Appraisal Scoop

UAD Reporting Consistency - Clarification by FNMA and Steetlinks

The following StreetLinks document is re-posted from the WinTOTAL Users Group

On April 10th, Fannie Mae and Freddie Mac announced the publication of a new UAD Update document and an Updated UAD Specification Appendix D, which details the Field-Specific Standardization Requirements for compliance with UAD appraisal reporting. Additionally, StreetLinks' Executive Management Team has been in recent discussions with UAD experts from Fannie Mae regarding their early stage analysis of appraisals that have been delivered via the Uniform Collateral Data Portal (UCDP). As a result of our discussions, we have a few clarifications, which are also included in the Updated UAD documents, that Fannie Mae asked us to emphasize with our appraisal partners.

Fannie Mae is now able to pinpoint significant differences between reported data for a single comparable property or subject property that has been used across multiple appraisal reports.

In particular, they are concerned about information that changes from report to report when the same subject or comparable transaction is utilized by the same appraiser in two (or more) independent analyses.

For example, instances have been identified where a comparable property has been described in one report to have an Adverse View, while in a later report, completed by the same appraiser, the same comparable property transaction is described to have a Neutral View or Beneficial View. Similarly, Fannie has found that Quality Ratings or Condition Ratings assigned by the appraiser have changed for the same comparable property transaction from report to report. Finally, Fannie Mae has identified comparable property characteristics such as GLA, room count and other basic features that have changed significantly from report to report.

With the understanding that this information is now being closely monitored, it is important for appraisers to be very consistent in their reporting of property information or explicitly document the reason for changes to reported data when the same subject or comparable transaction is used in multiple analyses. Since the property characteristics for the subject should be described and rated as they existed on the appraisal's effective date, (or for a "subject to" report, as if the improvements/repairs had already been completed on the appraisal's effective date), and property characteristics for a comparable property should be described and rated as they existed at their time of sale; there are very few instances where the data should actually change from report to report. Only if the appraiser has discovered new information about the property as it existed on the relevant date, or if the property has been involved in a subsequent transaction would a change to how the property characteristics are reported be appropriate. In these rare situations, the appraiser should clearly document the new information which led to the reporting change.

As it relates to this issue, the UAD Update April 2012 document includes the following additional instructions:

Appraiser Selection of Condition and Quality Ratings In other documentation, the GSEs have previously communicated that the appraiser's selection of the Condition and Quality ratings must be based on a holistic view of the property and any improvements.

When selecting the Condition and Quality ratings, an appraiser must:

• Consider all improvements to determine an overall Condition and Quality rating. The appraiser should then select the rating that best reflects the property as a whole and in its entirety.
• Describe the subject property as of the effective date of the appraisal on an absolute basis, meaning the property must be rated on its own merits. This requirement also applies to any other rating or description, including the View and Location. The rating should not be selected on a relative basis, meaning it is not selected on how the property relates or compares to other properties in the neighborhood. Additionally, the Condition and Quality ratings for comparable properties must also be made on an absolute basis (again, each comparative property on its own merits), not on a relative basis, and reflect the property as of the date of sale of that comparable property.

When an appraiser selects a rating and/or description of the subject property for a sales transaction, the selected rating and/or description must:

• Remain the same when reflecting that specific transaction. For example, if a C4 rating is selected for the sale of the subject property, then that property remains a C4 when using that specific sale as a comparable in future reports. The same expectation holds true for ratings and descriptions of comparable sales; when a comparable is used in a subsequent appraisal, the ratings and descriptions of that property should not change from one appraisal to the next when it reflects the same sale transaction.

It is also important to note, however, that properties can have the same rating or description and still require an adjustment. For example, all water views may not be equal. In this instance, an adjustment should be made and explained in the comments section of the form or an addendum.

StreetLinks recognizes that there may still be some subjectivity in assigning quality and condition ratings, particularly when the appraiser believes that a property shares characteristics of more than one rating standard. However, as clarified by these updated Fannie Mae documents, there should always be consistency when the same appraiser is assigning the rating for a particular comparable transaction according to their own interpretation of the criteria involved.

StreetLinks would recommend utilizing the Comparable Database or Comparable Archiving function available in most appraisal forms software packages in order to keep a catalogue of all of the comparable properties that the appraiser has analyzed (along with their assigned ratings), so that they can reasonably verify that the property is being reported consistently between appraisal reports. This is particularly helpful for those situations when a comparable property may exhibit characteristics of more than one rating standard resulting in a "judgment call" on the part of the appraiser.

The UAD Update can be found at the UAD page on Fannie Mae's website at www.efanniemae.com/sf/lqi/umdp/uad/index.jsp by clicking on the UAD Update April 2012 (.pdf) link.

