Collateral Underwriting and Bigfoot

Let’s say you are a scientist studying, oh I don’t know…Sasquatch.  Due to the countless hours you have spent researching the topic, you are considered somewhat of an expert.  People look up to you for the academic and scholastic approach you take to the subject.  Due to the controversial nature of Bigfoot research, you are very careful Bigfootappraiserto fully document your claims and back up your rhetoric with scientific evidence.

Now, let’s say you get an email from a prestigious journal of North American mammal research.  The email says the following:  “Dear Dr. XXXXXXXX.  It has come to our attention that your latest claim regarding the existence of Homo sapiens cognatus (Bigfoot or Sasquatch), is materially different than what other researchers have found.  We are in possession of several academic papers which indicate this to be the case.  Please address our concerns.”

You frantically look through the email for an attachment to the claimed, contradictory evidence, but find nothing.  Furthermore, when you reply to the email and kindly ask for the evidence cited, you are denied access as “it is confidential.”

Of course, the hypothetical scenario described would be ridiculous.  How can you address ‘evidence’ that is not given to you?  How do you adequately answer concerns on a subject if you are denied access to the very material they are citing as being in conflict with your own data?  The answer is… you can’t!

A few days ago, I finally got my first Collateral Underwriter (CU) notification.  Yeah!  It was on a home I had appraised just the day previous (can’t say CU is not timely).  Here is the body of the email:

“Please respond on a cover page addendum to the following and revise report if necessary. Thank you. FNM0424 N/A N/A Comparable 1 The condition rating for comparable #1 is materially different than what has been reported by other appraisers. Warning FNM1000 N/A N/A Appraisal The Collateral Underwriter Risk Score is 2 on a scale of 1 to 5 where 5 indicates highest potential collateral risk. A score of 999 indicates no Collateral Underwriter Risk Score available. Warning.”

Let me summarize.  “You reported one thing and other appraisers have reported something else.  Please explain why your information is different than others.”  No explanation of what the other appraisers might have put, and no attachment with the evidence.  Just a generic statement and a request for me to show why my data is better than theirs.

So, here is my question; how is this request from the AMC any different than the ridiculous, hypothetical scenario I presented above regarding Bigfoot?  In both cases, the person being approached is considered an expert in his or her field.  In both circumstances, the professional is being presented with ‘evidence’ that is contrary to the claims he or she might have made in a report.  Finally in both stories, the specialist is being asked to refute data but is not given the data he or she is being asked to refute.  Here was my answer:

“Per your rejection notification, I have once again evaluated comparable #1. Based on the best information available to me (MLS data, interior photos, county, exterior drive by, and verification with agent), the comparable is indeed a C3 condition per UAD definitions. If you have information available that is not currently accessible to me, I would request that such information be passed along that I might evaluate it. I reserve the right to amend my designations if better information from credible sources is made available to me.”

I have received dozens of emails and other correspondence from appraisers across the nation over the past several weeks.  Each of them have a similar theme; ‘how do we answer CU rejections when we are not even allowed access to the very data being used to reject our reports?’  The answer is simple; you can’t.  At least, you can’t with any degree of specificity.

Now, I am not saying we should not be able to justify our reports.  We should.  If I put a C3 rating for a comparable, I had better have a reason for doing so (and I better have that reason in my workfile).  In the case above, it took me about 30 seconds to pull up the workfile and reconstruct  my justification for the rating I gave to Sale 1.  I felt confident about the condition reported and would have changed it if I had realized a mistake had been made after the fact.

The concern is that we are being judged on information that we do not have access to (well to be fair, the report—not necessarily the appraiser—is being scored based on information we do not have access to).  What professional in any field would be okay with that?  If you are going to say I am wrong because what I reported is “materially different” than what others have reported in the past, I say we are justified in demanding access to the evidence being used to refute my data.  Hats off to the Network of State Appraiser Organizations for their recent letter ( for demanding just that.  Others are also calling for more transparency.

One way we as appraisers can help this effort is by not rolling over.  When you are asked to defend your report in the wake of other evidence, demand that you are given access to the evidence they are citing.  If you find that you were wrong, make it right, but do not simply change your report because CU says your data was materially different than what others have reported.  Doing so would be akin to declaring Bigfoot exists based on a new video that you have never seen.

Article Originally Posted by our Friends at Appraisal Buzz HERE

Dustin Harris is a super-successful, self-employed, residential real estate appraiser. He has been appraising for nearly two decades. He is the owner and President of Appraisal Precision and Consulting Group, Inc., and is a popular author, speaker and consultant. He also owns and operates The Appraiser Coach where he personally advises and mentors other appraisers, helping them to also run successful appraisal companies and increase their net worth.   He and his wife reside in Idaho with their four children.  He is helplessly addicted to Swedish Fish and is a staunch believer in Bigfoot.  


