Desktop appraisals okay for some Fannie Loans March 2022
Fannie announcement – About Desktop Appraisals
Beginning in March 2022, desktop appraisals will be an option for some loan transactions. This fact sheet provides high-level information on Fannie Mae’s requirements for desktop appraisals and answers some frequently asked questions. We’ll be adding information to the fact sheet, such as additional FAQs as needed.
- Use Form 1004 Desktop
- Must include floor plan with interior walls.
- The appraiser must have sufficient information to develop a credible report.
To read the fact sheet, click here
Desktop Appraisal to Become the New Norm
by Isaac Peck, Editor, WorkingRe
Note: This article was written before the Fannie announcement above.
Excerpts: A number of questions remain regarding how the GSEs will establish the eligibility criteria for what types of loans, transactions, and loan-to-value (LTV) ratios will qualify for these desktop valuations. For example, Thompson’s comments that such a move will provide relief on rural appraisals runs contrary to most conventional appraisal experience in the industry where appraisal waivers, hybrid appraisals, and other “alternative” valuation products have primarily been used in cookie-cutter, tract home neighborhoods where model-match comps are more readily available.
In fact, over the years many senior executives at the GSEs and at major lending institutions have acknowledged the need for traditional appraisals on rural properties—which are much more likely to have unique features and require more complex analysis.
There is also the question of whether the introduction of desktop appraisals will potentially lead to a broader range of alternative appraisal products into the mix. Given that some senior executives at Fannie Mae were predicting that hybrid appraisals would become mainstream by 2022, it is actually a little surprising that desktop appraisal assignments are the first alternative product to get a permanent place on the GSE’s valuation roster. Appraisers will just have to wait to see what the future holds!
To read more, click here
My comment: Interesting and worth reading about the background of Fannie’s change
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Appraising New Construction: Guidance for Follow-Up Inspections
Excerpts: Be completely honest.
Appraisers who mean well may classify a project as complete, even when work is still required. Don’t be lenient. If work is in progress or tasks are left undone, state that in your inspection documents. If you say work is complete and the lender releases funds, but the work is not done, you are liable if the builder doesn’t finish the project—and could face a law suit. Always report exactly what you see.
Remember that it’s not your job to tell the lender when to close a loan. It’s your job to report to the lender the progress on the home so that the lender can make an informed decision. Be very detailed in your reporting, include many pictures, describe the incomplete items and assign your estimated cost to complete them. Then let the lender decide what to do next.
The lender relies on you to confirm that the collateral is secure and that construction is complete. Don’t drop the ball when it comes to assessing both the level of completion and the quality of the construction. It’s your job to project the lender and borrower.
If you do new construction appraisals, read this.
To read more, click here
My comments: I quit doing new construction appraisals many years ago because of hassles over inspections and re-inspections and pressure to say it was completed. Also, getting correct sales price information from the subdivision office was sometimes difficult. Of course, the only new construction here is stacked condos or 3-4 story skinny townhomes!! Very little vacant land is available, and the land prices are high.
The January 2022 issue of the monthly Appraisal Today had an article: Construction Progress Reports by Claudia Gaglione, Esq. Liability advice and good examples of appraisers that got into trouble. See the ad below.
====================================================Email from Dave Towne, received at 11:24 PM (PST) last night
Subject: You’d better read this report from the ASC
My comments after the end.
Report title: Identifying Bias and Barriers, Promoting Equity: An Analysis of USPAP Standards and Appraiser Qualification Criteria
Because they were directed to do so, the Appraisal Subcommittee has produced an 80+ page report, which frankly and explicitly lays the blame for low market values of homes in ‘communities of color’ directly at the feet of independent appraisers involved with mortgage lending.
You will start seeing accusatory slanted media reports about this report. ABC news already has distributed it. A TV station in San Francisco has aired a story already.
