The FNC annual Collateral Management Conference provided an excellent opportunity to discuss the current state of appraisal data delivery initiatives and related dependencies. Senior executives from Fannie Mae, Freddie Mac, FHA and VA were present as well as executives responsible for collateral at the nation’s leading lenders, servicers and management companies.

We learned that the push to have appraisal data delivered to the secondary market, starting with Fannie Mae, continues to move forward. Fannie Mae remains focused on having its CDD (Collateral Data Delivery) initiative in pilot by late February or early March. Fannie Mae client teams have been holding meetings with leading lenders across the nation to explain how the process will work, set expectations and answer questions. The result is a flurry of initiatives to get lenders ready. Lenders that already receive appraisals as data, for instance those that use AI Ready, are well positioned and will require relatively few changes compared to lenders that still receive appraisals as PDFs.

We also learned that Fannie Mae and Freddie Mac are reading an initiative by the GSEs to standardize the data inputs for the current Fannie Mae appraisal forms. The GSEs have realized that in order to get consistent usable appraisal data, the possible responses from appraisers on these forms must be defined (think drop down menu with choices). Open text responses in every field of the appraisal forms may be a thing of the past if Fannie Mae and Freddie Mac are successful with this effort.

Freddie Mac revealed that they intend to require electronic appraisal data delivery as well. No details have been released but it is clear that they plan to do something in 2010.

Fannie Mae put MISMO back in the spotlight by stating they preferred delivery of the appraisal data in MISMO format (though they indicated that other open standards, such as AI Ready and certain proprietary formats from the appraisal forms vendors are intended to be acceptable.) After the initial announcement, Fannie Mae decided the current version of MISMO (2.4) does not meet their needs. Since that time, Fannie Mae, in conjunction with the Property and Valuations workgroup at MISMO, has been working to complete a new version that does meet their needs. As a result of that work, the MISMO 2.6 Property Valuation Response was released for a 30-day review on Feb. 9, 2010.

While this new MISMO release represents an improvement over previous versions, it does not correlate with the way appraisers and forms vendors currently do business. The challenges materialize when a MISMO form is created, either through PDF data extraction or XML data mapping. For example, today an appraiser can check the “Urban” box and also can check the “Suburban” box when filling out a 1004. The new MISMO standard allows only one choice to be selected. Given this constraint, the creator of the MISMO file must make a decision as to how to best represent what the appraiser intended to communicate by checking two boxes. Ultimately, if the creator of the MISMO file shows only the “Urban” box as checked, it could potentially be misleading to the user of the data.

In summary, the drive toward data continues. The benefits to the process are recognized. At FNC we are committed to helping our clients do business in a data-centric world, and making sure open standards meet the needs of appraisal data consumers. This is positive progress that will bring new and exciting opportunities for all of us.