18 thoughts on “Collateral Underwriting and Bigfoot”

  1. Pingback: Collateral Underwriting and Bigfoot - Appraisal Buzz

  2. Did your original appraisal explain why the comparable in question was a C3. I think this is what they are wanting. I would have responded with “As stated in the appraisal I submitted on xx/xx/xxxx, Comparable #1 was rated a C3 because it had updated siding, shingles, window, etc……” I think they want you to support your determination of C3, not just restate that you determined C3.

    1. I hear ya Mike, but the UAD addendum we attach to each report does specifically define C3. I might respond to a request of this nature by explaining that while the UAD definitions are certainly more specific than the practices of the past, they still leave opportunities for properties to fall in between the ratings, which would explain why one appraiser might say Q4 and the next guy Q3 etc. I would think the only cause for concern on FNMAs part would be when appraisers were more than one rating apart from each other, Q4 to Q2 for example.

        1. I’m just saying that they would not have a question regarding your condition determination if you state in the original appraisal why you determined C3 for the comp. Just answering the question before it is asked. One of my favorite things to do is to tell an underwriter to refer to page x in the report when he/she has a question. How would Fannie know who is correct about the condition determination unless we specifically say why C3 or C2 was appropriate.

          1. The question was asked, not because the appraisal was not clear. M is right, UAD is defined already. The question was asked because my C3 did not match something else that I did not have access to.

  3. Fannie has expressly prohibited lenders from passing along CU findings without a real human reviewing the flags and deciding if they have a material affect on the value conclusion. This implies that the human reviewer is QUALIFIED to make that determination. If you think the flags were simply copy-and-paste by an unqualified AMC staff clerk or underwriter (with no real knowledge or understanding of what the CU flags mean) a good response is to NOT answer directly, but point the requester to Fannie’s clarification letter dated 02/04/2015. You can find a link and more CU info on my blog at

  4. My issue with all of this is: who is to say that the data we’re being rated against is good data? The saying- garbage in-garbage out seems to play a role in this. Fannie Mae says they have over 14 million appraisals from which they built CU.. How much of that is garbage in that we’re now being rated against? I understand statistical analysis and that the larger the universe of data available, the lower the standard deviation, but, without the ability to analyze the data we’re being rated against, it’s all just another way to make us form fillers saying what someone else wants us to say in a way they want it said, taking away our independence and removing our judgment and experience from the process.

    1. Excellent observation. Odd how insisting on market support for adjustments is a move toward appraising by consensus, but when it comes to Fannie there is a plethora of proof that she is adept at enabling unintended consequences.

      I don’t think there is any intention in CU to enhance trust in the profession and I’m sticking to my story that this is nothing more than a secondary residential mortgage market effort to rid itself of the burden of appraisers.

      To Fannies credit she seems to have realized that her percentage limits on adjustments led to appraising to the limits. Which may also explain her reluctance to let appraisers see her data. Maybe she is just afraid appraisers will aim at complying with her data instead of exercising independent judgment. Ya think?

      1. Maybe your right Edd, maybe the push is to get rid of appraisers. I tell you what though, I don’t think that will ever happen, or at least it wont happen if it can be assumed that the powers that be actually do want unbiased and supported valuations. Why? In a word, human. No matter how this industry changes, it will always be a good idea to send a human being out to a property to document its physical attributes and then compare the attributes (most significantly physical condition, quality and appeal) to available sales data (MLS photos). You cant teach a computer good taste. One day the powers that be might actually reach the conclusion that the system we have now is as about as efficient and accurate as it gets. What I mean is think about all we do for the $ we charge. Its a great deal whether they realize it or not.

      2. “nothing more than a secondary residential mortgage market effort to rid itself of the burden of appraisers.”


        That is obviosuly the bottom line to all this CU business. When Fannie starts flagging all kinds of appraisals for all sorts of “inconsistenices” that will give the lenders ammo to argue “Its apparent that MANY appraisers are either incompetetant or negligent and we have plenty of god AVM data to make loan decisions on 75% of our mortgagesm so the “costly” appraisal is not necessary.

  5. My first encounter happened 1 day after I had sent my report through the AMC portal. Every condition of every comp was questioned with the same rejection language. I live in a rural, farming area of Kentucky & we are lucky to have good comparable sales, and I struggle to find as many as possible (comparable sales) that mirror the subject property as closely as possible – explaining why I made my choices. Then I get the “canned” response from some one (or a machine) that doesn’t have a clue with what I face daily.
    This stuff may have it’s place, but it most certainly isn’t in every area of the US.

  6. Great post. Some good replies too – thanks for the links everyone.

    I cant help but beat my usual drum – its more meaningless work for zero extra pay. I like the way you explained the situation coach. To me its not too far from asking us to review another appraisers work without even looking at it – two reasons for concern there. I have had just a couple of these requests and have responded pretty much the same way (paraphrased quote here) “My data and conclusions are as accurate as I can get it and I can offer no opinion on data derived from phantom sources”.