Yes, the report casually mentions actual facts that GOVERNMENT policies and procedures promulgated segregated and extraordinarily unfair housing issues in the US ….. from the 1930’s into the early 1960’s. The GSE’s, FHA, VA wrote the documents appraisers followed. Banks and other lenders went along with those policies. It was part of the culture at the time. Was it wrong? Yes. Just like the slave trade many COUNTRIES encouraged, which ended, thankfully.
Unfortunately, appraisal associations had to be sued in the early 1970’s to finally eradicate discriminatory advice they continued to promote until then. That appears to be one justification for the piling on this report does.
The report basically says, “you appraisers shouldn’t have done what you were told to do,” “you caused the low values,” and now we’re coming after you …. independent appraisers and the agencies who write policies …. to fix what ‘the GOVERNMENT’ originally caused.
The report also implies that ‘you’ are responsible because so few ‘people of color’ are appraisers. (If parity to equalize racial composition is such a huge concern, why no outcry about National Football League teams which are dominated by ‘people of color’?)
Appraisers need to take a few minutes and peruse this delightful document. If you read nothing else, read pages 1-12 and the Conclusion below.
There are some other interesting passages buried in the bowels. One that caught my eye is a suggestion that using the ‘Sales Comparison Approach’ is “not fair” to ‘communities of color’…. unless the appraiser leaves the immediate neighborhood to seek out higher priced homes elsewhere to artificially increase the appraised value of the subject.
Normally I’d attach the document as a PDF. But this sucker is 40 MEGABYTES in size. So you will have to click this link to see it, and print it:
To read the Report Click Here
This is the conclusion in the report:
An appraiser has the unique power to determine the value of a home, which for most Americans, is their single most important financial asset and holds the key to wealth, stability, and opportunity for their family and generations to come.
In addition, home values affect the tax base, school funding, and community investments. Moreover, time and again, our nation’s economy and financial markets have been significantly impacted by home valuations, with communities of color often bearing the brunt of failings in the mortgage market and the home appraisal process.
Given the importance of homeownership to American families, particularly families of color, governmental and private organizations have called for reforms and a comprehensive examination of the structure and governance of the appraisal industry.
In response to these calls for reform, we have assembled the research and recommendations in this report. We urge federal and state governmental entities, The Appraisal Foundation, the GSEs, lenders, appraisers, researchers, and civil rights and consumer advocates to work together to address the concerns raised in the report, including:
• Questions About the Governance of the Appraisal Industry
• Gaps in Fair Housing Requirements and Training
• Barriers to Entry to the Appraisal Profession
• Compliance and Enforcement
We hope that this report will encourage conversations among key stakeholders in the appraisal and housing industries to seek workable, sustainable solutions that benefit the whole of the housing market, including borrowers of color.
This ‘train’ of accusations started down the track about four years ago …. because appraisers are easy targets. It’s been building steam ever since. The ride toward ‘reforms’ is not going to be very scenic or pleasant for appraisers for at least three more years. Appraisers will need to keep very close tabs on the waybill of items being hauled your way.
Even though this report is extraordinarily discouraging, I will say again. If you are a biased appraiser in any way, in how you conduct yourself or in how you analyze data and report values, then you need to excise yourself from appraisal work. On the other hand, if you are doing your work appropriately and professionally according to current policies and procedures, continue being careful and diligent. And hold your head high.
Dave Towne, MNAA, AVAA, AGA, email@example.com
To be added to Dave’s list, send him an email.
My comments: I have been reading Dave’s emails for a long time. He somehow keeps track of the latest appraisals news and is often the first appraiser to write about them!
I have not had time to read the report, but it includes excerpts from appraisal textbooks as recently as 1973. Of course, few fee appraisers did lender appraisals before licensing. Almost all were staff appraisers at lenders.
Appraisers’ Dirty Little Secret” (my phrase).
There was never any mention of this in any appraisal classes I have taken.
I have been worried about appraisers and redlining for a while but did not have documentation. If I did residential lender appraisals back then I would have switched to commercial appraisals.