In order to strengthen your quality metrics with StreetLinks, please incorporate these clarifications within your UAD compliant appraisal reports on an immediate basis.

Source: StreetLinks

The 1004D - Appraisal Update and/or Completion Report - Uses and Misuses

Guest Author:  Ken Shure, Certified Residential Appraiser in the Los Angeles, California area.  Contact: kbshure@Yahoo.com

The 1004D form issued by Fannie Mae has two distinct sections. The first section is utilized to produce a summary appraisal report associated with a subject property for which a prior appraisal report was completed and to do so as of a new effective date. The form labels this section as a "Summary Appraisal Update Report" however it must be noted that when completing this section one has undertaken a new assignment and must be aware of the USPAP considerations of doing so. The second section is utilized to confirm whether or not requirements or conditions stated in the original appraisal report have been met. The focus of this writing is on the latter section.

The appraiser completing the lower section of the 1004D form certifies that they have performed a visual inspection of the subject property to determine that the conditions or requirements stated in the original report have been satisfied. This certification language makes the lower section appropriate for use when repairs were called for in a prior appraisal report that utilized the third check box option within the reconciliation section (CB3). Checking this box provides for the appraisal to be based on a hypothetical condition that specific repairs or alterations have been completed. In addition, the 1004D form is appropriate for use when the second check box option within the reconciliation section (CB2) has been utilized in the original report. Checking this box provides for the appraisal to be based on a hypothetical condition that the improvements have been completed according to plans and specifications that were in place as of the effective date.

Requests for completion of the lower section of the 1004D often expand beyond these appropriate purposes and it has become the "go to" form for lenders to request certification by the appraiser that an abundant array of issues are not problematic or have been solved. It is fairly evident to anyone who receives requests for this assignment type with any reasonable frequency that appraisers are being asked to complete assignments mandating the use of the 1004D in instances where this particular form is not appropriate.

The first example of this is the request for the 1004D when the lender requires an issue tobe corrected that was not conditioned for in the appraisal report via the use of CB3. The1004D language specifically states that the issues being confirmed as completed werethose where the requirements or conditions were called for in the original report. While this can be viewed as a minor distinction, it does mandate that the appraiser add in verbiage that the repairs are being required by the client. This will result in the presence of contradicting statements and the potential for one to be accused of producing a misleading document as the preprinted form language indicates that the repairs were a requirement of the original report. One possible action by the appraiser when such a request is made would be to supply an addendum confirming that the repairs required by the lender did in fact take place. Unfortunately this action is typically either not accepted by lenders or will result in the appraiser not being paid for the work involved for confirmation of the repairs in question. Ideally lenders and other clients would not put the appraiser in the position of having to complete an assignment or assignment element in an inappropriate and/or questionable fashion in order to be compensated for it.

The second example is one that can result in unnecessary and undesirable liability for the appraiser that complies. This deals directly with whether the original appraisal report called for repairs using CB3 in the reconciliation section or called for an inspection using the fourth checkbox option (CB4) in the reconciliation section. As was noted previously, an appropriate use of the 1004D form is to confirm that repairs or alterations that were called for by the appraiser via the use of CB3 in the original report have taken place. In these cases the appraiser can reasonably be expected to have the ability to confirm and certify the completion of these items using the 1004D.

Unfortunately, the 1004D is often being utilized by clients to engage the appraiser in cases where an inspection was called for via the use of CB4. This can be highly problematic for the appraiser.

• First, the form language of the 1004D does not call for the appraiser to certify that an inspection took place, was done properly, or had correct conclusions. The form language calls for verification that the improvements have been completed as required by the original report with certification that confirmation took place via a visual inspection of the subject property by the signing appraiser.
• Second, when an appraiser does certify that whatever item of concern is now satisfactory the appraiser has taken on a level of responsibility for the professional inspection that took place.

The signing appraiser has in effect become a potential responsible party in the event of a problem. The most common purpose of CB4 is for the appraiser to call for an inspection by an appropriate professional in cases where the appraiser is not qualified to make a particular determination. In these cases the inspection report is the proper vehicle to assist in the lending decision and complete the file, not a 1004D signed by an appraiser who has indicated via the use of CB4 in the original report that they do not have the expertise to make the determination in question. The only possible purpose of the 1004D in this instance is to add the appraiser to the list of liable parties should the inspection prove to be faulty. Appraisers would be well served to let other professionals such as roof inspectors, home inspectors, engineers, and pest controllers maintain full responsibility for their services and not sign certifications that make them responsible for the services, opinions, and conclusions of another professional.