    Its all getting to be ridiculous really. I have gone back and forth in my career towards the amount of text addendum I place in reports. When I started I plagiarized my supervisors text. After I knew what I as doing and how to communicate it (after I was licensed), I wanted to show off my new skills and deliver a “better” report by writing long text summaries on everything. Then after I was a reviewer for awhile I realized that in almost all cases, less is more, considering the 1004 form format accounts for 99% of everything we need to say anyways and writing too many details only opens an appraiser up to scrutiny by some jerk reviewer (like myself). So for a long time now I have just let the data do the talking and only elaborate for the client when the data is less than ideal. My appraisal life has been much better since and frankly I think most of the clients out there want less instead of more anyways. Appraiser jargon gobbly gook is incredibly dull, complicated and not feasible to add in every report (or at least in specific terms – not using boilerplate). That said, I found myself writing a couple of novels lately. All of this additional scrutiny has led me back down the old path of “ok, you want an explanation? Fine. Read this for the next 2 hours. Enjoy!” Of course after writing for a couple of hours I realize that a) the reader probably doesn’t understand what I’m saying, even if I take the time to explain it in the most simple and precise terms b) the reader probably doesn’t care c) the reader probably wont even read all of it, if any and finally d) it just aint feasible.

    So for today I have come to the conclusion that clients want more. They don’t know exactly what they want yet, but they want it. If we communicated our assignment results in the same vague manner as they have been phrasing their desires, we wouldn’t have jobs. If we did put the effort in to educate our readers with text addendums that are not too far from lectures on appraisal theory, these would probably fall on deaf ears 99.999% of the time and we would have to charge double to do that in every report. I am tossing the idea around of writing a very long and specific boilerplate that outlines every little thing I might do in an appraisal and why and what it might mean to the reader. But I don’t know. I’ve met too many dim witted and closed minded reviewers (or other people in positions of power over me) to feel comfortable about doing that just yet. We’ll see. For now its less is more and “I have no idea why your data says something different from what I concluded” (and in my head I would say, “how about you verify your data first before asking me to verify mine twice!!!”).

    Good grief.

    And because I can never seem to shut up, maybe the powers that be should consult some appraisers to tell them how a report could be written to give them what they want and need for a lot less money than they are spending now. What???

  7. The problem I see repeatedly is not with CU but the lack of training for the human that is supposed to review the results. Rather than the underwriter over riding some of the nonsense/absurd results that cu flags they are funneling it all back to the appraiser. Fnma has said that cu will generate faulty warnings. If banks want to utilize the system they should train their people accordingly. I happily correct errors if they exist but otherwise just restate/explain my opinion.

  8. To paraphrase a reply above… In my area there may be 40 appraisers. Of those, perhaps 10 are mediocre in quality, and 10 are bad. So when Fannie says that the appraisers in my area say a rating for condition is such an such, how do I know whether they have information from the 20 not very good appraisers, or from the 20 decent appraisers? If Fannie said that the best appraisers in my area said the rating was such and such, I would be impressed, but I hate to even think how Fannie would arrive at a conclusion as to who was a good appraiser.
    Fannie is just taking shots in the dark. One week we aren’t to make line item adjustments over 10%. The next week we’re told that we aren’t making adjustments that are big enough. A really good example of Fannie’s utter dysfunction in the area of appraisals is the 1004MC. Are you all aware that this form is being used in a basic statistics class at a Big 10 university…as an example of how NOT to perform a statistical analysis? Yet we are still required to provide it with every Fannie report, even though it is roundly ignored by both underwriters and Fannie.
    Fannie reminds me of that person we all know, the self proclaimed expert. When the mortgage industry blew up, Fannie refused to accept that they have some major problems in house, and externalized everything. Instead of looking inward to correct their problems, they decided that it had to be somebody else’s fault, and appraisers and lenders are paying the price. Like any other near monopoly, Fannie needs to be broken up. Until that happens, we will have to continue jumping through their hoops, and wasting time. And until that happens, I will continue to discourage anyone from becoming an appraiser.
    Fannie regulates us with their incompetence, and no one regulates Fannie.

  9. It’s a pretty well known condition that if ten appraisers were placed in a room with the exact same data, they’d come out with ten different reports. The attempt to “standardize” our industry has been going on for quite some time, and it’s destined to fail as long as there is a human factor involved. Enter the UAD and CU system…get the human factor out of the process. My first CU revision request involved a response from the system that said “there is a risk that the property is over-valued”. How does a computer determine that. CU is a mess, as far as I’m concerned, and will cause more harm than good for a period of time. My job, the profession that I have been trained to do, cannot be performed by a machine, period. They may get close, they may try to get us all in line, but unless we’re all linked to the same machine and sharing thoughts, I can’t see us ever being 100% in sync with each other.

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