Dreaded FNMA Letter RE Condition Ratings

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Dreaded Fannie Mae Certified Letter Regarding Condition Ratings

Certified Letter From Fannie Mae Regarding Condition Ratings

And then it happens, the moment we all know is coming – the dreaded certified letter from Fannie Mae. My door bell rings and the mailman is standing on my porch with pen in hand.  Now don’t get me wrong, we have all been warned. They have the super computer comparing all of us and if you are the outlier you’re getting notified!  If a majority of Appraisers give a specific house a certain rating and you disagree, you must be wrong – BOOM – letter.  I assume this is the case as I take the letter opener and slice through the very thick “Certified Mail” label. I remove and open the letter. Much to my dismay it does not say I have disagreed with my peers. Instead of attaching the entire letter to this article I will give you the highlights and a few quotes.  It went something like this:

Dear Appraiser: (real personal right)

Fannie Mae reviews appraisals it receives for data quality… We recently performed a review of appraisals performed by you… That review revealed certain inadequacies in the data. (I’m choking up at this point thinking OMG what the heck happened! I try my very best to do A+++ work every time. How can this be? Inadequate!!) You’re going to love this part…

In every appraisal outlined in the following addendum you rated the subject and all of the sales comparables C3. This seems highly unlikely as most neighborhoods consist of properties that vary in condition. The C3 rating is VERY SPECIFIC to the following:

Here they give me the verbatim definition of C3 with the newer note for clarity.

I seriously got a letter from Fannie Mae for selecting the comparables that best represent my subject property!!!! Did I miss a memo? Are we supposed to go find transactions that involved improvements that were in substantially better or worse condition than the subject? Is it now necessary to make substantial adjustments for condition on every report?

First and foremost, rating all of them C3 does NOT mean they are in the same condition; it only means the very ambiguous definitions provided best fit the subject or comparables. There may have been condition adjustments made on these properties but that is not addressed. The supercomputer just reads your C and Q info and generates a letter – a letter saying your comparables are TOO comparable. The letter goes on to say it is important to provide clear, accurate, and reliable information. Apparently this is done by finding comparables less like my subject?!

I did send a rebuttal to a provided e mail address. There is no name or signature on the letter (I assume a robot stuffed it in the envelope). My rebuttal explained that by reading Fannie’s definition of C3 it is actually VERY LIKELY that 80% of slightly older improvements are C3. C4 dictates “Chronological and Effective age are relatively close”. So a house built in 1980 would have an effective age of +/-35 to be a C4. I had this discussion in my last class with the instructor and after 2 days convinced him he needed to go back and relook at the work in their office. I also explained the C3 rating on all does NOT mean they are all in the same condition. If adjustments are made within the C3 parameters an explanation is given. I also disagreed that any of the C ratings are “Very specific” but that is a discussion for another time. I also asked them to have an actual human call me to discuss this further – we’ll see how that goes. Maybe the computer will call me.

So – are there any other Appraisers out there that have the same C rating on the subject and comparables? If so raise your hand. While it’s up there, wave at the mailman.

“The Appraisal Guy” has been appraising Real Estate for over 22 years and owned and operated his own company for that entire time. He has performed reports for many clients including Law firms, Municipalities, Trust companies and of course mortgage lenders. His work includes but is not limited to FHA, VA, USDA, ERC, REO and Conventional reports. He is currently contemplating his next career after this craziness.

Author requested the use of a pseudonym to avoid potential retribution. The author’s real name is known to only the AppraisersBlogs Team.

Photo Credit flickr - Mehta12
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17 Responses

  1. Tom D says:

    i was asked to bracket a 70 year old house. duh, maybe they are all 70 years old in the neighborhood.  of course i manned up, and changed the ages slightly.  even the city doesn’t always have the ages written down.  stop complaining about doing the right appraisal.  follow the asylum’s rules.  at least i can remember when appraising was a great life choice.

