Effective June 29, Loan Collateral Advisor will include new feedback messages via pdf to alert users when certain prohibited, subjective or potentially biased words or phrases are included in appraisal reports submitted to Freddie Mac through the Uniform Collateral Data Portal (UCDP). This insight is intended to help users identify potential issues and to assist in compliance with Freddie Mac Single-Family Seller/Servicer Guide (Guide) requirements, Freddie Mac said on its website.

“When the messages are added in June, they’ll have a warning severity and will not prevent a ‘successful’ submission status in the submission summary report (SSR) in UCDP,” Freddie stated. “However, beginning Q4 2023, some words and phrases will result in a fatal message, which will prevent a successful submission status in the SSR in UCDP and delivery of the loan to Freddie Mac. We encourage lenders to take proactive steps such as enhancing procedures and training to ensure unsuccessful appraisal submissions are addressed and minimize delays in origination turnaround times.”

Freddie Mac also noted messages will be shared in UCDP.

As to why are these messages being added to Loan Collateral Advisor, the GSE points to Guide Section 5603.4, which details unacceptable appraisal practices that use certain prohibited, unsupported, subjective or potentially biased words or phrases. When these words or phrases are used in an appraisal, they’re unnecessary in the development of an accurate valuation and can undermine the credibility of the report, according to Freddie Mac.

Additionally, by adding these feedback messages, users will have insight into potential issues earlier on. This will not only help eliminate such words and phrases in appraisal reports but will provide an opportunity for users to ensure appraisers are aware of Guide requirements and for appraisers to review their processes for areas of improvement.

Messages will be delivered on appraisals containing the most commonly used prohibited, subjective or potentially biased words and phrases.

Through Freddie Mac’s ongoing appraisal review process, it has identified some commonly used subjective words and phrases, which appraisers can avoid by sticking to the facts and identifying and describing specific property characteristics. This will help appraisers more effectively support their opinions of value. Examples of words to avoid include:

• Desirable/Undesirable;
• Safe;
• Well Kept;
• Prestigious;
• Students;
• Gentrification;
• Criminal/Crime; or
• Protected Class or Code Word Commentary.

  “This often is a result of information that doesn’t help in the development of the opinion of value and has the potential to introduce bias into the report,” Freddie Mac said. “This can happen when appraisers copy and paste information from third-party sources. Avoiding the urge to copy/paste information and reviewing existing templates to eliminate potentially biased content are good ways to keep reports free of this language.”

  Here are some examples of practices to avoid:

• Offering information about an area’s population demographics.
• Alluding to an area’s low or high crime rate.
• Including information about an area’s history.
• Alluding to the lifestyles or family makeup of an area’s residents.