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.