As has been noted, when CB3 has been checked and the original appraisal has been based on a hypothetical condition that certain repairs have been made, it is reasonable for the client to expect that the appraiser is able to determine if the repairs have been completed and provide certification via the 1004D. Appraisers need to carefully review what they are requiring via the use of CB3 and determine if they will be competent to make the determination that the repairs or alterations have been completed. If the issue is sufficiently complex as to possibly require substantial construction or significant alteration then the appraiser needs to be clear if the issuance of a building permit would be necessary to certify completion via the 1004D. If the situation of concern will involve the use of plans and specifications that have been prepared as of the effective date, then consideration should be given as to whether the second check box in the reconciliation section (CB2) would be the more appropriate avenue by which to proceed. This option is typically utilized for new construction or major renovations and is only engaged if proper plans are already in place that can be reviewed by the appraiser.

The time to ensure a proper engagement and completion of a 1004D begins during completion of the 1004 or related form. When it becomes apparent that the appraisal will need to be conditioned via CB2, CB3, or CB4 it is important to outline within the report what exactly the specific issues are and to classify them on an individual basis as to whether they have resulted in the report being conditioned subject to an inspection by another professional, subject to repairs, or subject to completion according to plans and specifications. It is also important to outline to the client precisely what the appraiser will be able to certify to in the event a 1004D is requested. Language within the original report clarifying that the appraiser will not be able to certify the conclusions of an inspection report called for via CB4 and completed by another professional (ie: roof inspection or termite inspection) is certainly proper. In cases where CB3 is utilized the appraiser needs to consider their own comfort level with certifying completion of the specific repairs that are being called for. While certifying that paint had been applied, a kitchen sink installed, or a window repaired would all be within reasonable expectations, would one be competent to certify that a roof had been repaired adequately to prevent the reoccurrence of water damage to the ceiling? If there is a question as to comfort level or competence in determining that the repairs being called for have been completed properly, one should evaluate if the more appropriate step would be to proceed via CB4. In the case of a roof issue, perhaps calling for repairs of the ceiling via CB3 if the damage is seen as extensive enough while also calling for an inspection of the roof by a qualified professional via CB4 to determine conclusively if repairs to the roof are needed and to what extent.

The 1004D form provides a desired format for a necessary function often required by lenders. When utilizing the lower section of this form appraisers would be well advised to proceed in a manner that conforms with the form language and to avoid the potential liability of certifying the inspection results of another professional. In addition, when conditioning a report for specific repairs via CB3 the appraiser should be confident that they will be able to competently determine if the repairs requested have been completed properly. If not, consideration should be given to proceeding via CB4 and requiring an inspection by the appropriate professional to determine if the need for repairs does in fact exist and if so to what extent.

Copyright KB Shure 2012

Guest Author:  Ken Shure, Certified Residential Appraiser in the Los Angeles, California area.  Contact: kbshure@Yahoo.com

GAO Recommendation: Appraisal Subcommittee Needs to Improve Monitoring Procedures

Why GAO Did This Study

Real estate appraisals have come under increased scrutiny in the wake of the recent mortgage crisis. Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 created an oversight structure for appraisals and appraisers that involves state, federal, and private entities. This structure includes ASC, a federal agency responsible for monitoring these entities’ Title XI-related activities. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) expanded ASC’s Title XI role and required GAO to examine ASC’s activities and exemptions to federal appraisal requirements. This report discusses (1) how ASC is carrying out its original Title XI responsibilities, (2) ASC’s actions and plans to implement Dodd-Frank Act provisions, and (3) regulatory dollar thresholds for determining when an appraisal is required. To do this work, GAO reviewed ASC records and reports, surveyed state appraiser regulatory agencies, analyzed government mortgage data, and interviewed industry stakeholders.

Full Report:  GAO-12-147 Click Here

What GAO Found

The Appraisal Subcommittee (ASC) has been performing its monitoring role under Title XI, but several weaknesses have potentially limited its effectiveness. For example, Title XI did not originally provide ASC rulemaking and enforcement tools that could be useful in promoting state compliance. In addition, ASC has not reported or clearly defined the criteria it uses to assess states’ overall compliance levels. Title XI charges ASC with monitoring the appraisal requirements of the federal financial institutions regulators, but ASC has not defined the scope of this function—for example, by developing policies and procedures—and its monitoring activities have been limited. ASC also lacks specific policies for determining whether activities of the Appraisal Foundation (a private nonprofit organization that sets criteria for appraisals and appraisers) that are funded by ASC grants are Title XI-related. Not having appropriate policies and procedures is inconsistent with federal internal control standards designed to promote effectiveness and efficiency and limits the accountability and transparency of ASC’s activities.

ASC faces potential resource and planning challenges in implementing some Dodd-Frank Act provisions. ASC has only 10 staff and is funded by appraiser registration fees that totaled $2.8 million in fiscal year 2010. The Dodd-Frank Act expands ASC’s responsibilities and authorities.

For example, the act requires ASC to establish a national appraiser complaint hotline and provide grants to state appraiser regulatory agencies, and it gives ASC limited rulemaking and enhanced enforcement authorities to help address prior weaknesses.

