Fannie Re-Evaluating Your Adjustments & VA Hiring Appraisers
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VA Hiring Appraisers and Fannie Mae Re-Evaluating You Based on Your Adjustments
If you were an appraiser looking for more work, this year’s Valuation Expo at the Flamingo Hotel in Las Vegas, June 23-25, was a good place to find it. Attenders included many product vendors, AMCs seeking appraisers, and representatives from agencies such as HUD and the VA.
Four sessions were offered for CE credit: “Keynote – panel of government and GSE representatives,” “Alternative Valuations,” “Valuation Visionaries,” and “Regulatory Compliance.”
In this month’s newsletter, I’d like to share some of the information covered by the Keynote panel: David Bunton of the Appraisal Foundation; Robert Murphy of Fannie Mae; Robert Frazier of the FHA; and Gerald Kifer of the VA.
Up first, Bunton shared information from the Appraisal Foundation, under which are all of the following:
- The Appraiser Qualifications Board (AQB)
- The Appraisal Standards Board (ASB)
- The Appraisal Practices Board (APB)
- Alliance for Valuation Education (Alliance)
Bunton opened with general statistics from the AQB, which reports that in 2013 there was a 30% increase in the number of people sitting for the national appraisal exams. Of these first-time test takers, 87% taking the Certified General exam had college degrees. Also, some younger people are taking an interest in the profession as 44% of first-time test takers were 26-35 years old.
Bunton reported that the new AQB-adopted requirements for appraisers will go into effect on Jan. 1, 2015. These requirements include a bachelor’s degree requirement for the State Certified Residential and State Certified General levels and an associate’s degree or 30 college credit hours for the State Licensed classification. Also, the experience and education requirements will both become prerequisites to sit for the exam. He also mentioned that the requirement for mandatory background checks has been pushed to 2017.
Bunton also covered USPAP issues being reviewed by the ASB:
- Definition of “Report”
- What constitutes a “draft” report and should it be addressed in USPAP?
- Handling confidential information when the client no longer exists or there is a “successor”
- Dates of appraisal reviews
These can be very important issues for appraisers. For instance, the current definition of a report ties the delivery of the report to the completion of the assignment. The proposed definition removes the link between these events. You can find the second exposure draft dealing with this topic on the Appraisal Foundation website.
The next topic Bunton covered was the Appraisal Practices Board (APB). This board was recently created on July 1, 2010 as another independent part of the Foundation. Considered the “how-to” board, it was established to provide guidance to appraisers from all valuation disciplines on valuation methods and techniques, particularly on emerging issues. Bunton believes the board is filling a void: because the majority of real estate appraisers do not belong to a professional appraisal society, they need a reliable source to get guidance for their practice. At this time APB guidance is strictly voluntary and has no congressional authority.
To date, the APB has identified over 50 emerging issue topics and the board periodically prioritizes these topics. After that, subject matter expert (SME) panels are selected to address a specific issue. Two topics of interest to residential appraisers the APB will be examining in 2014 are the valuation of green buildings and the collection and verification of residential sales data in the sales comparison approach.
Finally, Bunton gave the audience a quick overview of the Alliance for Valuation Education, which is a separate non-profit corporation, not affiliated with any other organization. The Alliance is composed of The Appraisal Foundation and many sponsors of the Foundation that remain in good standing. It is a course developer, not a course presenter and will make courses available to alliance sponsors and any other valuation education providers who will then present them. The initial focus is to develop classroom delivered real property valuation continuing education. The first course “What Is and What is Not a Comparable Property?” should be available in September. For more information about the Appraisal Foundation, visit its website.
Fannie Mae’s Murphy stated that over the past year, the GSE had been focusing on “quality” and “condition” ratings of comps used in multiple appraisals by the same appraiser and found many cases where the appraiser has changed the quality and/or condition ratings on the same comparable from appraisal to appraisal. ow, based on the examination of the Uniform Appraisal Dataset (UAD) data, Fannie Mae’s focus for the next 12 months will be on adjustments. The data indicates that many appraisers are not using proper methodology to make their adjustments. Murphy stated that some appraisers are still using the old standard $20-$40 per square foot adjustment on properties that are easily valued at $500-$650 per square foot.
Murphy explained that Fannie Mae is planning to re-evaluate appraisers based on their adjustments and the GSE will expect appraisers to comment on all adjustments if necessary. And, “it will be necessary,” he said, adding that Fannie has seen a lot of under adjusting. To be safe, appraisers should document their logic and reasoning for making any specific adjustments.
The remainder of his presentation focused on the first update made to the Fannie Mae Selling Guide since 2009. This is very important because the Selling Guide is basically the rule book lenders need to follow if they want to sell their loans to Fannie Mae. I will cover just a few of the highlights below, but it is highly recommended that you read Announcement SEL-2014 -03 for yourself. It can be found here.
Here are some highlights:
- Boarding houses and bed & breakfast properties have been added to the list of ineligible properties.
- Manufactured homes are not eligible if they have been previously installed or occupied at another site. New units can be moved from the dealer or the manufacturer to the permanent location.
- All appraisal update and/or completion reports must now be reported on the 1004D form – no more letters.
- At a minimum, a photograph of the front of the subject property must be included when completing an appraisal update (form 1004D).
- For properties with unpermitted additions, Fannie Mae is requiring that the appraiser comment on the quality and appearance of the work and its impact, if any, on the market value of the subject property.
Appraisers at the Expo were pleased to hear that HUD believes automated valuation models and other valuation tools are not as accurate as valuations from appraisers, according to the FHA’s Frazier.
The big news from the FHA is that it will finally adopt the Fannie Mae/Freddie Mac model and move to an all-electronic process. Its new web portal, called the EAD for “Electronic Appraisal Delivery,” will use the “Electronic Appraisal Process” (EAP) to handle the appraisal data; this will be very similar to the UAD format that most of you use for the majority of your work. The FHA is planning to both streamline its process and glean important information about appraisal quality when this new system becomes operational soon. FHA panel appraisers will be kept informed of what is required during the implementation process. For more information, go to www.hud.gov.
The VA’s Kifer stated that his news is very similar to that of the FHA: the VA is finally ready to move ahead with an electronic appraisal portal, which will have almost the same requirements as the Fannie/Freddie and FHA systems.
Kifer noted that the VA still needs qualified appraisers to fill vacancies on its “closed” panel. The VA has provided appraisers steady work at competitive prices and a spot on the panel has been coveted for many years. Many appraisers on the panel are nearing retirement and the VA believes that switching to an electronic format may also push even more appraisers who don’t want to deal with the changes toward retirement. For a complete list of VA appraiser qualifications and requirements, click here. To get the application (VA Form 26-6681), click here.
Overall, this session (3 1/2 hours) was packed full of information that appraisers really needed and can use. This business is changing quickly and these industry leaders were there to help keep everyone up to date. Please use the links in the article to find more details about any of the topics that interest you.