Freddie Mac Takes a Bite of the Apple

Wednesday, May 6, 2015

Not wanting to be left home from the party, Freddie Mac has announced that on June 30, 2015 it will begin providing new feedback on appraisals submitted to it via the Uniform Collateral Data Portal (UCDP). Like Fannie Mae’s system, the messages will be delivered to those lenders seeking to sell residential loans to Freddie Mac. Most of the feedback will be in the form of warnings which essentially alert a lender there are some inconsistencies between the submitted appraisal report and data that Freddie Mac already possesses (like public records).

For example, if the GLA differs by a certain percentage from public records, there will be a warning issued so the lender and appraiser can verify the GLA used is, in fact, correct. As most appraisers know, the GLA shown public records may be deficient, but it is also possible the appraiser included in GLA a non-permitted addition. Either way, the purpose of the warning is to point out the discrepancy so the lender and appraiser together can determine if the appraisal report contains the most reliable number. Warning messages may generally be over-ridden by a lender allowing the loan sale to proceed.

On the other hand, Freddie Mac has also identified a number of discrepancies which is considers to be fatal.  One example of a fatal issue would be when the signature by the appraiser is dated prior to the effective date of the appraisal report. Fatal messages are just that and cannot be over-ridden by a lender; the issue requires correction before the loan sale can proceed. Up until now, even fatal hard stops could be over-ridden by a lender so on June 30th a fatal message will truly stop the loan sale.

Thus far, Freddie Mac is not saying it has created a proprietary database to evaluate appraisers or appraisals like Fannie Mae uses in the Collateral Underwriter (CU) or Appraiser Quality Monitoring (AQM) system. However, we have heard such an announcement is imminent once Freddie Mac puts the finishing touches on its new (and improved, no doubt) quality control system.

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Based on recent experience with the CU roll out this Los Angeles Home Appraiser expects that the majority of underwriters will simply pass along the warning messages without reading the report to see if they have already been adequately addressed. I hope Freddie MAC does a better job educating underwriters and AMCs than FNMA did. This is supposed to be a tool to speed up the process, NOT a tool with which to beat up appraisers and make them do more work for the same pay.

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