Editor’s Note: In this opinion piece, appraiser Andy Anderson expresses what many of his colleagues are thinking about the upcoming UMDP requirements.
UMDP/UAD: Road to Ruin?
By Andy Anderson
The Uniform Mortgage Data Program (UMDP) is mandated by Fannie Mae and Freddie Mac (GSEs) under the direction of their federal regulator, the Federal Housing Finance Agency (FHFA). As every appraiser knows by now, these mandates include new methods and requirements for completing appraisal reports and for the delivery of loan packages and appraisal reports. They take effect September 1, 2011. These new requirements are in the best interests of Fannie Mae and Freddie Mac, not the American taxpayer.
The United States is experiencing financial instability due to the lack of enforcement of lending guidelines and quality control of regulations and review policies that were already in place. The failure of the Government Sponsored Entities (GSEs), lenders and investors to “follow the rules” is at the heart of the economic crisis we now find ourselves in. This is NOT the time for these types of dramatic changes in lending and appraisal quality control and delivery requirements. What is and will continue to be needed are experienced and educated underwriters and review appraisers who can recognize a reliable loan package and a credible appraisal report and make good business decisions regarding them.
The new Uniform Mortgage Data Program (UMDP) and the Uniform Appraisal Dataset (UAD) are the beginning steps toward the automated review of individual loan packages and appraisal reports. The Uniform Loan Delivery Dataset (ULDD) requirement assures future income and “job security” to MISMO and possibly the GSEs but will generate additional cost and expense to the consumer/tax payer, as the GSEs continue to request more financial assistance from Uncle Sam to fund the changes. When implemented, the faster and easier methods of review will continue to fuel the economic crisis and financial instability of our nation.
The new changes and mandated regulations include:
- UMDP – Uniform Mortgage Data Program, which is a program to standardize appraisals and loan delivery data for mortgages that are purchased by the GSEs.
- UAD – Uniform Appraisal Dataset, which is intended to standardize key appraisal data elements to promote consistency.
- UCDP – Uniform Collateral Data Portal, which is a portal for the collection of loan and appraisal data for loans sold to Fannie Mae or Freddie Mac, which must be used by lenders (sellers).
- ULDD – Uniform Loan Delivery Dataset, which is a standardized format for transmitting loan data (including appraisal data) from the originating lender to the GSEs; this includes implementation of MISMO® Version 3.0.
- MISMO® – Mortgage Industry Standards Maintenance Organization, which is a mortgage industry organization that created a set of technical standards which are being leveraged by the GSEs as part of the UMDP.
MISMO is a wholly owned subsidiary of the Mortgage Bankers Association. Visit the website at http://www.mismo.org and you will find confirmation that this entire effort is to create and promote automated underwriting and service fulfillment through loan administration and investor reporting.
If allowed to be implemented, we will see further devastation of small businesses similar to that experienced by mortgage brokers and independent fee appraisers following the GSE’s implementation of the HVCC (Home valuation Code of Conduct). This time, however, the loss of jobs and income will be felt to a greater degree by other real estate professionals, specifically GSE bank-and-lender-staff loan originators, loan officers, processors and underwriters. Eventually, real estate agents and real estate service providers will be affected as the ability to mine MLS (Multiple Listing Service) data and real estate information from appraisal reports will minimize the need for lenders and investors to participate with real estate associations and pay for MLS services.
Fannie/Freddie Track Record- Um….Not Good
The pursuit of automated evaluations and less than diligent property inspections of collateral have been a Fannie/Freddie benchmark for decades. The attempt to speed up the lending process during the past “bubble” resulted in less-than-reliable loan packages and less-than-credible appraisal reports. The fact that the GSEs have thousands of loan packages and appraisals under review, to force loan originators to “buy back” loans in default, is proof positive that quality control by the banks, lenders and the GSEs was less than acceptable. Where is the accountability?
Local appraisers should be able to continue to complete a report in English with terminology that the local borrower and lender can understand. Especially since the Dodd/Frank Reform Bill requires each borrower to receive a copy prior to the close of escrow. No appraisal client other than the GSEs and lenders want to see “codes” in the reports. Without a substantial addenda with an explanation, the new codes will be misleading to any reader of the report not familiar with the UAD requirements. It is a disappointment that the VA and FHA government agencies have agreed to the GSE mandates. The new requirements appear to have the potential of creating a misleading report to anyone not trained in the new codes and requirements.
It is much more important to have qualified and experienced underwriters and reviewers reading the report for clarity than to streamline the reports and loan files with “fast and easy.” That is what got us into the financial mess we are in. Some uniform standards may be an asset but the appraiser who puts misleading or inaccurate quality, condition, etc. statements in a report will also put misleading and inaccurate codes in the report. A lie is a lie and changing to the mandated format will not change the character of the person who completes the report.
Any investment into the creation and implementation of these new requirements by the GSEs is nothing less than a misappropriation of taxpayer funds and a further lack of oversight by the FHFA. To repeat, this is NOT the time for dramatic changes in lending and appraisal requirements. To allow the GSEs to mandate the use of these new lending and appraisal requirements is to agree that the GSEs know what is in the best interests of our nation, when in fact, they, along with the investors, banks and lenders are responsible for the current financial crisis.
Take a look at some totals at CNNMoney.com’s Bailout Tracker website: http://money.cnn.com/news/storysupplement/economy/bailouttracker. Approximately 1.3 trillion taxpayer dollars have been spent on or are earmarked to save the GSEs. When will it be time to stop supporting the GSEs’ demand for unnecessary changes?
It is time for accountability. It is time to educate the consumer and insist our government stop fueling the financial crisis by financially supporting the GSEs, major banks and lenders. It is time to encourage the consumer to use local banks, lenders and credit unions that will use ethical and competent professionals for much needed quality control. It is time for integrity in the real estate professions.
About the Author
Mr. Anderson is a taxpaying American citizen, a Vietnam-era Marine Corps veteran and independent fee appraiser. He is an appraisal education author and instructor and the founder of Integrity~ An Association for Real Estate Professionals, which is a grassroots effort created to promote the public trust through the use of honest, ethical and reliable real estate professionals and sound business practices.