How real estate agents should react to the new Fannie Mae Collateral Underwriter

How real estate agents should react to the new Fannie Mae Collateral Underwriter

On February 26th of this year the importance of an agent pricing their listings correctly and “to the market” becamefannie mae collateral underwriter tips more significant. The new Fannie Mae Collateral Underwriter, CU for short, went into effect. You may say “so what”, what does that have to do we me as a real estate agent? I hope that what I share with you today will show you how real estate agents should react to the new Fannie Mae Collateral Underwriter and how you can be proactive in seeing that contracts don’t fall through and closings are not delayed.

What is the Fannie Mae Collateral Underwriter?

The Fannie Mae CU is an underwriting tool for lenders that is focused on measuring the quality of an appraisal, the comps that are used, and the reasonableness of the adjustments and final value estimated by the appraiser. This is important to real estate agents in two ways. The first is that it could cause delays in closings because underwriters will possibly ask the appraiser to make revisions to the report or answer questions that they have, that may not have been asked before CU. The second problem is that if the home was not priced correctly in the beginning (ie-listed too high), and the comps used in the appraisal were chosen to support the unrealistic and high contract price, then this will be flagged by CU and the deal could fall through.

An important thing to note is that some of the delays that might occur right after the implementation may be reduced after everyone has gotten past the learning curve, but we’ll just have to wait and see. This is something that agents have no control over, but it is important to be aware of so that you can let your clients know what to expect. The second issue IS something that agents do have control over, so let’s take a look at what you can do to be proactive.

What agents can do to be proactive

One of the situations that people fear may occur with CU is that appraisals may be more conservative. Whether this is true we don’t know but what I have been telling agents that I work with is that if you price the home using the most recent and similar sales, which the appraiser is most likely to use, then there should be no issues. A list price based on these criteria may not be a popular choice because it does not meet the sellers hopes and wishes but it is one that will be more likely to avoid delays and/or result in the appraisal coming up short and the deal falling through.

The choice of using the most recent and similar sales is more important than ever with the CU because if these sales are not used then the CU will catch it, and can suggest up to 20 additional sales for the appraiser to consider. If there are better sales in this group of 20 that the appraiser ends up using then they will most likely lower the value since Fannie Mae is more concerned with the property being over valued as opposed to under valued. I find it highly unlikely that they would provide additional sales because they thought the value wasn’t high enough.

In my quest to educate agents on thinking like an appraiser, and pricing their listings accordingly, I offer the following suggestions when choosing comps:

  • Attempt to use sales that have occurred in the past 90 days. If this is not possible then consider looking in another subdivision that the buyer for this house might also look at. It will probably be in the same or similar school district, have homes similar in age, style, and quality, and of course be in the same price range. If there are some homes in the subject subdivision that exceed the 90 days these could be included, in addition to the newer sales, to help get a sense of how they compare to the more recent sales.
  • Bracket the home you are pricing by including sales that are inferior, equal to, and superior to it. This is what appraisers do, and by doing this you avoid pricing a home too high by using only homes that are superior to yours. The idea is that after adjustments are made to the bracketed sales the value you arrive at will be more accurate.
  • Look at active listings and pending sales. Who knows, these listings you consider during the pricing stage may be the closed sales the appraiser uses during the mortgage appraisal if they close before the subject. By considering the competitive properties the subject will face, you’ll get a better idea of what price the market will support. Pending sales that have financing in place, have been appraised for the contract price, and are just waiting to close are usually the best comps to use because they are the most recent transactions.

By using these 3 guidelines the value arrived at to list the home will be closer to market value and therefore more  likely to pass underwriting guidelines.


An agent that is aware of Fannie Mae’s CU can educate and inform their clients on what to expect and they can price the listing in a way that reflects true market value, while at the same time reducing the likelihood of the appraisal coming up short and causing delays in the closing process. If you have any further questions about how you can provide better service as an agent while at the same time meeting CU guidelines please feel free to contact me.

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  1. Another great article Tom. I’ve found markets with limited inventory and the only active listings were over priced. It makes appraising challenging when Lenders require 2 active listings and there are no reasonable listings to choose from. I have to use them but they really stand out like I’m trying to push a value in the appraisal, even if I adjust them down 25%. To me, this sends up red flags. On another note, I’m finding multiple consecutive listings for the same property that expire after 30 days and then the agent “restarts the clock” for DOM with each listing. How is this ethical. I’ve thrown out a comp because it had 6 consecutive listings in less than 12 months and I didn’t want to waste my time documenting the details of each one. So instead of selling in 6 days, it actually was 160 days. So much for accurate 1004mc data.

    • I can see where having those types of listings can give the wrong impression. I do not like when a listing has multiple listing dates either because it DOES give the wrong picture of how long it took to sell. I’ve heard agents say they do this to help the listing appear “fresh”. I think if it would have been priced correctly to start with then this wouldn’t be necessary, which is another good reason for a pre-listing appraisal if they are not sure what to list it at or if the seller thought it was worth more but the agent wants another expert opinion to support their list price. Good points Cindy and thanks for sharing your experiences.

  2. Only time will tell. However, what worries me about CU is that appraisals that come in low are not flagged as high risk by CU. This means if an appraiser wants to not be hassled by CU, they will be conservative. This feeling of a need to be conservative could start to take away from an appraiser feeling like they can support a contract price that seems reasonable in all ways, but most comps are coming up slightly short.

  3. Good advice, Tom. We are in a market of mass data where Fannie Mae and other organizations have massive amounts of data at their disposal. This underscores the need for properties to be priced realistically and for appraisers to do their jobs well. A commenter on Appraisal Buzz said CU should be called “Collateral Gotcha”, and that made me chuckle because it rings true to a certain extent.

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