dishwasher or drywall? Why does 2.1 baths mean the same as 2.5 baths? It’s all about standardization of appraiser responses on four appraisal forms: 1004 (full single family appraisal commonly referred to as a URAR), 2055 (drive-by appraisal on a single family home), 1073 (full condominium appraisal) and 1075 (condo driveby appraisal). Why do the GSEs want better data from appraisals? So they can finally run more accurate reporting to better analyze risk, and make better decisions. This helps not only the GSEs but other investors, lenders, and the entire housing industry…which in turn will ultimately help the consumer.
What specific changes are required of appraisers and AMC's to comply with the new rules?
Complying with the UAD required appraisers to update their appraisal forms software and learn a new way of filling out these four forms. Most have either attended an in-class training seminar, or have taken an online webinar. I have taught both appraisers and lenders on the UAD and also conducted webinars. There is no change to the forms themselves, only how the appraiser inputs the data about the subject and comparables. Once everyone gets used to seeing appraisal reports in this format it will be easier to understand what the appraiser actually means when they state that the subject’s condition is rated as a C2. It’s very specific. And all abbreviations will be the same on all appraisals. AMCs have to train their reviewers on how to read and understand the new appraisals too. Checking the appraisals for UAD compliance is easy because within the appraiser’s software there are built-in compliance checks. Even at the AMC level we can run these automated UAD checks. Reports cannot be submitted to the UCDP if they are not in full compliance. Initially the UCDP will offer friendly warnings but soon the appraisal report will be rejected if not in full UAD compliance.
Does this create specific technology requirements for appraisers, AMC's or lenders?
As of September 1st, the only thing required is that the appraisal be completed in UAD compliance, and that’s only for lenders that sell to Fannie and Freddie. And although HUD has adopted the UAD it is optional for FHA appraisals, including those for reverse mortgages, until it becomes mandatory on January 1, 2012. The UCDP is open for business for testing meaning that lenders and AMCs can start submitting appraisals today to the portal, but not many are doing that yet. Submission to the portal becomes mandatory on March 19, 2012. So, from now until then, lenders and their AMC agents can send appraisals to the portal if they wish in order to learn how it works. I recently wrote an article on “Understanding the Portal” and you can read it in our September Kirchmeyer Klips newsletter which can be viewed by going to our website www.kirchmeyer.com and clicking on the PRESS ROOM link. Once March 19th rolls around, appraisals will have to be submitted as XML with embedded PDF, MISMO, or 1st generation PDF. The latter will come at a price which I believe is $3.50 per file, and that’s only if it goes thru the first time! Most appraisal software programs allow sending the report to a client in various formats, one of which will be XML and thus UCDP compliant. Only the registered lender can designate who is allowed to upload the appraisals to the portal. If the lender uses an AMC they may request that the AMC submit appraisals to the portal on their behalf. Some AMCs like Kirchmeyer are directly integrated with the portal so delivering appraisals will be seamless and of no worry to our lender clients.
In requiring a standardization of data collection, how specific are the requirements for individual input values?
Very. Data is input in a specific way but the software forces the appraiser to place it on the form in UAD compliance. The UAD requires semi-colons (;) as separators within the same field so that the portal will know what information is before and after a semi-colon. The appraiser sees and selects items from a drop list but the value placed on the appraisal may be a standard abbreviation. An example would be a home with a water view. If the subject property includes a beneficial view overlooking water, “B;Wtr;” is placed on the form in the view section. No spaces after any semi-colon. The GSEs wish to collect this data and now that appraisers coast to coast fill out reports the same way the GSEs can actually collect this data and it’s clean. The basement section on the sales comparison grid is fun to look at also. “900sf575sfin” and “1rr0br1.0ba1o” are samples of what you will see in the basement fields. The appraiser simply answers questions prompted by their software about the basement, and the data auto-formats itself to look like that. What that really means is that the subject has a 900 square foot basement and 575 square feet of that is finished, and there is only an interior exit from the basement. Oh yea, let’s not forget my prior 2.1=2.5 comment. Two and one half baths to many used to read 2.5. That’s correct in the digital world. But some appraisers used to call that 2.1 meaning 2 full and 1 half bath. So they are the same right? It all depended upon how the appraiser was taught. And how, you ask, did the first appraiser state 2 full and 2 half baths before? As 3.0? 2 plus a half plus another half equals 3, right? But there are not really 3 full baths in the house! So the UAD adopted the latter format. The number before the period is the full bath count and after the period the half bath count. So 2.1 no longer equals 2.5!
Will the new requirements create any specific challenges that could delay processing or delivery of appraisals?
Many appraisers began testing their UAD software before September 1st so they could work out the kinks and honestly, the only way to learn is to actually do. The vast majority of national appraisers probably never even tried updating until this date because they are procrastinators. My appraiser staff has been completing UAD compliant appraisals for a full month prior to 9/1/11 so we are well aware of all the changes. I was a beta tester for my software vendor so we were well on the forefront of this new technology. That being said, despite the fact that we as an AMC are ahead of the game, we still have to work with appraisers around the country and I know they will initially take longer to get their software updated and struggle to complete UAD appraisal reports for us. They will be frustrated at first. Appraisers by nature hate change. But change is happening all the time in this business. What we struggle with as an AMC is that all these changes seem to always happen at once and appraisers try and fight by complaining and raising fees falling back on the C&R Dodd-Frank bill. And that’s another topic altogether! I’m an appraiser so I feel their pain, yet I try and help them any way I can and reiterate that there is always a learning curve at the beginning, but in the end they will be more efficient. It’s like the digital camera age in the early 90’s. Spend $1,000 on a new digital camera and you will save money over time. They didn’t buy it at first, but boy was that a time and dollar savings! One of the best inventions ever for the appraiser.
In summary, the UAD is a drastic change for the appraisal industry…for the better. My son plays football now and when he gets banged up during practice and feels the soreness from hours of conditioning in the heat, I say to him, “No pain, no gain!” That statement can truly be applied to the entire UMDP I am sure.
Thomas Kirchmeyer is co-owner and president of Kirchmeyer & Associates, a real estate appraisal and consulting company based in Buffalo, NY. Kirchmeyer is acknowledged as a senior residential appraiser (SRA) by the Appraisal Institute, and has been appraising residential property for 25 years. He is an approved continuing education appraisal instructor with New York State, and is a leading authority on topics such as: Home Valuation Code of Conduct (HVCC), local Market Conditions, FHA guidelines and the residential appraisal process.