As published in Scotsman Guide's Residential Edition, May 2010.
Whether or not you deliver loans to Fannie Mae yourself, you should be aware of Fannie's new appraisal-related initiative called the Collateral Data Delivery (CDD) program (sctsm.in/FanCDD). In essence, Fannie Mae is signaling the end of the paper-based loan file, starting with the appraisal.
Under CDD, appraisals must be delivered to Fannie in electronic form at least 24 hours before delivery of the loan. This requirement is set to start mid-year — though no sooner than July 1 — if all things remain on schedule. Freddie Mac is said to be planning a similar system, though no timeline has been announced for it.
The CDD system generates a unique identifier for each appraisal file. This will allow Fannie to correlate the electronic appraisal with the loan file instantly upon its delivery. The CDD creates a data warehouse for this essential valuation information and makes it available on demand before the loan is purchased. This means Fannie can refuse the loan if it doesn't like the appraisal for some reason — and you can bet Fannie will be checking thoroughly for patterns, trends and red flags.
Although this new system could complicate life for mortgage brokers, it's not a bad thing for the industry as a whole, in terms of instilling transparency and investor confidence. It also means Fannie will be more interested in digital files and less interested in seller or servicer assurances regarding loan quality.
It seems only a matter of time before all loans are submitted this way in their entirety. After all, appraisals are almost always created electronically with a loan-origination system (LOS) and then copied, costing them their digital integrity.
But with the CDD, each data element can be sliced, diced and compared to other fields in the loan file via automated analysis. And discrepancies in that analysis could bring problems.
Because your lenders will be delivering files to Fannie electronically, they will expect the files to be flawless when they receive them from you. How often does the information in the closing package match the data in your LOS file?
Meanwhile, the CDD means investors likely will be more satisfied with data integrity in loan files. This will eventually bring back a number of them, which is a good thing.
Griff Straw is president of Solidifi U.S., a leading technology-enabled appraisal-management company and provider of collateral-risk-management and data-analytic services. He writes a monthly column on valuation issues for Scotsman Guide. Straw is a 30-year mortgage banker, a former Freddie Mac technology executive and a Mortgage Bankers Association Master Faculty member. Reach him at email@example.com or (703) 496-7579.