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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 appraiserswho can
recognize a reliable loan package and a credible appraisal report
and make good business decisions regarding them.
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continues)
Automated Reviews
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.
David
Brauner Insurance Services/ OREP/Working RE Magazine
David
Brauner Calif. Insurance License: 0C89873
(story
continues)
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.
Wasted Money 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.