Incorrect 1004MC Form Trend Reporting
I have ‘come in contact with’ an appraisal report, produced by a Certified appraiser and its Licensed Trainee – working in the area near my office.
It’s clear to me that these two appraisers do not understand trend reporting that this form indicates.
By the way, I’m no great fan of the MC form. However, since we are required to use it, we better darn well learn to use it properly. Report what the trends on it show and not something obtained from elsewhere, sometimes called “PFA.”
If we don’t, or choose to ignore what the form shows, then the ENTIRE report could be judged to be problematic, and certainly not credible.
Take a close look at this MC Form, and the comment on it…
Now that you have looked these over, can you explain how every line item is exactly and precisely marked as STABLE?
In fact, this particular report was put out by the lender for a FIELD REVIEW by a second appraiser. In my ‘observation’ of the entire report, there are other notable incorrect issues (including USPAP violations), which when compounded with improper MC form trends, makes the report very problematic for lending underwriting.
So, let’s look at the line items above. When the left column is one number, and the far right column number is significantly higher or lower, the trend should be reported appropriately.
- Line 1 is DECLINING
- Line 2 is INCREASING
- Line 3 should not be marked with an X because there is NO TREND that can be reported – minimum of 2 columns must have numbers before a trend can be determined
- Line 4 same as Line 3 – no trend
- Line 5 is INCREASING
- Line 6 is DECLINING
- Line 7 is INCREASING
- Line 8 same as Lines 3 & 4 – no trend
- Line 9 is the only one that is STABLE… ‘0.3’ between the left and right is not significant enough to call it declining (IMHO)
- Line 10 is indicated as Stable, although technically there really can’t be a trend reported from this Yes/No question – but lenders want to see a trend box checked
With all this variability, how can the statement be written
“Nearly all indicators Stable, overall market deemed Stable?”
That’s totally absurd.
Most knowledgeable appraisers DO NOT RELY ON this junky MC form for trend reporting, and they say so on it. They do have other, more credible statistical info in their reports they do rely on, and are able to use that other info to properly report market trends.
If, on the other hand, you choose not to obtain credible market information elsewhere, and use this MC form for your analysis, do us all a favor and report what it indicates correctly.
The other glaring inconsistency on this MC form example are the 47 ‘comparable’ sold properties, and the 24 ‘comparable’ Active Listings. I work in the reported area and can categorically say that there are NOT that many truly comparable/competitive properties similar to the subject in this neighborhood area.
I wrote about improper ‘comp’ reporting process in a WorkingRE article that came out Nov. 18.
I’ve also done some reading in Fannie Mae’s actual documents (FAQ’s) about this form.
Read this one very carefully:
Q. Is the Median Sale Price as % of List Price determined by dividing the Median Comparable Sale Price by the Median Comparable List Price from the preceding data on the form, or is it based only on comparables for sold properties?
A. The Median Sale Price as % of List Price is to be determined by analyzing the comparables that have sold and settled during the specific time frame, not by using the data from the lines above this section on the form.
So, Fannie Mae is mandating appraisers to use their own form, but ignore data on it! How absurd is that??
The whole, entire and all-consuming function of this stupid MC form is to concentrate and focus on COMPARABLES. If that’s what is supposed to be on the form, how is it logically possible to ignore that data, as the above FAQ response says?
Is it any wonder there is so much misinformation and confusion about the mandated MC form that is supposed to be the ultimate revealer of market trends?
Another FAQ response concerning the MC Form says if certain column numbers are shown to be INCREASING, the reported trend should be shown as Declining, and vice versa!
Then we have other users – reviewers, underwriters, borrowers – who don’t have the time or knowledge to decipher this crazy form and our responses, criticize us. Remember, the form is telling us to report OVERALL TREND, not just the trend from two columns.
Someone who’s been in this business for 40 years, whose opinion and background I greatly respect, wrote to me earlier today. I’m clipping and pasting some of what that person wrote:
“Two appraisers completed/reviewed this appraisal and the 1004MC and they got it wrong? Did they get it wrong because of poor form design or because they didn’t know how to correctly fill out the form?
Was it Fannie’s poor form and instructions or lack of comprehension of fundamental housing market analysis? Appraisers nationwide continue to get it wrong, not just this form, but also the URAR and the value opinion.
These same appraisers repeatedly ask for help with fundamentals (basic things, FHA requirements, etc.) while posting on the forum and signing their names with “Certified Residential or Certified General” credentials.
Someone trained the appraisers who completed the 1004MC you posted. They were not trained well. The people that taught the people that trained them perhaps did not do a good enough job. Someone did not train the appraisers who taught the appraisers at Fannie Mae.
Had they been better trained, we would have a better form. If they were better trained, we would have better instructions and better appraisal guidelines, wouldn’t we?”
So you see, it’s not just me who is frustrated.
But…with so much contradictory information coming from Fannie Mae (& Freddie Mac), how is possible any of us can be properly trained?
The people who took over the ‘forms’ in 1986 can’t even get it right. Yet we appraisers are supposed to have a polished crystal ball always at our side to decipher all the contradictions.
Frankly, it’s a ludicrous position to be involved with.