Monday marks the implementation date of UAD 3.6, which requires appraisers to select specific data points from dropdown menus for every feature of a property, as opposed to writing text descriptions of the home as they previously did, increasing the amount of detail included in appraisal reports delivered to Fannie Mae and Freddie Mac.
Within UAD 3.6 is the new Certification 25, which has generated quite the buzz among appraisal professionals.
Certification 25, which was established by the government sponsored entities (GSEs), expands the data reuse beyond the parameters set in UAD 2.6, which included Certification 21, which largely governed who could receive or distribute a physical appraisal report.
Under Certification 25, entities that receive appraisal reports like lenders, GSEs, secondary market participants and data collection services to store, copy, reproduce, analyze, use and distribute all data within the report, including interior photos and property details, for internal or external purposes without needing the appraiser’s further consent.
While the certification does state that the appraiser and supervisory appraiser bear no liability for any use of the report outside of the specific mortgage finance transaction, appraisers are still concerned about this change and how it could impact their relationship with brokerages and real estate professionals.
In posts on social media and articles written on Appraisers Blog, Desiree Mehbod, a Virginia-based appraiser, has raised concerns about what would happen if interior photos of a child’s bedroom with the property address are leaked, reproduced and shared, ultimately ending up on the dark web.
“The biggest issue [with UAD 3.6] is Certification 25, which forces us to legally sign off that any downstream entity can permanently store, analyze, distribute and harvest our entire report data without our consent,” Mehbod told HousingWire. “Data privacy is incredibly important to people when it comes to their intimate spaces like bedrooms and bathrooms. When homeowners realize that the interior photos we take of their private living areas are being distributed to a long list of unknown third parties and permanent corporate tech archives, that trust is completely shattered.”
Data privacy vs. data distribution
For appraisers like Mehbod, it is noteworthy that these changes are coming at a time when privacy is becoming a hot topic among real estate professionals and consumers. From consumers asking their agents to remove listings photos from the internet after the sale of a home and the rise in private listings networks to MLS seeking to rein in who can use listing data and how, it seems that everyone wants increased data privacy and protection, but appraisers say Certification 25 is doing the opposite of that.
“The listing side is building walls to protect consumer privacy, while the appraisal side is being forced to demand more data to feed a permanent corporate tech archive,” Mehbod said. “Reconciling this requires giving independent appraisers the exact same granular data controls and licensing protections that Realtors now have.”
But the ability for downstream actors to have access to data like this is not new. According to Frank Gregoire, a Florida-based appraiser, Certification 25 is fairly similar to the statute it is replacing, Certification 21.
“Fannie Mae and Freddie Mac maintain a proprietary database about every single dwelling that has ever had a loan on it,” Gregoire said. “So, the ability for downstream users to have access to that data has been there since these forms were introduced in the early 2000s. But, what is new is that it now specifies that the appraiser is aware that some parties may be using the data from their reports without their permission.”
Who is getting this information?
While Ryan Lundquist agrees that this is the only primary change with Certification 25, he still finds it incredibly concerning.
“They can take the information and share it with whoever they want and the appraiser doesn’t have any control over that,” Lundquist, a Sacramento-based appraiser, said. “I know a lot of appraisers feel conflicted about that as it feels like it puts appraisers in a tough spot where a blank check to mine whatever data they want exists.”
Lundquist said he would love to know who this information will be shared with or sold to.
Gregoire is also concerned about appraisers including copyrighted data, such as images in the MLS in their report.
“If the appraiser is an MLS participant, they are using that information under license and they are permitted to use it to support their valuation, but that is it, they cannot grant someone else the right to use that information and that is what’s happening with Certification 25,” he said.
Just the beginning for Certification 25?
It is concerns like these that lead appraisers to say the discussion around Certification 25 is not over yet.
“I don’t think it will sit well with a lot of people in real estate when they read or begin to understand how and where this data may be used,” Lundquist said.
In addition, Mehbod said Certification 25 is why she and other like-minded appraisers have chosen to stop doing appraisal work for the GSEs. If a homebuyer wants their loan to close they have no choice but to allow the appraiser to generate a report, which Mehbod said will create “massive animosity right at the front door.”
“It positions the appraiser as a forced data collector rather than an independent expert,” she said. “This friction damages public trust and opens a legal minefield for our profession, leaving appraisers highly vulnerable to consumer complaints and lawsuits from angry borrowers when transactions get messy over data harvesting policies they never wanted to participate in.”
With UAD 3.6 just beginning to go into effect, it remains to be seen if anything regarding Certification 25 will change or how consumers and real estate brokers, agents and MLSs will respond.