As of October 2011, ASC had completed several implementation tasks that required no rulemaking or creation of new programs and was in various stages of progress on the others. The potentially resource-intensive nature of some remaining tasks will require careful planning. For example, operating a complaint hotline may require investments in information technology and the creation of screening and follow-up procedures. Also, implementing a grant program will require ASC to set aside funds, develop funding criteria, and oversee grantees. ASC is in the process of developing a strategic plan to help carry out these efforts with available resources.

GAO found that more than 70 percent of residential mortgages made from 2006 through 2009 were $250,000 or less—the regulatory threshold at or below which appraisals are not required for transactions involving federally regulated lenders. In recent years, however, the threshold has had a limited impact on the proportion of mortgages with appraisals because mortgage investors and insurers such as Fannie Mae, Freddie Mac, and the Federal Housing Administration have generally required appraisals for mortgages both above and below the threshold.

While these entities currently dominate the mortgage market, federal plans to scale them back could lead to a more privatized market, and whether this market would impose similar requirements is not known. None of the appraisal industry stakeholders GAO spoke with argued for increasing the threshold. Some stakeholders said the threshold should be lowered or eliminated, citing potential benefits to risk management and consumer protection.

Others noted potential downsides to lowering the threshold, such as requiring more borrowers to pay appraisal fees and requiring appraisals on more transactions for which cheaper and quicker valuation methods may be sufficient.

What GAO Recommends

To help ensure effective implementation of ASC’s original Title XI and additional Dodd-Frank Act responsibilities, ASC should clarify and report the criteria it uses to assess states’ overall compliance with Title XI and develop specific policies and procedures for its other monitoring functions. GAO provided a draft of this report to ASC and seven other agencies. ASC and two other agencies agreed with the report’s recommendations. One agency did not comment on the recommendations, and the others did not provide written comments

SOURCE: GAO-12-147 - January 18, 2012

Taking Stock of the 2055 "Exterior Only" Appraisal Form

Guest Author:  Ken Shure, Certified Residential Appraiser in the Los Angeles, California area.  Contact: kbshure@Yahoo.com

The 2055 form issued by Fannie Mae is a common vehicle for the reporting of an appraisal. The form includes a pre-printed scope of work indicated as the minimum needed to properly complete the assignment. This scope of work sets the minimum required inspection of the subject as a viewing of the exterior from the street. This minimum inspection requirement has provided some appraisers that complete reports utilizing the 2055 with a false sense of security as to their liability and overall responsibilities, particularly since the edits to this form that occurred in 2005.

Readers will note that the 2055 is designed to report appraisals of one unit properties or one unit properties with accessory units while the 1075 form is designed to report appraisals of a unit in a condominium project or a condominium unit in a planned unit development. While the focus is on the 2055 form the following discussion pertains to both forms, each of which are labeled as "Exterior Only Inspection" reports and have the intended use of evaluating a property for a mortgage finance transaction.

The scope of work section of the form includes the following paragraph:

The appraiser must be able to obtain adequate information about the physical characteristics (including, but not limited to, condition, room count, gross living area, etc.) of the subject property from the exterior-only inspection and reliable public and/or private sources to perform this appraisal. The appraiser should use the same type of data sources that he or she uses for comparable sales such as, but not limited to, multiple listing services, tax and assessment records, prior inspections, appraisal files, information provided by the property owner, etc.

Based on this paragraph the appraiser is expected to obtain proper levels of information that allow for a credible comparison of the subject to the comparable sales and per certification #10 due so without relying on unverified information provided by parties with a financial interest in the subject such as the property owner.

The data available to the appraiser for establishing the physical characteristics of comparable sales typically includes information as to the condition and quality of the interiors of these properties. The appraiser that is unable to verify the interior condition of the subject property while remaining true to certification #10 is therefore often in the position of having far better documentation for the interior condition of the comparables than for that of the subject. If interior condition and/or quality are factors with an effect on value for the particular assignment of interest, the information available regarding the interior of the comparable sales mandates an exercise of comparison for this parameter between the subject and these properties in order to provide a credible result.

Per USPAP, a properly incorporated extraordinary assumption with regard to the condition and quality of the interior of the subject property would be a compliant manner in which to proceed when one has highly relevant information regarding the interior of the comparable sales. However, the language within the 2055 form does not provide for making an extraordinary assumption while the "as is" box (CB1) is checked within the reconciliation section. This presents some level of difficulty for the appraiser attempting to properly make use of an extraordinary assumption regarding the interior condition and/or quality of the subject property when using this form.

While appraisers utilizing the 2055 form are certainly satisfying the specified minimum level of work by only completing an exterior inspection from the street, this does not remove them from any subsequent due diligence regarding the interior of the subject property.

