By Steve Costello, www.appraisalport.com
Steve reports on an educational session he attended at The Appraisal Institute (AI) annual conference in Austin, Texas, on Aug. 4-6, 2014. He also includes information from an Appraisal Institute seminar – Unraveling the Mystery of Fannie Mae Appraisal Guidelines
If you work for lenders, it is highly recommended that you read a summary of these recent changes for yourself in Announcement SEL-2014-03, dated . It can be found at
Lenders are still concerned with buy-backs, where Fannie makes them buy back loans that Fannie purchased. Yes, they are happening today, sometimes due to appraisal “problems”.
The ongoing scrutiny and updating of the Guidelines, combined with all these recent problems, are the reasons your lender and AMC clients now have to take great care screening your appraisal for any type of error. These days, it isn’t uncommon for a lender to be forced to buy back a loan that is still performing because an issue was discovered with the appraisal after the loan was sold on the secondary market. Many of the common UAD errors that cause problems may not have a direct effect on your final value, but these types of errors can still cause the lender to have to buy back a loan.
Another area of close attention by Fannie Mae that Underwood mentioned is the proper supporting of adjustments. Fannie Mae has determined this to be a problem area based on the volumes of appraisal data they examine. Just saying you made an adjustment is not good enough. You now need to show how and why you are making the adjustment. They found a lot of appraisers using “standard” amounts for adjustments. Many of these are old and outdated or no longer apply to a particular neighborhood. Fannie Mae is now looking for the appraiser to completely document how they arrived at their adjustments for any given property.
Note: Fannie Mae has said that they are especially looking to see some support for the adjustments made for gross living area and those items on the adjustment grid above gross living area, which include such attributes as the room counts, location, site and so on. How did you decide how much to adjust?
You may find some of Fannie Mae’s requirements surprising, but remember your lender may have different, more stringent requirements. Be sure to meet the requirements of your client even if they are above and beyond the Fannie Mae requirements.
A few Fannie guidelines you may not be aware of:
– Acceptable photographs include original images or those from MLS or the appraiser’s files. (If you can’t get to the comp, for instance in a gated community, you can use the MLS photos from the sale but make sure to document what you did).
– The appraiser must identify items that require immediate repair and deferred maintenance items which may or may not require immediate repair.
– Market condition adjustments must reflect the difference in the market conditions between the contract date of the comparable and the effective date of appraisal for the subject. (The adjustment may be either positive or negative).