Appraisal repurchase requests

Appraisal repurchase requests – mitigation strategy 1 of 5

Oct 3, 2023

This series of articles is designed to help lenders and sellers understand the tools available to them to address buyback risks before delivery, and how to be prepared if they receive appraisal repurchase requests.

Loan buybacks, repurchase requests or make-whole demands from investors are on-the-rise even as loan volumes have declined. Numerous articles and commentary have highlighted the challenge in the last few weeks, including Sterling Point Advisors, HousingWire and UWM CEO Mat Ishbia’s recent video.

New AI technology driving appraisal repurchase requests

While there are no definitive explanations for this increase, and the GSEs say they have not implemented any new policies, one reason may be the increased use of technology to review loans and appraisals.

The Fannie Mae Appraiser Update 2023 notes the use of image recognition technology in appraisal report reviews, focused on identifying differences in condition (C) or quality (Q) ratings between the subject and comparable properties. Fannie Mae says “In a recent test, we analyzed more than a million appraisals with this technology. The test identified a small subset with high probability of erroneous C or Q ratings.”. So they automatically analyzed around 35 million photos in traditional appraisals, which would be around 75 million photos if they were hybrid appraisals!  This is clearly a lot more ground than human reviewers can cover.

Presumably they compare the calculated results with those in the appraisal and flag anomalies for human review. They also deployed text recognition to identify prohibited factors and subjective terms in the appraisal and B4-1.3-03 Neighborhood Section of the Appraisal Report. Both of these initiatives help identify B4-1-1-04-Unacceptable-Appraisal-Practices that could lead to repurchase letters.

Recap on Fannie Mae Collateral Underwriter (CU)

For some years CU has been the de facto industry standard for appraisal QC – including the ubiquitous ‘CU score’, flags and messages that lenders, correspondents and their agents see upon submitting appraisals to the UCDP. Perhaps less known are the capabilities of the web-based tool; but with repurchases on the rise, it may be a good time to take another-look.

To recap, CU comprises the following two components:

  • CU score, flags and messages

    • Contained in Submission Seller Reports (SSRs) following submission to the Uniform Collateral Data Portal (UCDP)
    • CU score of 2.5 and below receives representations and warranties relief from Fannie Mae (similar from Freddie Mae on LCA)
    • Flags for overvaluation, undervaluation, appraisal quality, property eligibility, and appraisal compliance
    • Available to lenders, correspondents and lender agents (who submit to UCDP on behalf on their lenders)
  • Web-based interactive tool for users, includes

    • Comparable sales data, mapping & aerial imagery, market trends, public records, dynamic local market conditions and analytics
    • Only available to lenders and correspondents
    • Since August 2023, post close QC vendors were able to gain access to CU

Guidance and prohibitions of CU

The next article will spend more time on how to use CU effectively, but Fannie Mae provides the following advice: “Users must understand the limitations of automated analysis and be aware of potential property or neighborhood nuances. CU is predictive of appraisal defects, but not all influences on value can be modeled. Well-informed human judgment should take precedence over automated results.

It is worth noting that to preserve the independence of appraisers and valuations, Fannie Mae specifically prohibits:

  • Providing access to CU’s web-based user interface to third parties (including AMCs and appraisers); and
  • Providing copies or displays of Fannie Mae reports that contain CU findings to AMCs and appraisers.

Fannie Mae advocates the use of third-party appraisal QC and collateral risk tools to complement CU and help appraisers and lenders address material concerns before loan delivery, and to avoid costly appraisal repurchase requests.

Leading causes of appraisal repurchase requests

While there may be other causes, the three main reasons for appraisal repurchase requests are:

  • Failure to use comparable property sales that are locationally and physically similar to the subject
    • Inappropriate selection due to GLA, location, site character & age
    • Inadequate adjustments to comparable sales, and
    • Failure of the adjusted comparable to support the appraised value.
  • Misrepresentation of the physical characteristics of the subject property, improvements & comparables
  • Failure to comment on negative factors in neighborhood, subject property or proximity of adverse influences


To wrap up, we are seeing the following trends:

  • Appraisal repurchase requests are increasing in relative terms every quarter
  • The GSEs are utilizing automation and AI to improve their reviews of loans and appraisals
  • Fannie Mae CU is the de facto standard for collateral risk analysis and is provided free to lenders, correspondents and post-close QC vendors to help assess appraisals
  • Key drivers of appraisal repurchase requests are subject comparable, condition & quality and adverse influences
  • There are sophisticated QC tools available to help lenders

Coming soon… the next four articles will address:

  • How to use CU effectively to address the concerns that result in appraisal repurchase requests
  • How to provide effective feedback to appraisers where there are concerns regarding appraisal repurchase risk
  • What to do next if appraisers are unable to address those concerns
  • How to effectively document the ‘well-informed human risk analysis’ and action taken prior to loan delivery

If you need to find out more sooner please…. Contact us