FNC: Streamlining Fannie's appraisals

Oxford, Miss.-based FNC has been chosen by Fannie Mae to provide systems to mitigate risk and streamline its appraisal-related processes, company officials announced. FNC is the developer of the Collateral Management System (CMS) -- a workflow solution used by some of the nation's largest mortgage lenders. Fannie has been using the system since April.

Fannie is using CMS to streamline its foreclosure appraisal processes in two of its divisions: the National Property Disposition Center (NPDC) and the National Underwriting Center (NUC), both in Dallas. Both the NPDC, which processes more than 10,000 appraisals per month, and the NUC, which processes about 1,000 appraisals per month, are concerned about mitigating risk associated with fraud, according to John Scott, FNC's director of alliance sales.

According to FNC, one of the reasons the nation's largest secondary market investor is using CMS is because it includes a built-in fraud tool called GAAR (Generally Accepted Appraisal Rules). Built into the CMS, the GAAR Risk Series automatically reviews appraisals and instantly flags any violations that may be indicators of fraud.

Additionally, the CMS will automate many of Fannie Mae's historically manual processes, including ordering appraisals and the subsequent tracking, receipt, analysis, and reporting processes related to those appraisals.

Recently, Fannie Mae, in accord with Freddie Mac and as part of an agreement with the Attorney General of New York, issued a Home Valuation Code of Conduct that limits the way many industry players can interact with appraisers. The GSEs hope to implement the Code on January 1, 2009, but there is stiff industry opposition. If implemented, the Code would require lenders to either automate the process of ordering appraisals or hand that job off to independent third parties.

While the rising delinquency wave is currently lifting all boats, making it one good reason that a company like Fannie Mae would seek to streamline some of its default management processes, this may also be a case of a GSE taking its own medicine before forcing it down the throats of the rest of the industry.

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