When I started appraising in the late 70s, I think it had mostly disappeared from official documents. I know a local female appraiser who started with FHA in the mid-70s, when they increased appraiser diversity: women, blacks, etc. I started at the same time at an assessor’s office as the first female appraiser. Of course, assessors would not want to have lower values. Affirmative action was big back then. Before that time, there were few female appraisers.
I had planned to write about this topic in my March newsletter. This new report has lots of information and links I can use.
The answer: Change how we do appraisals for lenders? Change how appraisals comps are selected? What happens when prices fall?
Construction Progress Reports
By Claudia Gaglione, Esq.
Use disclaimers (Note: more disclaimers in the full article)
Many lenders have pre-printed forms that they ask the appraisers to
complete. The forms have a list of specific items and the appraiser must
estimate a percentage of completion for each item. If at all possible,
consider adding some disclaimer language to the prepared form such as:
“This report is prepared for the benefit of the lender to assist in making
loan proceed disbursements. It is not prepared for the benefit of the
NEVER CERTIFY THAT WORK HAS BEEN COMPLETED IF THAT IS NOT THE CASE
It doesn’t matter whether the building materials are on-site and the
work is in progress or not. Promises that the work will be completed must be ignored. You might not want to travel back to the site to perform a second inspection, but it has to be done. Appraisers have been duped too many times only to later find out that promised work was not performed.
Suits against appraisers involving the performance of construction
progress inspections are a troublesome area of appraiser litigation. It may not always be possible to avoid this exposure since assignments are often accepted to please a client or to preserve an existing business relationship. However, by following some simple loss prevention suggestions, you may be able to avoid being cast as the “villain” when the buyer’s dream home becomes a “nightmare”.
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Skepticism Can Lead to Poor Appraiser Decisions
By Jamie Owen
Excerpt: We must be careful to not let skepticism negatively affect our work. Have you ever heard an appraiser make a statement that is similar to one of the following?
“I don’t see what the big deal is with supporting my adjustments. No one can really prove that their adjustment is exactly correct, so what does it matter?”
“Show me any report, and I will find mistakes in it, so I’m not going to put that much time into my appraisals. They can’t be perfect anyway.”
“What’s the big deal about measuring the home we are appraising? After all, the public records and MLS are probably not accurately reporting the size of the homes I am using as comparable properties, so what does it matter?”
Would you agree that these thoughts might be fueled by skepticism? What is skepticism anyway? Skepticism is having an attitude of doubt…
Some have argued that ANSI measurements don’t always reflect the market. That is true! We may measure to ANSI Standards, but we appraise based upon the market.
If there is a conflict between the two, we must still find a way to credibly appraise a home, accurately reflect the market, even when ANSI Standards may conflict with the view of buyers. And it can be done! It does require more commentary to explain what we did and why we did it. However, as long as we properly explain the situation and what we did, we will not be misleading the intended user of the report. At least in my opinion.
To read more, click here
My comments: Jamie Owen has a unique, very interesting, interpretation of how appraisers think! Plus a fun video and lots of animated gifs! I will write about the ANSI issues above, plus many other issues, in the March issue of the monthly Appraisal Today.
Triple-Dome Design in North Carolina
Excerpts: Located on a private, 13.1-acre wooded lot, the multilevel, three-bedroom home features a number of modern amenities. Plenty of features are packed into the home’s unique design. A spiral staircase leads up to a loft from the main bedroom, and skylights let in an abundance of natural light. Then there are Bluetooth-paired lights and slate stone flooring.
All three domes are connected, and one serves as a two-car garage.
Lawrence (the agent) explains that the main dome serves as living space, with a sunken section and stairs that go up to a loft. Behind the loft is the kitchen, which lines the back of the second dome. “You go down another hallway that is lined with bookcases, and there is a third dome,” she says.
It has three bedrooms, the primary bedroom and two others.
