Collateral Underwriter® (CU™) is a proprietary appraisal risk analysis application which lenders can use to submit appraisal reports for conventional loans that are Fannie Mae or Freddie Mac. This system, much like Zillow, creates an automated value system for homes. The scoring system is based on a scale of 1-5. The lower the number the better (meaning less risk) and the higher the number indicates a higher risk.
This application is important to understand from both a buyer and seller perspective. As a seller, now your home many have an appraisal done, but also this appraisal may be inputted into this automated system, CU, to be scored in order to eliminate any “errors” and reduce any risk. For example, if your home scores a 4 or 5 (meaning “higher risk”) the underwriter will have to speak with the appraiser to see why they didn’t use certain homes as comparable(s) as this system will point out sales that the appraiser opted not to include in the report. As a buyer, this application is good to be aware of as the buyer may opt to extend their appraisal contingency timeframe to adjust for any days that may be needed for the underwriter and appraiser to discuss a high-risk score.
As with an automated system there are always going to be limitations. It will be interesting to see what the future of Collateral Underwriter will become and how this will begin to impact appraisers and the success of a transaction.
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