Many appraisers have concluded that they have the ability to incorporate an extraordinary assumption into the report regarding the interior condition and submit the report with CB1 checked.  Per the form language, that cannot be altered in cases where the report is to be utilized in transactions heading to Fannie Mae or Freddie Mac, additional assumptions cannot be made beyond those already accounted for within the form's format. An extraordinary assumption can only be incorporated via the proper mechanism located within the reconciliation section.

The proper route for doing so on the 2055 and certain other Fannie Mae forms such as the 1004 and 1025 involves checking the fourth box in the reconciliation section (CB4) and requiring a subsequent inspection for confirmation. By checking CB1 and incorporating an extraordinary assumption into the narrative of the report one could be accused of producing a misleading report. This is due to the fact that the presence of an extraordinary assumption within the narrative is in direct contradiction to what is present in the reconciliation section when CB1 is checked rather than CB4. Contradictions such as this are not to be considered beneficial elements within an appraisal report and could be used as a means to discredit the appraiser that allows them to be present in their work product. This issue is discussed further in a prior article: You Can Write an Appraisal on a Napkin..... But you probably just didn't

Click HERE to continue reading this article

FreddieMac Single-Family Updates to Appraisal Related Forms and Reconciling Multiple Opinions of Value

Single-Family Seller/Servicer Guide (Guide) Bulletin 2011-25 announces updates to our requirements for appraisal-related forms and reconciling multiple opinions of market value.

Review Freddie's Guide Bulletin to get complete details on the Guide changes outlined below.

Effective April 1, 2012, the following revised property eligibility and appraisal requirements will apply:

• Specific Guide forms are required for appraisal field review reports and appraisal updates. Sellers are required to use Guide Form 1032, One-Unit Residential Appraisal Field Review Report, or Form 1072, Two- to Four-Unit Residential Appraisal Field Review Report, when obtaining an appraisal field review report as a part of the mortgage file. We are also requiring Form 442, Appraisal Update and/or Completion Report, to be used when obtaining an appraisal update.
• Guidance on reconciling multiple opinions of market value. New Guide Section 44.16, Reviewing Appraisal Reports, Obtaining Subsequent Appraisal Reports and Appraisal Field Review Reports, and Reconciling Multiple Opinions of Market Value, has been added, outlining the requirements for reviewing the appraisal reports and determining which market value to use when several opinions of market value are obtained.
• Updated requirements for appraisers. To be consistent with the Uniform Standards of Professional Appraisal Practice (USPAP), we are specifying that Sellers must select appraisers with knowledge and experience in appraising the property type in the market area and access to applicable data sources.

Source: Freddie Mac

FannieMae Communication: Important UAD Appraisal Instructions

This communication was sent to Direct FannieMae Vendors (REO Appraisal Vendors) and covers a number of important instructions required for properly submitting REO appraisals. Please read it carefully and retain it for your reference.

DOM / CDOM / Subdivision Name

The new UAD format does not provide fields for Days On Market and Cumulative Days On Market (DOM/CDOM) nor the name of the Subdivision, which we request for comparables.

Effective immediately, enter DOM/CDOM and Subdivision Name on two of the blank rows near the bottom of the comp grid:

Days On Market is the number of days since the last price change. Cumulative Days On Market is the number of days since the property was listed. When entering this information, use whole numbers separated by a slash, using no spaces. (As if you were typing a fraction.)

Examples:

30/100 = OK vs. 30-100 = Rejected (did not use slash)

30/180 = OK vs. 30 / 180 = Rejected (inserted spaces)

On the next line, write "Subdivision Name" and enter the name of the subdivision, if applicable.

Effective Age (Yrs) and Actual Age UAD instructs that if the age of the property is not known, then you are to estimate the age and use the tilde character (~), typically located left of the number 1 key, to show the date is approximate. This may cause a "Draft Not Acceptable" error within AppraisalPort. Please alert us via AppraisalPort if this error occurs, and we will accept the case.

For both Effective Age (Yrs) and Actual Age, enter a whole number (no decimal places) representing number of years.

Examples:

20 = OK vs. 19.5 = Rejected

~20 = OK vs. Approx 20 = Rejected

Remodeling and Renovations

Only include remodeling and renovation costs when there is extensive damage that will require many repairs where making these improvements in the process makes sense. Otherwise, Do NOT include these costs in your repair estimates which should include repairs needed to bring the property up to a typical condition for the neighborhood.

Additional Photos

Positive and negative external influences around the property may impact the estimate of value. To ensure all external influences are accurately documented, our new order letter will now require the following additional pictures:

• Picture of what is behind the subject and directly across the street
• A street scene view both directions and for a corner lot all 4 directions
• Aerial view of the subject and the surrounding structures for a few streets either direction

Any external influences and any positive or negative impact on value should be addressed in the appraisal.

