Thank you for attending the Collateral Underwriter user interface basic training. My name is Steve Jones and I will be taking you through the course. Our objective today is to provide a foundational understanding of CU s user interface. By the end of this session, you should be familiar with the general lay-out, navigation, and basic functionality of the application as you begin your Collateral Underwriter user experience. If you want even more information, look for the advanced training, which includes more use cases and demonstrates CU s full functionality. In addition to understanding how to navigate the system, it is important that you are familiar with the CU risk score, flags, and messages. If you have not already, we strongly recommend that you access the Understanding CU s Risk Score, Flags, and Messages elearning course available on the CU web page. 1
While every effort has been made to ensure the reliability of the session content, Fannie Mae s Selling and Servicing Guides and their updates, including Guide Announcements and Release Notes, are the official statements of Fannie Mae s policies and procedures and control in the event of discrepancies between the information in this seminar and the Guides. 2
Before the user interface demonstration and use cases, we will provide a brief recap of the CU risk score, flags, and messages. In the demonstration we will cover help options, basic appraisal search, general system navigation, and two different use cases one identified by CU as high risk and the other identified as low risk. Some topics covered include Comp Selection, Data Discrepancies, and Property Eligibility and Compliance. We will finish by providing some helpful tips for using Collateral Underwriter. In order to move around to different sections or to replay a section, click on the Menu tab in the upper left corner to access the course menu. This will allow you to skip to different sections of the course as well as review different portions of the demo. In addition, a PDF version of the non-demo portion of this course is provided in the Resources tab in the upper right corner. Again, we strongly recommend viewing these prerequisite courses available on the CU web page before viewing this training. 3
Before we get into the user interface, let s quickly recap some of the key points about the CU risk score, flags, and messages. Collateral Underwriter is a proprietary appraisal review application developed by Fannie Mae that performs an automated risk analysis of appraisals submitted to the Uniform Collateral Data Portal. Upon submission to UCDP, the CU risk score, flags, and messages are returned to the submitting lender. These results are available on the Fannie Mae tab in UCDP, on the Submission Summary Report (or SSR), and in the CU user interface that we will show you shortly. Fannie Mae is sharing Collateral Underwriter with our lender partners so that they can address potential property eligibility or policy compliance violations, overvaluation, and other appraisal issues proactively before loan delivery. The objective of CU is to assist lenders with assessing property eligibility and appraisal quality. However, it does not provide approvals or denials, nor may lenders use the results as basis for a credit decision. Lenders remain responsible for the accuracy and credibility of appraisals delivered to Fannie Mae, but CU may assist lenders in performing more effective and efficient reviews. Collateral Underwriter results including the risk score are used to inform Fannie Mae s internal quality control framework including our post-acquisition loan review process and our Appraiser Quality Monitoring initiative. Lenders will be provided with additional transparency and certainty by having access to the same appraisal data and analytics used by Fannie Mae. However, the CU results by themselves are not the final word on appraisal quality. While there is a strong correlation between the CU risk score and the likelihood of selection by Fannie Mae for post-purchase review, we do have a random review sample as well. There is no guarantee that appraisals with low risk scores will not be selected for review or have defects identified through human review. Just like Fannie Mae uses CU in conjunction with human due diligence, lenders are encouraged to do the same. A high risk score does not necessarily mean an appraisal is bad, nor does a low score necessarily means the appraisal is good. The same is true with individual messages. For this reason, lenders should not make appraisal review decisions based solely on this automated feedback. The single, overall risk score reflects CU s automated assessment on a scale of 1.0 to 5.0, where 1 is the lowest risk and 5 is the highest risk. A score of 999 is returned if Collateral Underwriter is unable to generate results, typically due to geocoding issues or data errors. Risk flags identify factors contributing to high risk scores. On appraisals with high risk scores, you will see at least one of these flags. The intention is to help the enduser understand the nature of the risk. Are there appraisal quality issues leading to potential overvaluation? Does the appraisal appear acceptable, but there may be a potential property eligibility issue? This is important because the reviewer s course of action may vary depending on the situation. More granular messaging aligned with key components of the appraisal provides additional clarity and directs users to specific aspects of the appraisal that may require further attention. These key