How to deal with low-ball appraisals
By JEFF LAZERSON / CONTRIBUTING COLUMNIST
While at the Mortgage Bankers Secondary Marketing Conference in New York, I learned about Freddie Mac’s new appraisal underwriting platform named Loan Collateral Advisor which is part of Freddie’s new Loan Advisor Suite.
Say goodbye to Freddie’s old Loan Prospector underwriting engine.
You may be able to use Loan Collateral Advisor as possible leverage with the lender to get reconsideration of value if you think you received a low-balled appraisal.
Once an appraisal is completed and it’s targeted for a Freddie Mac loan program, the appraisal is uploaded into Loan Collateral Advisor. As a result, two scorecards are provided; one is the property valuation using a 1-10 scale (10 being highest), the other is the appraisal quality score (quality of work) using the same 1-10 scale.
Freddie’s system uses advanced data analytics, similar to Fannie Mae’s Collateral Underwriter but perhaps more comprehensible for a lay person to understand.
The appraisal is checked against public records, multiple listing service information, closed sale comparable properties in Freddie’s rich database of nearby properties.
Loan Collateral Advisor analyses how those other appraisers adjusted for values when they used the same comparable closed sales for their work, how the subject property appraiser adjusted for value on this appraisal and his or her recent history of adjusting and concluding values of other properties.
To be clear, this system is not designed for consumers. But, there is nothing wrong with you going to your loan officer and asking him or her to get a copy of the Loan Collateral Advisor Report or if the loan is targeted to Fannie, their Collateral Underwriter report.
So, on these two 1-10 scorecard scales, where is the line in the sand causing Freddie Mac to reject the appraisal and give you a free re-do of the $500 that you spent?
“We will never say we won’t take this appraisal,” said Sharon McHale, Freddie Mac’s communications vice president.
But in a March 31 press release, Freddie said in part, “Loan Collateral Advisor’s rules based engine provides insight into eligibility for earlier collateral representation and warranty relief.”
I interpret this statement to mean if you give us crummy appraisals via low scores, you might be buying back that loan.
I’m probably the world’s biggest screamer when my borrowers get low-balled, and I’m usually on the lenders for reconsideration of value. But there is something else to consider here.
“I’ve never once heard anyone say to me, ‘Thank you for not allowing my borrower to overpay.’ Or, ‘Thank you for not allowing the lender (to take too much risk,” said Lance Siegel, president of Lake Forest-based HVCC Appraisal Ordering Inc.
Siegel, who provides appraisal management services nationwide, has 250 independent appraisers on his Orange County list. He takes about five complaint calls a day about low-balled values.
Siegel’s point was brilliant, particularly now. Let’s face it.
Right now we may very well be at the top in this economic cycle in respect to sales prices and property values.
Jeff Lazerson - Mortgage Columnist since 2011