To read more and see lots of photos, click here
My comment: Conforms to ANSI. One story at grade level! Don’t ask me to measure it!!
New ANSI Z765-2021 Resources Web Page at www.appraisaltoday.com/ANSI
Every week I have been writing about new classes, Webinars, and videos. I am putting them on this web page now. Plus, removing old information, such as a class that has changed the dates it is offered.
Fannie Mae Answers your Questions About ANSI
Lyle Radke Senior Director of Collateral Policy at Fannie Mae at FREE youtube webinar. Feb. 28 at 10 am CT It will be recorded so you can watch it later.
To watch, go to www.youtube.com and search for appraiser elearning. Scroll down the page.
Do Not Take a Class, Using the 2013 Version of ANSI !! Look for ANSI Z765-2021
Education providers who have been offering the 2013 version are updating their classes to the 2021 version. When I was looking for classes, it was confusing. I kept getting info on the 2013 version of ANSI. The title of one class was not clear, but the class summary said it was about the 2021 version.
Also be careful with written material, Youtube videos, recorded webinars, etc.
The February 1 issue of the monthly Appraisal Today will have lots of info on ANSI Z765-2021
HOW TO USE THE NUMBERS BELOW. Appraisals are ordered after the loan application. These numbers tell you the future for the next few weeks. For more information on how they are compiled, go to www.mbaa.org Note: I publish a graph of this data every month in my paid monthly newsletter, Appraisal Today. For more information or get a FREE sample issue go to https://www.appraisaltoday.com/products.htm or send an email to email@example.com . Or call 800-839-0227, MTW 7AM to noon, Pacific time.
Mortgage applications increased 2.3 percent from one week earlier
WASHINGTON, D.C. (January 19, 2022) – Mortgage applications increased 2.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 14, 2022.
The Market Composite Index, a measure of mortgage loan application volume, increased 2.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 3 percent compared with the previous week. The Refinance Index decreased 3 percent from the previous week and was 49 percent lower than the same week one year ago. The seasonally adjusted Purchase Index increased 8 percent from one week earlier. The unadjusted Purchase Index increased 14 percent compared with the previous week and was 13 percent lower than the same week one year ago.
“Mortgage rates hit their highest levels since March 2020, leading to the slowest pace of refinance activity in over two years. The 30-year fixed rate reached 3.64 percent and has increased more than 30 basis points over the past two weeks. FHA and VA refinance declines drove most of the refinance slowdown,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Despite the increase in rates, purchase applications jumped almost 8 percent, with conventional purchase applications accounting for much of the stronger activity. The average loan size for a purchase application set a record at $418,500. The continued rise in purchase loan application sizes is driven by high home-price appreciation and the lack of housing inventory on the market – especially for entry-level homes. The slower growth in government purchase activity is also contributing to the larger loan balances and suggests that prospective first-time buyers are struggling to find homes to buy in their price range.”
The refinance share of mortgage activity decreased to 60.3 percent of total applications from 64.1 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 3.8 percent of total applications.
The FHA share of total applications decreased to 9.3 percent from 9.9 percent the week prior. The VA share of total applications decreased to 10.0 percent from 11.4 percent the week prior. The USDA share of total applications remained unchanged from 0.4 percent the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 3.64 percent from 3.52 percent, with points remaining unchanged at 0.45 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $647,200) increased to 3.54 percent from 3.42 percent, with points increasing to 0.47 from 0.36 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.64 percent from 3.50 percent, with points decreasing to 0.44 from 0.45 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 15-year fixed-rate mortgages increased to 2.95 percent from 2.73 percent, with points increasing to 0.43 from 0.35 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 5/1 ARMs increased to 3.04 percent from 3.03 percent, with points increasing to 0.24 from 0.20 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, and thrifts. Base period and value for all indexes is March 16, 1990=100.
Ann O’Rourke, MAI, SRA, MBA
Appraiser and Publisher Appraisal Today
1826 Clement Ave. Suite 203 Alameda, CA 94501