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    • Bryan Trenholm says:

      I thought the entire idea of UAD was to limit appraiser’s subjective opinions. It appears subjective letters will be the response from big data.

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  2. Bill Johnson says:

    I have a duel platform company that I work with (AMC / Software as a Service – SAS) and within their viewable documents for the property, I’m able to see the reports generated by the CU system (limited info). As part of this system the report is given a score of between 1 to 5 with the higher number reflecting what I think is a possible higher risk loan. Although I believe I read this score will not be used to judge an appraiser, if they are going after issues as stated in this article, I’m sure its just a matter of time before we all get letters. I’ve had scores between 1 and 2 with the CU platform offering no explanation to the varying scores. If their own system judges properties to be at a higher risk (increased liability to the appraiser) then why are lenders able to have set fees in advance with TRID (zero tolerance)? The scoring matrix is of course not on display for all to review, but what do they consider? Lenders like to think complexity is related to GLA, 2+ acres, ocean front, etc., but I would bet the score being generated takes into account many issues. Is the appraiser and or property at a higher risk with lower down payments? Is the property an investor flip with recent value increases of 20% or more? Do the characteristics place the property at the top or bottom of the scale for the area? Does the property have an existing CU file that the current appraisal will be compared to? If the property does have a rating on file, could the lender access this data and provide increased fees based on past scores (complexity / increased liability / risk / scores of 1.5 or higher)? The CU scoring system needs transparency otherwise we are all just pissing in the wind.

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  3. bubba jay / Retired Appraiser II bubba jay / Retired Appraiser II says:

    i received a similar letter late last year. i tried to call and explain myself and get some clarification on a couple of items, but of course nobody was willing to do that. i guess its a lot less stressful to not talk to anyone and be a spineless worm, and sit behind a desk critiquing appraisers over nit picky stupid stuff, and send out these types of letters. the letter quickly went into the burn pile where it belonged.

    this “profession” has absolutely lost its mind. you name it – fees, AMC’s, new FHA requirements, certified letters, USCRAP, 4-year degrees, it never ends. i dont know of any other “profession” that is so mucked up.

    lets look at a licensed plumber as an example.

    after a licensed plumber gets done plumbing a new house, does he ever get a certified letter like this ^^^ in the mail? not that i am aware of.

    how about USCRAP? does he have to deal with something like that? not that i am aware of.

    how about this scenario – after he gets done plumbing a new house, does he get a revision request from (someone) that says, “10 of your peers have plumbed these similar homes differently. here are the addresses of those houses. please explain in detail why each one of those houses were plumbed differently and submit.”? not that i am aware of.

    how about this – the homeowner disagreed with the way he plumbed the house, and has filed a complaint with the state. even though the state has no clue if anything was done wrong or not, they decided to prosecute anyway because there are absolutely no consequences for them if they break their own rules/laws or for malicious prosecution. so besides paying through the nose for unnecessary legal fees, the plumber will have to pay for and take a two-day day ethics class and some other all day class that also wont be given any CE credit. does this happen?  not that i am aware of.

    how about this – we know your expenses have gone up in everything over the last 10 years mr plumber, but a third party who has almost total control of your business, has still decided again this year to continue the freeze what you can charge your customers. does this happen? not that i am aware of

    really? all this is normal to anyone?

    and we wonder why people are leaving? i know, i forgot – its because everyone is getting OLDER.

    the bleeding continues . . . . .

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    • Retired Appraiser Retired Appraiser says:

      Great illustrations Bubba.  I couldn’t have said it better myself.  I’m not sure if the 89,999 appraisers who remain in the business are independently wealthy or if they self medicate to get through each day.

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  4. Wayne says:

    Thanks for a great post. I was reading on the appraisers forum a comment that said “without FNMA most residential appraisers would be gone in a heartbeat”. Gee…I looked again at my general certification and all that was printed on it. NOWHERE did I see Fannie Mae! Check your license/certification….maybe they have issued yours!

