Effective June 29, 2023, Loan Collateral Advisor® will include new feedback messages to alert users when certain prohibited, subjective or potentially biased words or phrases are included in appraisal reports submitted to Freddie Mac through the Uniform Collateral Data Portal® (UCDP®). This insight is intended to help users identify potential issues and to assist in compliance with Freddie Mac Single-Family Seller/Servicer Guide (Guide) requirements.

When the messages are added in June, they’ll have a Warning severity and will not prevent a “Successful” submission status in the Submission Summary Report (SSR) in UCDP. However, beginning Q4 2023, some words and phrases will result in a Fatal message, which will prevent a “Successful” submission status in the SSR in UCDP and delivery of the loan to Freddie Mac. We encourage lenders to take proactive steps such as enhancing procedures and training to ensure unsuccessful appraisal submissions are addressed and minimize delays in origination turnaround times. NOTE: Messages won’t just appear in Loan Collateral Advisor, they’ll also be shared in UCDP.

Why are These Messages Being Added to Loan Collateral Advisor?

Guide Section 5603.4 details unacceptable appraisal practices, which include the use of certain prohibited, unsupported, subjective or potentially biased words or phrases. When these words or phrases are used in an appraisal, they’re unnecessary in the development of an accurate valuation and can undermine the credibility of the report.

Freddie Mac is committed to promoting equity and sustainable homeownership. As such, we’re required to adhere to all fair housing guidelines, which prohibit the consideration of a borrower’s race, color, national origin, religion, sex, familial status or disability when they apply for a residential mortgage loan.

By adding these feedback messages, users will have insight into potential issues earlier on. This will not only help eliminate these words and phrases in appraisal reports but will provide an opportunity for users to ensure appraisers are aware of Guide requirements and for appraisers to review their processes for areas of improvement.

Which Words and Phrases Will Result in Messages?

These messages will be delivered on appraisals containing the most commonly used prohibited, subjective or potentially biased words and phrases.

Subjective Words and Phrases

Through our ongoing appraisal review process, we’ve identified some commonly used subjective words and phrases, which appraisers can avoid by sticking to the facts and identifying and describing specific property characteristics. This will help appraisers more effectively support their opinions of value. Examples include:

  • Desirable/Undesirable
  • Safe
  • Well Kept
  • Prestigious
  • Students
  • Gentrification
  • Criminal/Crime

Protected Class or Code Word Commentary

This often is a result of information that doesn’t help in the development of the opinion of value and has the potential to introduce bias into the report. This can happen when appraisers copy and paste information from third-party sources. Avoiding the urge to copy/paste information and reviewing existing templates to eliminate potentially biased content are good ways to keep reports free of this language. Here are some examples:

  • Offering information about an area’s population demographics.
  • Alluding to an area’s low or high crime rate.
  • Including information about an area’s history.
  • Alluding to the lifestyles or family makeup of an area’s residents.

You can review the new feedback message language and message IDs here. We’ll provide a reminder when these Warning severity messages are added and again when the Fatal message goes into effect in Q4 2023.

For additional information on this topic, please refer to our Q&A with Freddie Mac Single-Family Chief Appraiser, Scott Reuter. Scott talks about the importance of removing these words and phrases from appraisal reports and discusses ways we’re trying to assist in compliance with Guide requirements while also offering best practices for appraisers.