Appraisal News and Business Tips

Posts Tagged Fannie forms

Fannie Mae – buy backs, adjustments, MLS fotos, etc

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
https://www.fanniemae.com/content/announcement/sel1403.pdf

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”.

Excerpts:

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 Many of these are old and outdated or no longer apply to a particular neighborhood.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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Fannie's new Collateral Underwriter to check appraisals Using Fannie's Big Data.

Fannie’s new Collateral Underwriter to check appraisals Using Fannie’s Big Data. 

Another great email from Dave Towne in Washington!!

10-14 FNMA Collateral Underwriter Flyer showing info about the FNMA Collateral Underwriter process they will make available to lenders (NOT APPRAISERS) in January 2015. You should review it. It has to do with their Enhancement of Risk Controls.

This is what we know as Appraisal Quality Monitoring (AQM) …. which was announced almost 2 years ago. FNMA has already been using the ‘scope’ on your reports, but will soon allow the lenders to have access to the software so that they can do pre-submittal exams prior to uploading the loan file, and your appraisal, to FNMA.

Virtually everything is digital now in our real estate appraisal world. That makes it incredibly easy for ‘big data’ to be analyzed very quickly and efficiently. Hiding relevant property info under a rock, your clipboard [tablet?], or just ignoring it, is no longer possible. Discrepancies will be found fast, and you will be asked for explanations or corrections.

Note the examples from the flyer:
– Chain of property ownership
– Inconsistency in reported property data from your info compared to your peers (subject & comps)
– Checking adjustments made (or not made) – primarily the math
– Testing for comps in terms of location, characteristics, sales prices, etc.

FNMA’s news release about their Collateral Underwriter:
Introducing Collateral Underwriter
Collateral Underwriter™ (CU™) is a proprietary appraisal risk assessment application developed by Fannie Mae to support proactive management of appraisal quality. CU will:
– Provide additional transparency and certainty by giving lenders access to the same appraisal analytics used in Fannie Mae’s quality control process.
– Perform an automated risk assessment of appraisals submitted to the Uniform
– Collateral Data Portal® (UCDP®) and return a CU risk score, flags, and messages to the submitting lender.
– Be available at no charge so lenders can take full advantage of the application for quality control and risk management purposes.

The CU risk scores, flags, and messages will be available to all UCDP users in real-time beginning on Jan. 26, 2015 through UCDP. Find more information on the CU web page at https://www.fanniemae.com/singlefamily/collateral-underwriter?cmpid=sln102114 .

Dave Towne, AGA, MAA Owner / Educator
360-708-1196
towneappraisals@clearwire.net
www.towneappraisals.com
Mount Vernon, WA

My comments: The PDF only has three pages of the document. The other pages were not available. Real estate is location, location, location. What about the 4th approach to value: Curbside Approach. That is where you sit on the curb across the street from the subject and ask yourself: “Does this value make any sense?”

There are many appraisal review programs in use and being developed. I knew that Fannie would be using their Big Data to automate underwriting reviews of appraisals as well as monitoring appraisers.

Does this mean appraisers focus even more on making sure their appraisals pass these automated reviews rather than focusing on what counts – the value? Is this another path along the way to not focusing on what appraisers provide – reliable and accurate values? Plus, disclosure of any problems with the property?

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Appraisers receiving warning letters from Fannie about discrepancies in Q and C ratings

I keep reading online about appraisers receiving warning letters from Fannie that they are using different Q or C ratings on the same property.

Of course we do change our opinions about a property. Sometimes we have new information or just re-think the property and change our opinion. Be sure to explain this in your appraisal.

You need to set up a way to use your comp database to check the Q and C ratings for any property you use in your appraisals. It should only take a few minutes. Hopefully software vendors will automate this for you. Bradford has software for this.

What happened to the appraisers who got the letters? Nothing that I heard of. But, Fannie may be putting them on a special list so their appraisals are scrutinized. Fannie has stated for awhile they would be sending warning letters.

Why is Fannie looking at Q and C ratings? Who knows why they picked these factors. Maybe because they are absolute. But, I suspect that other factors are being looked at or will be coming soon. I don’t think they would want to get into the very hot issue of GLA…

Remember, Q and C ratings are absolute, not relative. If you don’t agree with this, don’t do appraisals for Fannie Mae loans as that is in their Scope of Work.

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Bracketing – lenders gone wild!!

Filling up an appraisal report with “comps” that “support” adjustments is a hassle for appraisers and often does not contribute to the accuracy and reliability of the subject’s value. Note that the “comps” are sales, but not necessarily comparable sales.

Sure, it often works fine when you are appraising a typical home in a conforming tract with few adjustments. But, what if you work where I do, where most homes were built prior to 1930 and many Victorians were modified over the years? I am hearing about appraisers being asked to use sales from 2-8 years ago for “bracketing”. What if you have an “oddball” home in a conforming tract, such as a home with a large addition or an “inlaw” space?

One of my first appraisal clients was a local lender who still has an appraisal department, is very savvy and treats their fee appraisers as professionals. They specialize in Fannie Mae loans. I recently spoke with an appraiser who does appraisals for them. She said they were asking for “bracketing”, including asking their appraisers to consider using very old sales if necessary.

Why are lenders asking for “bracketing” of adjustments? The same reason we have been hearing since 2008. They don’t want Fannie to require buybacks of the loans they sold to Fannie. They are also worried that Fannie will not buy a loan. I have noticed that lenders are often like sheep. When one does it, or says it should be done, they all do it.

Perhaps they are doing this in order to have some sort of “support” for adjustments. I guess they finally figured out that putting “adjustments done using matched paired sales” in an appraisal doesn’t mean much.

More important, state regulators want to see “support” for adjustments. I don’t know how to “support” all the adjustments in many of my appraisals. I know what buyers will pay more or less for. But, the exact dollar amount can be very difficult to determine. I don’t think it is right to conclude an incorrect value just because I cannot prove the exact dollar amount. Matched paired sales and statistical analysis doesn’t work for many adjustments. Matched paired sales can be manipulated and statistical analysis often does not work due to lack of data.

Market conditions is the easiest adjustment. Square footage and number of bedrooms, lot size, can often be supported statistically. If I spent many, many hours I might be able to “support” some of the other adjustments. But, would my appraisal be more accurate? Does my scope of work agreement with my client include spending 2 weeks or much more on a home appraisal for a loan?

Appraisers should consider what affects value. I worry about appraisers not making adjustments that are indicated by the market because “support” can be very difficult resulting in a less reliable, or inaccurate, value.

I have been thinking about not using any adjustments in my non-lender residential appraisals. Instead I could just use plus or minus signs. Why? I can’t “prove” most of the adjustments for my state regulator. I worry about losing my appraisal license. My clients don’t care about dollar adjustments.

What’s the answer? The only answer I can think of is to carefully pre-screen appraisal requests so you only accept appraisals of conforming homes in conforming tracts.

Should you do bracketing when the sales you use are not comparable? Some appraisers refuse and others do it. In my business, when requested to include information that is not relevant to the value, I always put “Included at client request. Given no weight.” Only you can decide what works best for you.

I am writing an article for the August issue of the paid Appraisal Today about making more money increasing your hourly billing rate. Working in conforming tracts is Number 2 of my primary suggestions.

To subscribe, and increase your hourly billing rate, click on the ad below!!

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