UAD Photos

Include enough pictures to support the subject property condition rating with a special focus on bathrooms, kitchen and other improvements.

New Order Letter

We will soon be implementing a new Order Letter. The new letter is more streamlined, and intended to provide you with the key points and tips to complete your assignment according to Fannie Mae process and format.

Source: FannieMae

Fannie Mae Selling Guide Update SEL-2011-11: UAD and Uniform Collateral Data Portal Requirements

The affected topics (and specific paragraphs) are noted for each policy change. Lenders should review each topic to gain a full understanding of the policy changes. The updated topics are dated October 25, 2011.

Uniform Appraisal Dataset and Uniform Collateral Data Portal Requirements

On July 26, 2011, Fannie Mae issued Announcement SEL-2011-06, Selling Guide Updates, which contained information concerning the Uniform Appraisal Dataset (UAD) and the Uniform Collateral Data Portal (UCDP®). The UCDP is the joint portal through which lenders will be required to submit electronic appraisal reports to Fannie Mae and Freddie Mac. The UCDP was made available on June 27, 2011, for customers and their designated agents to begin to submit selected appraisal data files.

With this update of the Selling Guide SEL-2011-11 (10/25/2011), Fannie Mae is clarifying the following requirements:

• Lenders must ensure all applicable appraisals have been completed in compliance with Appendix D of the Fannie Mae and Freddie Mac Uniform Appraisal Dataset Specification (“UAD Specification”). (Previously, the Selling Guide referred to the entire UAD Specification.) Appendix D lists the requirements for the data that must be included in specific forms and how the data must be communicated on the appraisal report.
• In addition to submitting the required Fannie Mae appraisal reports forms to the UCDP, lenders must also receive a “Successful” status from UCDP before the delivery date of the mortgage loan to Fannie Mae.

Updated Selling Guide Topic

B4-1.2-05, Requirements for the Appraisal Report

Effective Dates

As a reminder, the following effective dates are applicable:

• The four UAD appraisal report forms with effective dates on or after September 1, 2011, must be completed utilizing Appendix D of the UAD Specification when reporting the results of an appraisal for a conventional mortgage loan.
• For all conventional mortgage loans for which an appraisal report form is required and with an application date on or after December 1, 2011, and a delivery date on or after March 19, 2012, selected appraisal report forms, including all exhibits, addenda, and photographs, must be submitted to the UCDP and receive a “Successful” status from UCDP before the delivery date of the mortgage loan to Fannie Mae.

In addition, the Selling Guide has been updated as follows:

• A2-5.1-03, Electronic Records, Signature, and Transactions (Uniform Collateral Data Portal™(UCDP™)): Information concerning the UCDP has been added to this topic.
• B4-1.4-12, Appraisal Report Review: Actual and Effective Ages of the Improvements: This topic has been changed to clarify that whenever adjustments are made to an appraisal for the year the dwelling was built, the appraiser must provide an explanation for the adjustments.
• B4-1.4-18, Appraisal Report Review: Lender Review of the Adjustment Grid (Proximity to Subject Property and Location, Date of Sale and Time Adjustments): The description of the proximity of the comparable sales to the subject property must now be reflected in “miles” and include the applicable directional indicator. This topic also requires the lender to provide the month and year of the sales contract and settlement or closing for comparable sales.

Effective Date

These changes are effective immediately.

Source: https://www.efanniemae.com/sf/guides/ssg/2011annlenltr.jsp

NAIHP Files Formal Complaint Against Fannie/Freddie Regulator Over HVCC Alleged Cover-Up

WASHINGTON, DC, Oct 14, 2011 (MARKETWIRE via COMTEX) -- NAIHP has filed a formal complaint with the Inspector General's Office, alleging Fannie/Freddie and their regulator agreed to the terms of the Home Valuation Code of Conduct (HVCC) as part of a plea bargain like agreement to avoid further investigation by the New York Attorney General's Office.

In December of 2008, Fannie Mae, Freddie Mac and the Federal Housing Finance Agency (FHFA), agreed to the final version of HVCC on the condition then New York Attorney General Andrew Cuomo, drop the GSE's from his valuation fraud investigation.

"In May of 2008, I met with Fannie Mae General Counsel Beth Wilkinson. During our meeting, I asked the G.C. why Fannie signed on to the HVCC agreement. Her exact words were, 'Cuomo has his foot in our throats.' 

Amongst other evidence, this supports our allegation that the GSE's only signed the agreement to escape further investigation by Cuomo," said NAIHP President Marc Savitt.

NAIHP is vigorously pursuing copies of the tens of thousands of public comment letters received by the GSE's and the FHFA, with respect to the HVCC. NAIHP has made numerous requests for these letters, all of which have been denied. A formal request through the Freedom of Information Act (FOIA) is being
prepared.

