Danny Salas

If You’re in Real Estate, and Don’t Understand This… You’re in Trouble.

AMC’S FORMED BY HVCC, WILL UPLOAD UAD CODES, TO THE UMDP’S UCDP, SO THE GSE’S CAN ASSESS A URAR AND 1004(D), TO APPROVE A 1003!  If you’re in real estate, and don’t understand this…you’re in trouble! 

After the Mortgage Credit Crisis (that’s it!  I’m referring to it as MCC from here on out!), everyone was blamed for the financial meltdown of Capitalism, worldwide.  Brokers, Bankers, Appraisers, Underwriters, and carnival ride operators (not sure about that one) were blamed for the fiasco. Government agencies were abolished, and new ones formed, like the Federal Housing Finance Agency (FHFA).  New laws were put in place, like Home Valuation Code of Conduct (HVCC) laws implemented into effect May 4, 2009.  Essentially, these entities were structured to manage lending practices to be certain that the world never experienced again, the gargantuan apocalypse and failure of the world capital markets.  So, for the most part, these changes have been favorable for the consumer.  No longer should you, legally, show up to escrow and have a surprise charge or interest rate on your closing statement.  No longer should the value of the home you’re purchasing be falsely represented to greedily, financially benefit a Realtor or Lender.  No longer should people purchase more than they can truly afford for a home.  Today, we’re going to discuss the appraisal changes that have already occurred, and what’s expected around the corner. 

As mentioned, on May 4, 2009, the Home Valuation Code of Conduct laws went into effect.  This change was implemented to prevent Loan Originators (Banks, Brokers, Credit Unions, etc.) from ordering appraisals from their “in-house” or commonly used appraisers.  In some markets, unscrupulous lenders were working with appraisers to increase the value of some homes, just to make a transaction work, as opposed to generating a true, appraised, “real,” value.  HVCC developed the formation of Appraisal Management Companies (AMC’s) requiring that lenders use these AMC’s to order their appraisals from a “panel” of appraiser “experts,” that the AMC had “hired.”  In essence, this removed the potential unrealistic valuations by putting a divider between the relationships.  Sounds like a good thing, right?  In some aspects, of course, it was a good thing.  The problem was that the AMC panels consisted of anyone that would do the job.  At first, we had appraisers from Texas, reviewing appraisals in Chico, and lowering values.  We had derelicts, that shouldn’t be operating carnival rides, appraising properties and adjusting values non-consistent with the experts that scrupulous lenders were used to dealing with in the past.  Estimates, into the trillions of dollars, were lost on real estate transactions that didn’t have careful, thought-provoking, legitimately adjusted calculations by professional, competent, knowledgeable appraisers. 

This nightmare wasn’t experienced on every deal, however, lenders learned quickly (the smart, educated ones, anyway) that  the “panel” of appraisers, on your AMC, was the key to successful real estate transactions, and smooth closings.  As you can imagine, it took time to understand the AMC’s procedures, and how to encourage an AMC to influence their learning curve, into an understanding of who the best appraisers were, in their particular areas, and to keep on their panel; building a good reputation for the AMC, and therefore, the lender.  This worked beautifully, for about a year and a half, until the introduction, this last month, September 1, 2011, of the Uniform Mortgage Data Program’s (UMDP) Uniform Appraisal Dataset (UAD).

UMDP will be used by Fannie Mae and Freddie Mac (The GSE’s), as a common way to deliver appraisals with uniform data requirements, like similar codes, to support improved quality and accuracy of data while preserving each GSE’s ability to determine what the data means to loan performance and loan quality, or how people pay the loans back.  It consists of the Uniform Loan Delivery Dataset (ULDD), the Uniform Collateral Data Portal (UCDP), and the Uniform Appraisal Dataset (UAD).  The ULDD and UCDP will be behind the scenes type changes, some already in effect, other changes to come.  But, the big change is (UAD). 

The UAD standardize certain data points to support consistent appraisal reporting.  Similar definitions, codes, common verbiage, etc. will be expected on appraisals so that the GSE’s have a uniform way of determining the quality of valuation, and influences on loan performance.  This information will be uploaded to a common portal, or website, monitored by a common entity. 

So, appraisers, via the AMC’s formed by HVCC, will upload their information and two pages of codes, to the UMDP’s UCDP, so the GSE’s can uniformly assess a client’s URAR and 1004(D), to approve a client’s 1003! 

This, actually, makes sense.  For those of you not understanding the industry jargon, URAR’s are Uniform Residential Appraisal Reports, and 1004(D)’s are appraisal certifications of completion from numbers that accompany appraisals.  A 1003 is the form number used for an application for a loan. 

Now, you must understand that in order to accommodate these new changes, the most significant impact on real estate transactions, will be expected turn times on appraisals.  Prior to September 1 and UAD, appraisal contracted turn-times, with our AMC, were five business days.  However, as appraisers learn the new codes, verbiage, and processes for uploading the information, we have experienced that 10 business days (or double the turn times) are more likely to be experienced.  At least until we all familiarize ourselves with all of the changes. 

Our turn times are still good…as we’re learning the new tricks, to circumvent delays…as we are smart!

This entry was posted on Wednesday, September 28th, 2011 at 10:53 am and is filed under Chico Home Loans, Mortgage Industry Updates. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

1. Post Mortgage Credit Crisis Changes | Access Real Estate Lending by Daniel C. Salas said at October 4th, 2011 at 3:25 pm

   [...] If You’re in Real Estate, and Don’t Understand This… You’re in Trouble. [...]

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