ASB Letter to FHFA Regarding Uniform Appraisal Dataset
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Serious concern over misapplication and misinterpretation of Uniform Appraisal Dataset requirements
April 29, 2011
Alfred M. Pollard
Federal Housing Finance Agency…
Re: Uniform Appraisal Dataset
Dear Mr. Pollard:
Thank you for the opportunity to meet with you and representatives from the Federal Housing Finance Agency, Fannie Mae, and Freddie Mac on February 17, 2011 and March 10, 2011 to discuss the Uniform Mortgage Data Processing (UMDP) initiative and the Uniform Appraisal Dataset (UAD).
We applaud your efforts to bring about more consistent appraisal reporting. However, in light of our discussions and further examination of the publicly available documents that have been updated on Fannie Mae’s and Freddie Mac’s websites regarding the Uniform Appraisal Dataset, we continue to have serious concerns.
It is essential that appraisers develop and communicate their analyses, opinions, and conclusions to intended users of their services in a manner that is meaningful and not misleading. While the Uniform Standards of Professional Appraisal Practice (USPAP) does not dictate the form, format, or style of real property appraisal reports, the substantive content of a report determines its compliance. Each written or oral real property appraisal report must clearly and accurately set forth the appraisal in a manner that will not be misleading and must contain enough information to enable the intended users of the appraisal to understand the report properly.
We are greatly concerned that instructions communicated in documents such as Appendix D: Field-Specific Standardization Requirements will result in unintended consequences and potentially produce misleading reports. Given the prescribed field-specific requirements expressed in the UAD and overall lack of instruction for situations where data is not applicable or unavailable in the normal course of business, appraisers may have to choose between compliance with USPAP or compliance with Fannie Mae and Freddie Mac reporting requirements.
For example, in the Improvements Section of Form 1004/1073, the appraiser must indicate “Yes” or “No” if there has been any material work done to the kitchen(s) or bathroom(s) in the prior 15 years. This may lead to a misleading response if an appraiser is unable to answer “Unknown” when the improvement’s history is, in fact, not known. In the Site Section of Form 1004/1073, the appraiser must provide at least one, but not more than two, view factor(s). According to Appendix D, if a view factor not present on the list materially affects the value of the subject property, appraisers must enter a description of the view associated with the property. This description, however, “must fit in the allowable space.” If there are three or more view factors that materially affect the value of the subject property or if a description that exceeds the allowable space is necessary for a meaningful report, the current instructions in Appendix D will have a detrimental impact on the quality of appraisal reportsraises serious concern over misapplication and misinterpretation of UAD requirements. Any adverse effects could impact not only the appraisal profession but also the mortgage lending industry. The unfortunate truth is that many appraisers often take the “easy way out,” opting to simply choose pre-provided options instead of providing clear and accurate descriptions of a property. We believe the UAD would contribute to this mentality, at a point in time where we should be concerned with improved appraisal quality.
In conclusion, we believe that without improved clarification, the reporting requirements in Appendix D coupled with the lack of guidance on the permissibility and procedures to expound on prescriptive statements create an environment conducive to misstatement and misrepresentation. Additionally, we believe state appraiser regulatory enforcement agencies, intended users and other interested parties will likely utilize Fannie Mae and Freddie Mac documents as benchmarks to determine regulatory compliance. Though some are stating that the UAD is expected to become the “industry standard,” it should be made clear that while it may be a lending industry standard, it is a condition imposed on appraisers that may, in some cases, prevent them from clearly communicating the subject property or market characteristics.
While Appendix D may have been intended as a technical document of instruction, it could ultimately result in the creation of an impractical standard by which appraisers will be measured when attempting to determine compliance with Fannie Mae/Freddie Mac assignment conditions.
Should you have any questions or need additional clarification, please contact us at your convenience.
J. Carl Schultz, Jr.
Appraisal Standards Board