Fannie Mae issued Lender Letter (LL-2013-10) regarding the Appraisal Quality Monitoring (AQM) process to remind lenders of its appraiser selection requirements, highlight several data quality issues, and describe new processes that Fannie Mae has implemented to identify and monitor individual appraisers.

Fannie Mae began collecting appraisal data in 2011 through the Uniform Collateral Data Portal (UCDP). Millions of appraisals have been submitted by lenders and their authorized agents, enabling Fannie Mae to monitor and evaluate appraisals for data accuracy and consistency, leveraging the availability of standardized appraisal data.

Here are some frequently asked questions (FAQs) answered by Fannie Mae pertaining to the AQM process.

Q: What types of quality monitoring does Fannie Mae conduct?

A: The AQM process identifies appraisers whose appraisal reports exhibit a pattern of inconsistencies, inaccuracies, or data anomalies. The intent and expectation of communicating these issues to appraisers is for training and educational purposes, and to provide them with an opportunity to improve their work. Future appraisal reports from those appraisers are then monitored to assess improvement.

The AQM process also can identify appraisers whose appraisal reports exhibit more egregious issues. In those cases, Fannie Mae will contact the appraiser and its lending partners informing them that either 100 percent of the loans submitted with appraisals from the identified appraiser will be reviewed in the post-acquisition file review process, or that Fannie Mae will no longer accept loans with appraisals completed by the specific appraiser.

Q: Are Collateral Underwriter (CU) risk scores and AQM the same thing?

A: No. Although information from CU’s analysis of appraisals is one tool that Fannie Mae uses in the AQM process, there is no direct connection between the CU risk score and AQM. High CU risk scores do not automatically trigger AQM reviews.

Additionally, AQM identifies appraisers whose appraisal reports exhibit patterns of appraisal quality issues for the purposes of training and education.

Q: Why does Fannie Mae correspond directly with appraisers without notifying lenders?

A: The primary AQM objective is to improve the quality of appraisal data submissions. Training and educating the appraiser through targeted correspondence has proven to be an effective way to improve data quality in many instances.

Q: What should an appraiser do after receiving an AQM letter?

A: Initial communications are intended to be instructional, except in cases where egregious issues were identified. An appraiser who receives an AQM letter should review the information provided in the letter, consult the Fannie Mae Selling Guide for additional information if needed, and make appropriate changes to avoid making similar mistakes in future assignments.

Q: How does an appraiser know if they are on the “100 percent review” list?

A: AQM letters include statements indicating they are for educational purposes and provide the appraiser an opportunity to improve their work. If the quality of the work does not improve and Fannie Mae deems the pattern of appraisal quality issues to be egregious enough that 100 percent post-acquisition review is warranted, the appraiser will be notified of this decision via certified letter and given the opportunity to respond.

Fannie Mae may consider removing an appraiser from the 100 percent post-acquisition review list if he or she can demonstrate a significant improvement in appraisal quality.