Mortgage Appraisals and CU

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In early 2015, software by the name of Collateral Underwriter (“CU”) became part of the modern mortgage process.  CU’s sole purpose – confirm the validity and reliability of an appraisal.  Now an appraiser’s opinion of value has a drone like system of checks and balances.

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CU Simplifies Conventional Flip Purchases

Post-CU implementation and so far so good.  In fact, CU has been a ghost as far as problems are concerned.  Every appraisal on conventional loans is analyzed by the Collateral Underwriting software.  However, the loan process has not slowed or encountered major obstacles as a result.

Pre-CU, whenever a borrower purchased a flipped home using a Conventional Loan chances were a 2nd appraisal would be needed.  The purpose was to get 2 opinions of value instead of one.   That way, lenders had more confidence in the valuation of the property.   Then, all that changed and mortgage lenders gained more comfort with flips.  Due to CU validating the accuracy of the appraisal on a flipped home, we saw a 99% reduction second appraisal requirements on Conventional flip purchases.

Collateral Underwriting’s Role in Home Loan

CU screens every Conventional loan appraisal.  Then, it spits out a score measuring the screened appraisal’s validity or reliability.  CU Scoring is a 1 to 5 risk score system.  A score of 1 indicates the lowest rick or in other words, the lender should rely on the appraisal as is.  On the contrary, a score of 5 reveals the appraisal is risky.  In other words the lender should not rely on it.

For example, after running an appraisal through CU, it receives a score of “4”.  A score of “4” means the appraisal is “high risk.”   As a result, underwriting requires an appraisal review.  During an appraisal review, a 3rd party company analyzes the appraisal.  Then, that company tells us what they think.  If the 3rd party felt that appraised value should be lower, they recommend a specific lower value in their report.  Now, the 3rd party’s lower value is used by the lender.

In conclusion, Collateral Underwriter modernized the home loan process. As a result, lenders manage and respond much better to appraised value concerns.

By Jeremy House





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