In an effort to continue to improve the quality of the appraisals Fannie Mae receives, the GSE has instituted some new appraisal requirements and made some clarifications. The good news for our customers is that FNC’s Collateral Management System® (CMS®) and Collateral Headquarters™ (CHQ) platforms as well as the AI Ready data standard make compliance with these changes essentially automatic. Your appraisers will be able to get you the data you need and your system will be able to track and process appraisals in a compliant manner. Some of these Fannie Mae updates take effect immediately and others later in the year. You can view the entire announcement and specific updates by clicking here to open a PDF.
Here is a list of the changes that impact appraisals, the appraisal review process, and appraisers:
- Inclusion of interior photographs in the appraisal report
- Lender changes to the appraised value and guidance on addressing appraisal deficiencies
- Appraiser selection criteria
- Sources of comparable market data
- Selection of comparable sales
- Communication under the HVCC
- Seller concessions
- Treatment of personal property
- Market Conditions Addendum to the Appraisal Report (Form 1004MC)
Most of the changes are not significant and may already be a part of your process, such as asking for interior photos or communication with appraisers under the HVCC. However, automatically checking to make sure the appraiser included interior photos may not be part of your process.
However, one of the more potentially impactful changes will be how Fannie Mae wants lender-made changes to the appraised value addressed. Fannie Mae now requires that the original appraiser make any changes to the appraisal. If the appraisal is so lacking that it can’t be remedied, the guidelines suggest that the lender should obtain a replacement that is at least the same level of inspection as the original. If a review appraisal is ordered, Fannie Mae requires that the reviewer also be licensed in the state where the property is located and have access to all needed data.
Additionally, Fannie clarifies:
“It is not acceptable for the lender to exercise blanket discretion by arbitrarily changing the opinion of market value from a report for use in the lending process. For example, it is not within the lender’s discretion to simply average the two opinions of market value in order to arrive at a final value conclusion.”
The CMS platform has the ability to track and manage the review process in such a way as to prevent inappropriate value modifications and subsequent appraisal or review ordering.
Another potential impact is that lenders must ensure that the appraisers they use are familiar with the area. In other words, the lender must ensure the selected appraiser is geographically competent.
In Fannie’s own words:
“Although the Uniform Standards of Professional Appraisal Practice (USPAP) allows an appraiser who does not have the appropriate knowledge and experience to accept an appraisal assignment by providing procedures with which the appraiser can complete the assignment, Fannie Mae requires that lenders only use appraisers who have the appropriate knowledge and experience, and does not allow the USPAP flexibility. Consequently, the Selling Guide has been updated to state that appraisers who lack the requisite knowledge, experience, and access to appropriate data must not be utilized.”
There are many tools available from FNC, such as the Appraisal Report, Generally Accepted Appraisal Rules™ (GAAR®) and the Appraisal Score that can help lenders and management companies ensure compliance in this regard. Please contact your account support team for more information.
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