Fannie

Newz: New Fannie Highest and Best Use Playbook, UAD 3.6 Nov. 2 and Other Deadlines??

September, 25, 2026

ARTICLE LIST:

In Order, Scroll down the page to read

• LIA AD: Conflicting Assignments and Professional Ethics
• New Fannie Highest and Best Use Playbook and Q&As
• For the Price of a San Francisco Condo, You Can Buy a 400-Acre Historic Marshland Retreat
• UAD 3.6 — Whose November 2 Deadline Is It? There are many dates!! By Doug Smith, SRA
• MY AD: Make use of your driving time by exercising
• Rethinking Private Appraisal Delivery: Building Interactive Web Reports with AI By Dustin Harris
• MBA stats: Mortgage applications decreased 1.5 percent from one week earlier

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New Fannie Highest and Best Use Playbook and Q&As

By Dave Towne

For those of you doing (or will do) the New URAR/UAD 3.6 mortgage lending reports from now into the future, you need to read and understand this new policy change from FannieMae. Because this new UAD report process also applies to FreddieMac, my presumption is they will issue a policy statement of their own with similar wording.

For the time being, here is the FNMA new policy, issued on Sept. 2, 2026: Highest and best use requirements for Uniform Appraisal Dataset (UAD) 3.6

This policy updates the highest and best use requirements for appraisal reports completed using Uniform Appraisal Dataset (UAD) 3.6.

These changes apply only to UAD 3.6 appraisal assignments to support the new Uniform Residential Appraisal Report (URAR) reporting requirements and do not apply to appraisal reports completed using legacy appraisal report forms.

We updated our policy to:

• require the property’s highest and best use, as improved or as proposed, to be a residential use, rather than requiring it to be the property’s present use;

• define present use, residential use, and subordinate use in the context of highest and best use;

• require the property to be a primarily residential one- to four-unit property, with any non-residential use subordinate to the residential use, replacing the previous “residential in nature” guidance; and

• establish the eligibility criteria and reporting requirements for one- to four-unit residential properties when the present use does not satisfy one or more of the highest and best use tests.

The UAD 3.6 Policy Supplement has been updated to reflect these changes.

Effective: This policy change is effective immediately for appraisal reports completed using UAD 3.6.

Remember, to be USPAP compliant, you can’t “just check the box” on the New URAR/UAD 3.6 data base input field (or on the Legacy forms either) to indicate ‘present use,’ and then move on. You must add a written statement in that site section comment input field explaining why you decided that is the accurate use of the property. Craft your statement to comply with the above policy.

Also remember this: if you decide the property’s H&BU is not Residential use, you must check the box “No.” In most cases, when you do that, the need to complete a full appraisal report ends at that point because the lender cannot proceed with a residential mortgage loan. Your statement needs to define what the actual use is if not Residential. Stop working on the report and contact your client to fully explain the current situation. Let them determine how to proceed.

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What is in Fannie’s New The Highest & Best Use 25 page Playbook (Per Fannie)

• This playbook provides key concepts and illustrative scenarios to help industry participants better understand how the results of the highest and best use (HBU) may affect loan eligibility.

• Each scenario presents a complex highest and best use question based on the specific circumstances of a subject property. While every property has its own unique characteristics and circumstances, which may lead to different conclusions, these scenarios are designed to demonstrate how you can apply Fannie Mae policy consistently across a range of situations. They are intended to provide practical guidance and support informed, policy-compliant decision-making.

• A resolution is provided for each scenario, along with the appraiser and lender responsibilities with relevant Fannie Mae Selling Guide Supplement: Uniform Appraisal Data (UAD) 3.6 Policy resources.

• The Highest and Best Use Frequently Asked Questions document addresses common questions related to present use, highest and best use, mixed-use properties, analysis of subordinate uses, comparable sales, the URAR, and loan eligibility. The document is available separately and linked throughout the Playbook for easy reference.

To read the Highest and Best Use Playbook, Click Here

To read the separate FAQ document, with 27 Q&As, Click Here

My comments: Many thanks (again) to Dave Towne for writing a summary of the 25 page document at the top of this article. To subscribe to his regular emails, send an email to dtowne@fidalgo.net . Say that you want to subscribe to his list. I have been subscribing for many years.

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