Appraisal Guidelines
In the August edition of the AppraisalPort Newsletter, I reported on some of the general information covered at the National AI Connect Conference in Indianapolis, July 23-25, 2013. This was a great conference, covering a wide range of topics. This month, I want to pass on some information covered in one of the breakout sessions for residential appraisers.
The session was titled, “Residential Chief Policy Roundtable” and included presentations from Fannie Mae’s Robert Murphy, the Appraisal Institute’s Bill Garber, HUD’s Ada Bohorfoush, and the VA’s Gerald Kifer.
At Fannie Mae, Murphy handles many of the issues regarding appraisers and the appraisals they produce. He explained that since the implementation of the Uniform Appraisal Dataset (UAD) and data delivery to the Uniform Collateral Data Portal (UCDP), Fannie Mae has been able to capture appraisal data for all of the loans they buy. Before this program, they typically saw appraisals only when there was a problem with the loan but now they see all of them. The goal of the UAD program is to standardize certain data points to support consistent appraisal reporting—regardless of geographic location of the property or any localized reporting conventions—by addressing vague or useless data and terms that had been included in some appraisal reports. Overall, the program is working well and has enabled Fannie Mae to see specific appraisal trends for the first time.
Even though the vast majority of appraisers are doing a good job, Murphy explained that some of the reporting hasn’t been as consistent as was hoped. Appraisers are still making errors and, in rare cases, committing fraud. The biggest problems continue to focus on the UAD ratings for “quality” and “condition.” If the appraiser is using the same comparable for multiple appraisal reports, the respective ratings on the comps must stay the same regardless of the condition of the subject property. So, in other words, if you use the same comparable on many different appraisals and you rate it as a condition C-3 in one, it must continue to be rated as a C-3 on all your appraisals that contain the comparable. Murphy also said Fannie Mae understands that additional information may be gained on a specific comp, warranting a different rating, but this should be the exception rather than the rule. He cited an example of an appraiser who used the same comparable on 25 different appraisals and had only used the same Q&C rating combination three times. The bottom line: the quality and condition ratings for comparables shouldn’t change just because the subject is different.
Murphy further explained that consistency within a report is just as important as the consistency between reports. Fannie Mae sees many problems with the subject fields such as quality, condition, view, location, square footage, room counts, and even sales prices being inconsistent within the report—all mostly due to report cloning. It’s acceptable to speed up your report completion process by cloning information from previous reports; just make sure you complete and check all the fields that need to be updated to represent the specific new property. Murphy closed his presentation by stating that until now Fannie Mae has been heavily focused on examining the appraisals connected with defaulted loans. But moving forward, the GSE plans to review more appraisals on a random basis, looking for inconsistencies.
Ada Bohorfoush stated that HUD now has 50,951 appraisers on its national roster. As we know, these appraisers must have some level of certification since HUD will no longer accept a licensed appraiser on the roster. She further explained that HUD still expects the appraiser to do a “full” inspection of the property; this includes checking basements, running faucets, flushing toilets, and at least looking in the attic from the entrance. She said that a lot can be seen and discovered about a property (leaks, rot, mold, etc.) from a quick look in the attic. HUD expects every property it insures to be “safe, sound, and secure.”
Bohorfoush also encouraged taking and including your own photos, even if you have to submit one with a person in it, which is better than no photo at all. You may also “supplement” your photos with MLS photos as long as you clearly note which ones are from the MLS.
HUD has dealt with a multitude of natural disasters in recent years. Many homes in official disaster areas may require a new inspection by an FHA-roster appraiser. Bohorfoush highly recommended reading HUD Mortgagee Letter 2012-23 if you appraise anywhere near a declared disaster area.
Gerald Kifer explained that the VA appraisal panel is much smaller than that of HUD and for most of recent history it has been difficult to get a spot on the panel. The old joke was that someone had to die before an opening on the panel became available. However, at this time, the VA is having an open enrollment to increase the numbers. The minimum requirements are to be licensed or certified and have at least five years’ experience.
Kifer noted that the VA gets busier as rates go up and the conventional lenders start to slow down. Some VA policies differ from those of other agencies, but they stand behind their default rate, which is lower than “prime” loans. One example of a VA-specific policy: if an appraiser sees they won’t make value, they are required to stop and immediately advise the lender of the situation. The lender then has two days to provide the appraiser with additional information to help make the value. This probably seems a bit odd to most appraisers, but this policy has worked well for the VA and is not meant to apply undue pressure to the appraiser. The hope is that the lender may have more current or complete information about recent transactions in a specific area. The appraiser is then free to evaluate this new information and make the value judgment accordingly.
Finally, Kifer mentioned the impending shortage of appraisers. He said they are in the initial stages of developing a program to train returning veterans as appraisers. The goal is to help the appraising/lending community and some deserving vets in the process. Click here for more information on the VA and their appraisal policies.
Overall, this was a very informative session. All of the speakers were well versed on what their agencies expect from appraisers and shared many useful tips with the attendees. Look for more coverage of the breakout sessions from this conference in future newsletters.
By Steve Costello, a Relationship Manager at FNC working directly with the appraisal community since 1986. When not in the office, Steve can be found riding off-road motorcycles and doing home improvement projects. Steve can be reached on LinkedIn or Twitter. ~ Source AppraisalPort
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The industry continues to spend boatloads of money seeking cost saving solutions. When the solution to quality service is to stop trying to rip off the contractors. Without an established minimum fee expectation of $500+, this industry and the associated consistency with every sort of industry measure, will continue to contract and fall short. Independent analysis of fee relationships say that appraisers fees should be at $750+, to have a comparative relationships to broker fees and home prices, in todays modern analysis.