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How ClearCollateral® Review can help with appraisal risk management policy reminders from Fannie Mae®

By February 10, 2021 No Comments
You’ve likely seen the Fannie Mae® Lender Letter released on January 6 with appraisal risk management policy reminders. Do you know that ClearCollateral® Review can help you with these lender responsibilities?

 

We’ve broken it down for you below. 

 

Fannie Mae Lender Letter (page 1–2): Lenders’ responsibilities for appraisal review
This section points out that the lenders’ responsibilities change depending on the CU® score of the appraisal. 

How does ClearCollateral® Review help?

  • ClearCollateral Review automates the process of submitting the appraisal to Fannie Mae and getting the CU® score back 
  • Then, it directs appraisals to the appropriate level of reviewer depending on the score
  • Through the use of tailored forms, ClearCollateral Review supports different levels of review depending on the score. This takes the burden off of the reviewer for understanding what needs to be checked and what does not.

Of the specific things the lender remains responsible for:

  • ClearCollateral Review presents Fannie Mae’s findings to the reviewer. If Fannie Mae says that all the other valuations on this subject have a different condition rating than the appraisal, we’ll show that finding to the reviewer so they know to look carefully at this aspect of the report.
  • ClearCollateral Review brings together the subject characteristics and the photos, map, and sketch in the Smart View so that they can confirm the information in the report matches what they see in the photos
Fannie Mae Lender Letter (page 2): Top Appraisal Findings and Defects

The five most common appraisal significant defects with a CU® risk score of 2.6 or higher are: 

  • Inappropriate Comparable Sale(s) Selection Due to Location  
  • Inappropriate Comparable Sale Adjustment(s)  
  • Use of Physically Dissimilar Comparable Sale(s) – Gross Living Area  
  • Use of Dissimilar Comparable Sale(s) – Site Characteristics  
  • Failure to Adjust Comparables

How does ClearCollateral Review help?
Within ClearCollateral Review we use our ClearQC® tool to set up rules to identify — and provide actionable data to help resolve — all five of the most common failures Fannie Mae sees on their files with scores of 2.6 and above. We do this through the use of sourced and proprietary real estate data, public records data, ClearRank™, and intelligent rules around comparable adjustments.

Fannie Mae Lender Letter (page 3):Top Appraisal Findings and Defects

Five common appraisal findings with CU® risk scores of 2.5 or lower that lenders remain responsible for (not covered by value rep and warrant relief) are: 

  • Subject Physical Features Reported Inaccurately – Condition / Quality of Construction  
  • Subject View or Location Reported Inaccurately  
  • Failure to Report or Analyze the Subject Sales History  
  • Wrong Form for the Property or Transaction Type  
  • Subject Physical Features Reported Inaccurately – gross living area

How does ClearCollateral Review help?
Our ClearQC tool used within ClearCollateral Review has rules to identify — and provides actionable data to help resolve — all five of the most common failures Fannie Mae sees on their files with scores of 2.5 and below. We do this through the use of public record data, Smart Views, and presentation of aerial maps and streetview for the subject.

Fannie Mae Lender Letter (page 4): Appraisal Underwriting Best Practices

These highly recommended underwriting practices will help lenders manage appraisal quality risk: 

  • Evaluate your appraisal underwriting process to be sure you are aligning your review resources with risks. 
  • Remember that we require lender review of all appraisals, even those that qualify for representation and warranty relief on value based on a CU® risk score of 2.5 or less. 
  • Consider a bifurcated review process that assigns review of appraisals with indicators of poor quality (based on CU® scores and messages) to more experienced staff appraisers or well-trained senior underwriters. 
  • Gain operational efficiency by focusing the underwriting of appraisals with representation and warranty relief on those aspects that lenders remain responsible for. 

ClearCollateral Review supports lenders in implementing and maintaining the following best practices:

  • ClearCollateral Review assists lenders in aligning review resources with risks through the use of tailored rules, review tiers/qualifications (directs the right reviewer for the job to complete the right level of review for each file), and configurable review forms
  • For lower risk reviews, ClearCollateral Review identifies the necessary items for the reviewer to focus on, so that they  can stay focused on what matters  
  • For higher risk reviews, ClearCollateral Review identifies the problematic areas so that lenders can stay efficient even while doing a deep dive into these files
  • ClearCollateral Review is purpose-built to support a bifurcated process by way of tiers and qualifications ensuring the right reviewer for the job completes the right level of review for each file 

© 2021 ClearCapital.com, Inc. Clear Capital®, the Clear Capital logo, ClearCollateral® Review, ClearQC®, and ClearRank™ are the property of ClearCapital.com, Inc. or its subsidiaries. All rights reserved. Other company and product names may be trademarks or copyrights of their respective owners. This publication or any portion thereof may not be reproduced, distributed, or transmitted in any form or by any means without the express written consent of Clear Capital. Fannie Mae® and CU® are registered trademarks of Fannie Mae.

Ashley Bierwolf

Author Ashley Bierwolf

Ashley Bierwolf is a product analyst at Clear Capital.

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