components include data integrity, comparable selection, adjustments and reconciliation. These messages are simply warnings to assist with the lender s review and do not necessarily need to be cleared. At this time, none of the Collateral Underwriter messages impacts the submission status in UCDP. Functionality in the user interface will provide even more insight as you address these messages. Sophisticated statistical modeling is used to identify appraisals with higher probability of material overvaluation, but CU does not provide an estimate of value. CU is intended to be an appraisal review utility and is not an automated valuation model. There are no more granular messages associated with this risk flag, but other messaging and information contained in the user interface will assist lenders in assessing this risk. It is also important to note that high risk scores may also be indicative of potential under-valuation or other cases where credibility of the report is in question. CU does not take a lower is better approach to value. In summary, CU is intended to supplement your existing appraisal review process not to substitute for it. Appropriate due diligence will still be necessary to determine the appropriate course of action with your appraisals. CU provides valuable information to assist with this process, but still requires human review and discretion. 4
Now that you ve had a refresher on the CU risk score, flags, and messages let s take a look at the user interface. 5
As stated in our introductory sessions, Fannie Mae s objective in distributing Collateral Underwriter is to facilitate more proactive management of appraisal quality and to facilitate closer alignment with our customers. By granting access to the same appraisal data and analytics Fannie Mae uses internally, lenders will be benefit from additional transparency and certainty by being able to address potential appraisal issues prior to loan delivery. There are also process efficiencies that lenders may realize by segmenting appraisals according to risk profile and using CU as a data source to supplement their quality control processes. To realize maximum benefit of the application, lenders may be able to process lower risk appraisals more efficiently, thereby allowing more time and attention to be dedicated to higher risk files. Now that you re familiar with some of the basic functions of the CU user interface, we want to share some helpful tips as you begin your user experience. First, as pointed out in the CU Risk Score, Flags, and Messages training, CU is predictive of appraisal defects, but there are false positives and false negatives. Well-informed human judgment should take precedence over automated results. CU is a robust data source and powerful tool, but is not intended to be a substitute for your existing quality control processes. CU is simply a tool to assist with your analysis of the appraisal and you should not rely solely on the automated output. Second, when considering the alternative sales provided by CU, Fannie Mae s expectation is not that you have the appraiser address all 20 comps. Nor is it our expectation that the appraiser use only those sales ranked highest by Collateral Underwriter. Again, CU is intended to be a helpful data source, and you may find it helpful to analyze the appraiser s comparables in a broader market context. Also note that comps with similar rankings may not be all that different. For example, comps 1 through 5 may not be all that different than comps 6 through 10, and they may not necessarily lead to different results. It is also important to understand the limitations of automated analysis. There may be nuances with the subject property, the comps, or the market in general that the appraiser explains in their report. Lenders using CU should carefully review the appraisal report before seeking additional clarification from the appraiser based on CU findings. The same holds true when dealing with data discrepancies. CU will flag outliers because there is higher probability of inaccuracy, but outliers are not necessarily wrong. You may have heard the following example that we share regularly. We identified a case where 1 appraiser disagreed with 23 of their peers on the GLA, bedroom count, and bathroom count of a comparable. Upon analysis of the appraisal report and documentation provided by the appraiser, it became clear that the 23 other appraisers had incorrectly included an accessory unit in the GLA, bedroom count, and bathroom count for that comp. The one outlier was the only appraiser who reported correctly! In this example, the only way to clear this message would be to ask the appraiser to provide inaccurate data, and that is obviously not the desired course of action. Lenders are encouraged to validate potentially inaccurate data, but should not emphasize conformity with peers over accuracy. As described in the CU Risk Score, Flags and Messages training, CU will also assist in identifying potential Property Eligibility and Policy Compliance issues. To do this, Fannie Mae is leveraging the existing edits and Proprietary Messages in UCDP that you are already familiar with. However, it is important to understand that not all of these require action from the appraiser. For example, if a property is truly illegally zoned or if the property is a unit in an ineligible condo project, there is nothing the appraiser can do. This is a property eligibility issue and not an appraisal issue. On the other hand, if less than three settled sales are used or if the research