    It may come as a SHOCK to some of my fellow appraisers but be aware that there is a He!! of a lot of money to be earned in the selling, building, lending, insuring, etc. of real estate. FNMA earns billions of dollars (a lot goes to our government)….FHA, VA, etc. all have a stake in this process. What would happen if ALL of the residential appraisers took a month off? We could have an extended convention in Cancun. Do you think anyone would notice? Maybe no one would pay for a silly appraiser coach, maybe no news letters, magazine subscriptions, Appraisal organizations dues, NO MONEY FOR THE AMC PARASITES!

    Oh well, a fellow can dream!

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  5. Divedude says:

    Does anyone know where Donald Trump stands on Dodd/Frank, AMCs’, FNMA, open & free market, etc?  He’s obnoxious but I’d love to hear his take on the stupidity.

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    • bubba jay / Retired Appraiser II bubba jay / Retired Appraiser II says:

      with almost 100% certainty, i would say the conversation would go something like this:

      Appraiser: So Donald, where do you stand on Dodd/Frank AMC’s, FNMA, open & free market, etc.?”

      Donald: “I do know a little bit about it. Who runs it?”

      Appraiser: “It was put in place by the government.”

      Donald: “Then its probably a disaster, and is being run by incompetent people.”

      . . . and as usual, he would be right.

      choose either (a) or (b):

      a. [  ] agree

      b. [  ] agree

       

      the bleeding continues . . . . .

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  6. BC says:

    I adjust within the same rating and explain in the addendum, that while the rating may have been a C3 it was considered a lower end/or higher end C3 etc, (as the kitchen/baths cosmetics were not as updated etc) When UAD came out FNMA had langue to the effect that no 2 homes are the same and it is acceptable to have adjustments within the same rating. As long as you refer to your MLS data and verify with broker’s and the interior photos if available for the comparable’s you should be OK. I think what they are saying is “How can everything be the same all the time” Just my take on it. Good luck out there.

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    • Bryan Trenholm says:

      Per the article that is what this Appraiser was doing. The computer doesn’t take into consideration your narrative.

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  7. Koma says:

    And they wonder why this is happening. Per AI: 2015 actual number of appraisers in the US 78,500 with an annual decrease of 3%. An estimated 20% left the field since 2007. Broader analysis suggests the recent average annual rate of decrease could continue for the next 5-to-10 years due to retirements, fewer new people entering the appraisal profession, economic factors, government regulation, and greater use of data analysis technologies.

    No one will care until it hits the lenders in the face (wallets). The first loan that is approved without a physical appraisal is the end of our economy! Count down til retirement!

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  8. Retired Appraiser Retired Appraiser says:

     

     

    1:23 to 2:33 sums it up for residential appraisers quite well.  Thank you Larry The Liquidator for your summary of the profession.

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  9. FNMA crush you FNMA crush you says:

    I often cut this joke;  Skynet is now reviewing all appraisal reports.  Actually, it’s not that funny anymore.  Billions upon billions floating through the system, and the federal government cannot attach the name of a case worker, handler, or contact individual for these FNMA CU complaints?  Apparently due process is no longer a right a privilege of American citizens, if they are real property valuators.  The sooner the government stops backing international lenders interests, the better.  Did you hear the one about FNMA selling notes to hedge funds, without the borrowers being aware?  What about FNMA giving steep discounts to investor purchasers who evict existing mortgagee residents, but the residents are denied principal reductions? So don’t forget that FNMA although federally chartered, is still a private corporation.  If they could have successfully fulfilled their charter, they would have a very long time ago.  Be a smart consumer, and get a mortgage loan held in house at credit union instead.  FNMA sure does cast a lot of judgements on hard working appraisers, despite the fact that FNMA should have been shut down a long time ago.  Get the government out of lending and watch the value of valuation professionals boost up dramatically.  People care about quality valuation services, when they’re lending their own money.  /  You tell me if FNMA is following their charter, given the above disclosures from the two linked articles…

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