Officials from the government-sponsored enterprises continue to encourage lenders to be proactive with their appraisal and origination technology vendors in preparation for the new requirements in the Uniform Mortgage Data Program.
On Sept. 1, Fannie Mae and Freddie Mac required appraisers to begin generating their valuation reports using new forms that comply with the Uniform Appraisal Dataset.
The UAD is an XML file format for the four standard appraisal reports currently required by the GSEs. It also sets a standard for the responses that appraisers can input in the appraisal forms.
Appraisers have typically been given leeway to complete appraisal forms however they chose. But that leads to inconsistency from one appraisal to another—an appraiser who describes a property's condition as “average” may mean the same thing as an appraiser who puts “fair” or “good” on a form, but there's no way to differentiate between the terms.
Together, the UAD sets standards for both the structure of the electronic appraisal forms, as well as the acceptable answers for many points in the appraisal report, like property condition and quality. These data standards are critical to the success of a future GSE initiative: the collection, indexing and databasing of all appraisals of properties that are collateral for GSE-purchased mortgages.
“If you have appraisals and they're not in the compliant format, that's not where you want to be,” Marianne Sullivan, Fannie Mae senior vice president of credit portfolio strategy, told the audience during a session at the Mortgage Bankers Association's annual convention held last month in Chicago.
The delivery mechanism, a technology platform called the Uniform Collateral Data Portal, is already in use on a trial basis for lenders and their appraisal vendors to ensure they work out any issues ahead of the deadline. And the GSEs are “already monitoring a very good diversion of observations around property condition and quality,” from the appraisals delivered by the more than 1,000 registered UCDP users, Sullivan said.
The UMDP was mandated by the Federal Housing Finance Agency so the GSEs will capture consistent and accurate data, improve loan quality and manage risk better, Sullivan said.
Sullivan said lenders need to identify the business processes they will implement ahead of when the GSEs will begin collecting appraisals; March 19, for loans with application dates on or after Dec. 1.
One way to do this is for lenders to manually upload PDF or XML files of the appraisals to a Web browser-based interface with the UCDP. While the cost to upload directly to the UCDP is free, PDF files must be converted to XML, which will incur a cost for lenders. The process, known as PDF scraping can also lead to errors that could lead to delays for lenders trying to sell loans to the GSEs.
“Conversions are not 100% accurate, so I highly recommend going to XML,” Sullivan said. “It's cleaner and less expensive in the long run.”
But even with XML files, lenders that manually upload to the browser portal can only upload 10 files at a time, according to Vladimir Bien-Aime, CEO of Global DMS, a Lansdale, Pa.-based technology company that provides appraisal management and appraiser form-filing products.
According to the GSEs, 23 technology vendors and appraisal management companies have implemented or are working on technology that enables the submission of electronic appraisal data to UCDP by the Dec. 1 deadline.
With the UCDP integrations, lenders or their designated AMCs can batch upload the XML appraisal files faster and with built-in error checking.
“Without a technology like Global Kinex, lenders will be spending up to five to 15 minutes to deliver appraisals, plus there's a maximum upload limit of 10 files at a time,” Bien-Aime said when Global DMS released its UCDP integration software.
Appraisers have traditionally provided PDFs of appraisal reports, which let lenders read the appraisals, but limits their ability to tamper with the information. The new XML files enable the GSEs to organize the appraisal information into a database, but are more difficult for lenders to read. Another company providing an integration to the UCDP, Oklahoma City-based a la mode, recently released a free XML reader designed specifically to access the embedded PDF in the UAD-specific XML file.
While a la mode provides appraisal form-filling software, the UAD Reader works with any file created in the GSEs' standard, regardless of which forms software was used. With it, lenders can read the appraisal in a split screen presentation that shows the PDF and corresponding XML. Lenders can also run an error check that highlights the specific parts of the report that have an issue.
Another function lets lenders share a PDF of the appraisal to the borrower, complete with a guide that explains the definitions and terms used in the report. The UAD Reader also serves as a delivery mechanism to deliver the XML file to the UCDP.
With the next UMDP deadlines quickly approaching, lenders will need advanced technology and processes to better manage the appraisal process during mortgage originations.
