By Steve Costello,

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 Many of these are old and outdated or no longer apply to a particular neighborhood.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).


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  1. For Paul Smith, note Andrew Butter’s discounted cash flow/Trend line analysis for over/under realty values. what’s happening here is a complex issue of proprietary rights to AI machines; rather reminiscent of the old CMDC stuff set up by chief appraisers (and the first instance of appraisers losing all their rights to material they developed. Oops, sorry, not ‘developed’: work product). This plays into Big Data.
    This sorry state of affairs can be laid to rest directly at the porch of the AI offices in Chicago, a toothless/miserable/lobbyless conglomerate of …..fill in the blank.

    The interplay of Big Data/QuantumMachines (they are coming)/US moronic legal system (ex. patents)/PoliticalPandering (ex. The BarneyCuomoFamily) leaves appraisers out of the loop, period. The Real Question? what do the big banks see here? where can they interfere (cause they’ve got the lobby money) to make dough out of all this tangled mess?

  2. What is going on with all these requirements? I remember when an appraiser’s opinion could not be mentioned at friendly neighborhood block parties because it was considered to be as reliable as an actual estimate of value. Oh I realize that there is more to the neighborhood party issues with the need for a written appraisal to back it up. But my point is that times are a changing and even with our specialized schooling and extensive training it is not good enough to just make a statement that it is your professional opinion as to how things affect your subject and its market value. In today’s marketplace the buyers of appraisals are demanding that we, the appraiser, have solid proof of the need for an adjustment and an objective way showing how we came up with the adjustment plus the written evidence as proof for the adjustment.
    What we need as appraisers is a universal system that is plausible and usable throughout the United States. I have designed a computerized mathematical algorithm that works with multiple regression analysis that could be just the beginning of what we need as appraisers to comply with the need for more justification to our adjustments.
    For more information about this product, go to the website
    Paul J. Smith, CEO Appraisaltool .net

  3. Any time the government gets involved things get screwed up pretty quick ala The health care act.Appraisers should decline all Freddie and Fannie work until we can get this UAD mess cleared up.

  4. more BS. there is something going on between the banks (the 6 majors only) and the bank lobbyists together with Congress/Admin/Feds. the banks cannot be happy w/this nonsense. side note: for you econ majors out there, a cautionary word from a guy who was trained by Central Bank Prez’s: the Fed was setup by Al Hamilton for ONE thing & One thing ONLY. not price elevation up er down/not employment up er down/not money supply or any of that biz. ONLY to protect each individual important bank (note, not the banking system as an entity). this is carried out via the only beings the Fed worries about, the politicians. The banks have to be ticked off big time by this fiddling by the GSE’s, and, baby, they want their money’s worth.

  5. The most interesting thing I got out of this was that there is a section of the Fannie Mae Guidelines that outlines how a lender should review an appraisal section by section. If all appraisers would review this and review their own appraisals OR have an office mate go back over their reports before they are sent in, we would all have superior work quality.

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