APPRAISAL QC: the new GSE requirements.

Author:Miller, Jennifer
Position:VALUE JUDGMENTS - Government-sponsored enterprises
 
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APPRAISAL QUALITY CONTROL (QC) has always been a hot industry topic and, until now, everyone had a different opinion on the right approach. In light of two recent Fannie Mae announcements, the days of individual interpretations are over.

Now we all know that before funding, investors and regulators want every appraisal to undergo a documented, consistent QC process.

A QC process shouldn't be confused with the dozens of QC products on the market. Those are typically reports of extra data about the property, but they aren't a QC process for the appraisal itself. They help substantiate data and values (hopefully), but they do not satisfy Fannie Mae's newest QC requirements.

July--Fannie Mae adds pre-funding QC process and documentation requirements Fannie Mae's Selling Guide Announcement (https://www.fanniemae.com/content/announcement/sel1305.pdf) issued on July 30 focuses on quality-control requirements to reduce repurchases.

The list is long, but I've isolated a few of the specific requirements that many lenders and appraisal management companies (AMCs) don't have in place yet: I Your QC program must be documented and incorporate systems and processes for achieving your QC standards.

* Your program must specify the location of QC findings and all related QC documentation. This requirement eliminates the mental checklist or spreadsheets that many use. In repurchase requests or exams, Fannie Mae is looking for a documented QC audit trail.

* You must develop severity levels to categorize defects. Fannie is requiring this type of scoring, but it's a good idea to implement anyway. QC scoring with severity levels is useful to streamline your internal operations because you can more effectively triage files to the appropriately experienced underwriters for each score range.

* You must report on QC findings monthly to senior management. Without a consistent QC process and system, meaningful reporting will be very difficult. Trends and overall findings of all your QC staff can't be determined without a standard process that eliminates as much subjectivity as possible.

* Your QC process must include stated data and documents, so you can ensure the data relied upon in making the underwriting decision is accurate. This last requirement makes clear that these new standards apply to a review of the appraisal.

September--UCDP expands to include QC messages

We've known the government-sponsored enterprises' (GSEs') appraisal QC requirements would eventually...

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