of a prior sale was not performed, this is something you will want to address with the appraiser. So when you see the Property Eligibility and Policy Compliance Flag and any corresponding messages, examine the nature of the issue to determine the appropriate course of action. Last, while we have done our best to consolidate as many tools as possible at the click of a button to help you complete your analysis of the appraisal report, Fannie Mae does not expect lenders to use the full extent of information and functionality available in CU on every appraisal. These tools are there when you need them, but you will not need all of them on every appraisal. Also, the various tools in CU can be used to validate or dismiss potential red flags. CU is intended to help you identify potential appraisal defects, but it will also help you efficiently validate the majority of appraisals that are well-supported. Again, the objective with CU is to process lower-risk appraisals in a more efficient manner so more time and attention may be dedicated to higher-risk appraisals. In summary, lenders can utilize CU to make fewer but more informed requests for clarification from your appraisers. Among early adopters, we have not seen a significant increase in correction requests being sent to appraisers. CU will certainly identify some things you may not have otherwise identified, but it will also help you validate many appraisals without unnecessary back-and-forth with the appraiser. These two factors should balance out and allow all parties to utilize their time and resources more effectively. 6
Upon successful registration for CU, we strongly encourage you to take advantage of the CU User Guide and FAQs document available in the user interface. Both documents contain a wealth of information about CU s extensive functionality. We hope that you find these resources useful as you begin your Collateral Underwriter user experience. As you begin using the application, please take note of the following important reminders. First, remember that CU results are only available to the submitting lender. So if you are looking for CU results on a file submitted by a correspondent customer or in the case of an appraisal transfer you will not be able to access the results in CU. Second, CU results are only available on single-family and condominium property types in the 50 US states and District of Columbia. Other property types, such 2- to 4-family, manufactured homes, and co-ops are not supported, nor are properties in the US territories. Third, while the CU risk score, flags, and messages are available in UCDP within seconds of your submission, real-time results are not available in the user interface, which is updated hourly. Before calling the Help Line in an attempt to locate your appraisal results, please keep these three points in mind. Additionally, remember that appraisals are rescored each time they are submitted to UCDP. Depending on the nature of any changes made to that appraisal, the score may increase or decrease, and flags and messages may appear or be cleared. It is also possible that the results do not change. Again, it all depends on the nature of the changes to the report. Fannie Mae does not discourage correction and resubmission of the appraisal report if necessary, and is concerned with the final product. The final appraisal submission and the CU results on that submission will be the document and results of record. Also note that appraisals with one of the 21 Proprietary Messages that converted to Hard Stops in January 2015 will receive a Proprietary Eligibility and Compliance Flag and an elevated CU Risk Score. Entering an override reason will not change the CU Score or clear the Property Eligibility and Policy Compliance flag. While many lenders use appraisal management companies or lender agents to submit to UCDP, lenders are ultimately responsible for assessing property eligibility. Fannie Mae will display an elevated CU risk score and the related risk flag even if an override reason is entered so lenders are alerted to potential eligibility and compliance issues. Lenders are encouraged to review the override reason available through UCDP, on the SSR, or on the Messages Tab in the CU user interface to ensure its validity. Last, keep in mind that high CU risk scores do not necessarily indicate potential over-valuation. Recalling our use case examples, you saw that issues with appraisal components like data integrity or comp selection work both ways. As a result, CU may identify cases with potential under-valuation or cases where credibility of the appraisal may otherwise be in question. CU is not designed to encourage bias in one direction or the other that is, it is not biased toward either higher or lower values. The objective is to support credible opinions of value based on credible data and methodology. Finally, users seeking information about additional CU functionality or looking for additional use cases can access the CU advanced training elearning course available on the CU web page. We hope that this course provides a foundational understanding of the CU user interface, and encourage you to view the additional elearning courses to supplement your knowledge and take full advantage of CU s functionality. 7
Thank you very much for your attendance and your interest in Collateral Underwriter. Please be on the lookout for additional information and educational opportunities available from Fannie Mae. Before you exit this elearning course, please take a minute to give us your feedback. 8