In a May 19, 2010 letter to Andrew Cuomo, FHFA Acting Director Edward DeMarco stated, "The Home Valuation Code of Conduct deployed by Fannie Mae and Freddie Mac was implemented after taking extensive market place comments." "Refusing to release the comment letters after admitting they relied upon them when implementing the HVCC suggests the letters fail to support the code's implementation and the FHFA is deliberately withholding this information from the public and Congress," said Savitt.

According to the NAIHP: Since HVCC was implemented on May 1, 2009, valuation fraud has risen by over 50%, appraisal quality has decreased substantially, thousands of appraisal professionals have been forced out of business and home values have continued to decline. Additionally, new appraisal rules have created a sharp increase in settlement costs for consumers.

Although, the HVCC agreement expired late last year, it's been replaced by similar language in the Dodd-Frank Act and GSE guidelines. NAIHP will continue to work with Congress and the CFPB on this important issue.

National Association of Independent Housing Professionals. 601 Pennsylvania Ave NW. Ste. 900 Washington, DC 20004

Contact: Marc Savitt 540-550-4496

SOURCE: National Association of Independent Housing Professionals

Appraiser Independence - Where Do We Go From Here?

GUEST AUTHOR: Larry Benjamin “Benji” Brossette, is an Independent Licensed Real Estate Appraiser Trainee #T1925.  Benji currently attends Strayer University working towards an Economic Degree.  Benji specializes in the valuation of Land, Residential, and Commercial Properties in the Central Louisiana Region.

Buyer Beware! Where is the Value?   (PART 1)

In the years of 2007/2008, the ideologue of, “Appraiser Independence” had become popular for the real estate market’s economic agents and the processes it relies on to function properly. The idea gained respect, due to the perseverance of Real Estate Appraisers carrying out their Independence, during the decade of 2000-2010.

The Home Valuation Code of Conduct (HVCC) was introduced according to prevailing design and initiative:  the advancement of a market in need for an inspired and renewed sense of competition and freedom, but with sensible regulation to assist in reducing adverse affects of pure unattainable greed, to allow economies the ability to evolve and/or progress.

In retrospect, Fannie Mae and Freddie Mac—these secondary financial power houses, were placed into the center of attention with a well deserved, controversial lawsuit—instead, a decade worth of accomplishments were somehow mismanaged and/or changed, thwarting a sincere Independent Real Estate Appraisal Process. Wall Street Firms failed; they backed fraudulent/misleading documents—paying a premium while looking for unattainable returns; however, the most daunting reasoning, are artificially/manufactured (high) values, maximizing an unattainable greed, at once, cycle after cycle, and unfortunately without missing a beat.

The Dodd/Frank Financial Bill continues to have an impact on real estate economies, and its processes. In the Financial Bill’s failure to effectively and faithfully execute Appraiser Independence to its fullest, the Financial Bill inherited the exploited spirit of the HVCC. Now, the spotlight is on Appraisal Management Company’s (AMCs) liability to the real estate market’s overall value.

Before the real estate market went into a recession, then depression, and before the implementation of the exploited HVCC (Appraiser Independence), the general public was no-where near being knowledgeable (well informed or well advised).

I would like to share a summary—a professional description of the standard for which our real estate market typically operates—“Market Value.” Value definitions are pertinent to any Appraisal. Unfortunate events can occur when the real estate market is not operating within its full, socio-economic, and morally ethically, capacity to deliver an interpretation of a credible, but meaningful value. Value, in general definitions, strongly suggests a knowledgeable buyer and seller (well informed or well advised)

“…The definition of "Market Value" in its strictest sense is the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently, knowledgeably (well informed or well advised) and assuming the price is not affected by undue stimulus.”

A market cannot experience freedom and sincere growth, the Real Estate Appraiser cannot experience true Independence, and the buyer/seller cannot be knowledgeable when value is pre-determined, biased, dictated, pressured in any way, enslaved, blackmailed, or manipulated and exploited, recreated and replaced.

Between the years of 1998 and 2000, the prevailing issues were acknowledged. Changes were accepted as a necessity to avert a foreseen crisis, by a small group of Real Estate Appraisers who were historically and spontaneously joined by social technology (www.appraisersforum.com). Economically speaking, the logic is simple: tinkering with or outright playing with real estate value is pure economic suicide. Many Independent Real Estate Appraisers, over the prior decade, were hard at work eliminating commissioned driven, and profit motivated professionals; from selecting, retaining, and managing/controlling the Real Estate Appraiser (thus, estimates of value) during the run-up to the economic crisis; subject to the duress from the content outlined in the opening sentence of this paragraph.

