Magazine article Mortgage Banking

A UCDP Guide for Small Lenders: Deadlines Are upon Us for the New Appraisal Data Program Required by Fannie and Freddie. If You Are a Smaller Lender and Looking for Some Compliance Help, Here Are Some Tips

Magazine article Mortgage Banking

A UCDP Guide for Small Lenders: Deadlines Are upon Us for the New Appraisal Data Program Required by Fannie and Freddie. If You Are a Smaller Lender and Looking for Some Compliance Help, Here Are Some Tips

Article excerpt

The government-sponsored enterprises' (GSEs') deadlines for the Uniform Mortgage Data Program (UMDP) are finally upon us. Larger lenders with plenty of resources and staff have been preparing for months. They are already submitting their loan files to the GSEs' new website, the Uniform Collateral Data Portal (UCDP).

Many large lenders have built direct connections to the UCDP that are integrated with their own internal systems. They've spent millions of dollars and countless hours to comply with the GSEs' requirements, so their pipelines won't be interrupted and their loans will be approved for sale without issues or delays.

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The big guys are ready. But what about the nation's smaller and mid-size lenders?

These smaller institutions are originating a growing percentage of the nation's residential loans, but most don't have the resources to plan technology in advance of the GSEs' deadlines.

Yet, these smaller and mid-size lenders have the most to lose when closings are delayed or loans aren't purchased. The 800 lb. gorillas can take a few hits. Smaller lenders simply can't afford it.

This article offers best practice guidelines for smaller and mid-size lenders to help them easily and affordably comply with the GSEs' new requirements.

UCDP and smaller lenders

UMDP was created jointly by the GSEs at the direction of the Federal Housing Finance Agency (FHFA) to standardize the common requirements for appraisal and loan data across the industry. Historically, the data in collateral documentation varied widely from appraiser to appraiser--even for the same property--as a result of the different requirements of thousands of lenders. In a marked departure from past practices; UMDP provides a data standard for the GSEs to evaluate the loan files submitted to them.

If you sell directly to Fannie Mae or Freddie Mac, your appraisals must be in compliance with the Uniform Appraisal Dataset (UAD) when you submit the file. Even if you don't sell directly to the GSEs, you'll still need to be in compliance because most investors will sell the paper eventually.

Other major investors have already committed to the adoption of the same collateral data standardization. In Mortgagee Letter 2011-30, the Federal Housing Administration (FHA) announced adoption with an effective date of Jan. 1, 2012.

In Circular 26-11-14; the Department of Veterans Affairs (VA) followed suit with the same effective date. It's clear that UCDP compliance matters, even for portfolio lenders. The chances of that loan file being sold at some point in the future are good, so preparing the paper in accordance with modern industry standards is a best practice.

You have probably already seen the changes in the appraisals you receive. UAD--a component of UMDP--took effect on Sept. 1, 2011. To comply, all appraisers must complete their reports in the required UAD format.

The affected forms include all the common appraisal reports every lender likely receives each day:

* Uniform Residential Appraisal Report (Fannie Mae Form 1004, Freddie Mac Form 70);

* Individual Condominium Unit Appraisal Report (Fannie Mae Form 1073, Freddie Mac Form 465);

* Exterior-Only Inspection Individual Condominium Unit Appraisal Report (Fannie Mae Form 1075, Freddie Mac Form 466); and

* Exterior-Only Inspection Residential Appraisal Report (Fannie Mae Form 2055 and Freddie Mac Form 2055)

In its Oct. 18, 2011, Uniform Appraisal Dataset (UAD) Overview, Fannie Mae stated: "Any appraisal submissions on these forms not completed using a UAD-compliant form will receive a 'not successful' submission status in the UCDP if the appraisal effective date is on or after Dec. 1, 2011."

The GSEs have indicated they will expand the forms governed by UAD in the future, so there's little doubt the UAD data and format standards will permeate appraisal reports of all types, and for all investors, in the future. …

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