If we are to comprehend and deal with what is needed today for a healthy real estate market, we must all understand the complications of its history (most importantly, recent history). No profession that actively participates in the real estate market banded together to protect the general public, the value of the market, investor confidence, and the containment of the unattainable we call greed—making a difference by being open and honest—only the Real Estate Appraisal Profession portrayed that courage.

Ladies and gentlemen, it all starts with real estate value—this is about power and greed—beyond the majority’s wildest imagination.  As a group, between 1998 and 2000—Real Estate Appraisers stood up and said, “ENOUGH!” A petition was lobbied for by a young man aspiring to be an Independent Real Estate Appraiser, and then argued among a small group of Real Estate Appraisers in a newly formed virtual forum. Eventually soon after, a brave Independent Real Estate Appraiser ended up writing a petition, and Real Estate Appraisers had begun to realize their Independence. I am privileged to have played an important role in Appraiser Independence. Along with the excerpts quoted below, a website which hosts this very petition (over 10,000 signatures) is provided. The petition was publicly introduced in the year 2000, while staying open for nearly a decade: http://appraiserspetition.com/

 “…Lenders (meaning any and all of the following: banks, savings and loans, mortgage brokers, credit unions and loan officers in general; not to mention real estate agents) have individuals within their ranks, who, as a normal course of business, apply pressure on appraisers to hit or exceed a predetermined value.”

“…This pressure comes in many forms and includes the following:

• the withholding of business if we refuse to inflate values,
• the withholding of business if we refuse to guarantee a predetermined value,
• the withholding of business if we refuse to ignore deficiencies in the property,
• refusing to pay for an appraisal that does not give them what they want,
• black listing honest appraisers in order to use "rubber stamp" appraisers, etc. “

Disclosure: Appraisal Organizations and Government were not involved. Individual Appraisers had everything to do with realizing Appraiser Independence, banding together for the social interest, putting it on the table, and advancing it. (I know—I was there—I am here today!).

Buyers and sellers are still too important to be influenced in a negative way. Main Street must be confident and knowledgeable, and investors must know for sure they can rely on the interpretation and true spirit of value. Instead, Main Street, and investors must feel assured the opinion of values are competently executed, ethically estimated, reconciled by the appropriate professional, and delivered in confidence—without pressure, predetermination, and without recreating and replacing, we largely experience today.

Automatic Valuation Models (AVMs) and Broker Price Opinions (BPOs) are physical reflections of “recreating and replacing” by the lending industry/data mining companies such as Zillow (AVMs), and real estate brokers/agents (BPOs). Unattainable greed forces unfound negligence upon the economy, as a whole—mocking capitalism, and depriving everyone of a meaningful study of value; a perception which conveniently allows the dictation of future market endeavors (supply/demand/value). Independent Real Estate Appraisers, today, can help protect the value of the real estate market by assisting the buyer and seller, being well informed or well advised.

Protecting and representing the real estate market’s value and relying on a knowledgeable buyer and seller, is an “Appraiser Independence” issue—today, and tomorrow. Without it, Appraiser Independence will be destined to fall. The unexploited HVCC (the original) did not go far enough in protecting the real estate market’s value, by creating a knowledgeable market and releasing the pressure from the profit driven who look to data mining for recreating and replacing, and of course to push loans through in the lending industry.

Appraisal Management Companies (AMCs) are the hubs/arms for carrying out real estate value “control” and “exploitation” within the real estate market, as of today (the profit driven—pressuring values, and data mining). An unknowledgeable market (buyer and seller), is one of several problems we all face, together, as a market; however, it is the core problem in defining value, as it is missing today.

Independent Real Estate Appraisers understand what unknowledgeable buyers and sellers do not——it is certain, and the most troubling: an unknowledgeable buyer and seller. The Real Estate Appraisal profession has an opportunity to do something great, in the midst of realizing and capturing Appraiser Independence, whatever that may come to be.

GUEST AUTHOR: Larry Benjamin “Benji” Brossette, An Independent Licensed Real Estate Appraiser Trainee #T1925. I currently attend Strayer University, in order ascertain, or earn, an Economic Degree. I am on path to earn a General Certification in Real Estate Appraisal.

 

HousingWire: New mortgage technology arrives at MBA - Bradford Technologies

Appraisal software provider Bradford Technologies, software company Schakra and real estate finance tech provider Nasoft * partnered to build a submission service for the new Uniform Collateral Data Portal that is powered by Windows Azure.  [* Nasoft has formerly partnered with Zaio 11/2009]

New requirements from Fannie Mae and Freddie Mac took effect Sept. 1 requiring appraisers to submit electronic property data through the UCDP.

The software from these three companies can merge with existing systems for lenders and appraisal management companies. By synching it up with Windows Azure, the banks and AMCs can then build out, using the cloud-computing software in a Microsoft datacenter.

  Source: HousingWire