Changes from Fannie Mae

John Pratt
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Changes from Fannie Mae: ANSI, Desktop Appraisals & Virtual Inspections. 

Fannie Mae has decided to make at least 2 significant changes…

The New Year is here and along with that comes change. The appraisal industry and the appraisal profession is no exception to this. Change is something we should embrace provided that the change is for the betterment of those effected by the change. Before we make a change we need to identify what we are trying to accomplish and will the purposed changes achieve the desired results and is this the best way to accomplish our objective. I am not sure that we have identified the problem that we are trying to solve or asked the right questions. Fannie Mae has decided to make at least two significant changes, adopting ANSI standards and New Desktop Appraisals with new guidelines and standards. There are a few others that are in the works and I will address those when more details are available.

Let’s cover the ANSI standards first.

Fannie stated that two or more appraisals on the same property by different appraisers showed a different GLA sometimes. Fannie did not state how often or by how much of a difference. My first question is how often did this occur and was it a significant difference that influenced the valuation? What was the factors that caused these difference? Was it improper measurements of the exterior walls or was it including area in the GLA that should not be considered in the GLA, such as enclosed porches or patios, basements, unconditioned space or unpermitted areas, etc. Depending on the answer to these and other questions, did Fannie make the correct decision to resolve the problem? Fannie’s answer was to take the easy way out and incorporate the ANSI Standards by reference without changes or clarification. This will add time to the appraisers inspection and completion of the sketch in the report, and I will talk about that later ). MY question is does a 2’ – 3” difference in an exterior wall of a 1,500 sf home make a significant difference in the value conclusion of that home? The ANSI Standards does have some guidelines that are helpful that should have been included in the Fannie guidelines such as how to calculate GLA where there are sloping ceiling and staircases. Some of their other guidelines serve no meaningful use in the appraisal process.

Since this will now be in the Fannie guidelines, it may open up the appraiser to additional liability if the borrower challenges the appraisal report and states that the appraiser did not follow Fannie guidelines by not measuring the homes exterior to within 1’.

Now let’s look at the New Desktop Appraisals with new guidelines and standards. Fannie stated that this was to speed up the appraisal process. They did not mention that it was to reduce the fee for appraisals, yet all appraisers can read between the lines. However, the ANSI standard they mentioned above contradicts the stated object of trying to speed up the appraisal process. Fannie has now slowed the process for completing the URAR with ANSI and created an abbreviated 1004, Desktop Appraisal, to offset. Looks like Fannie is trying to appease the Mortgage Brokers and the AMCs.

The new forms, final guidelines and requirements are not in print at this time so I won’t go into too much detail. Fannie has stated that the appraiser will not have to visit the site but will need to include a sketch with interior walls and this can be accomplished by several methods by an individual to assist the appraiser in a “Virtual” inspection of the exterior & interior of the subject. That individual can be the homeowner, Real Estate agent, loan officer, neighbor or an employee of the appraiser or most anyone else. It is my understanding that to accomplish this “Virtual“ inspection the appraiser must have an “Outline” of the exterior of the home (formerly a sketch) in his/her possession to accomplish this procedure, (I may be incorrect in this matter). Many counties and cities in California will not allow the appraiser or anyone else to view a copy of the floor plan or any other documents in the assessors or building department’s file of the subject property, which means that if the appraiser does not go to the property he/she is relying on an untrained individual to provide the sketch.

I have already been contacted by several AMCs to sign up for these new Desktop Appraisals. I personally do not feel comfortable evaluating a property that I have not viewed and will not be accepting any “Desktop Appraisal” assignments. I have worked hard for over 20 years to produce excellent appraisals and I am not interested in completing an abbreviated report for half price while the rest of the Mortgage industry continues to receive lion’s share of the fees.

Image credit flickr - Neil Kandalgaonkar
John Pratt

John Pratt

Self-employed since 1999. Banking Industry for over 20 years: Real Estate Loan Officer, Commercial Loan Officer, Manager Loan Dept, Senior Loan Officer in charge of Lending. President & CEO of an Independent Bank in California. Chief Financial Officer of 2 startup firms in Silicon Valley which raised over $5,000.000 in startup venture capital. He also conducts meeting which are open to all appraisers on a monthly basis with an open format discussing anything related to the appraisal industry.

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30 Responses

  1. Avatar Cheryl says:

    I used CubiCasa to “measure” and draw my own home. The final product was BEAUTIFUL. However their GLA was more than 200sf larger than my home per my own measurements and the architectural plans. That’s a 5% increase and would definitely affect and final value conclusion.

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  2. Avatar Koma says:

    As always your business, your choice. I personally do not like ANSI and have never and will not be using it. As for a Desktop, wouldn’t touch them with a 1,000 ft (give or take a 1′) pole. The only person I trust with my licence is me!

    Got a an email from an AMC to join and use their desktop that adheres to the new GSE’s, thought this was only on Fannie, measurement requirements. Did this with all the other spam I get, delete and block.

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  3. Avatar Mee says:

    If they wanted to speed up the process for an appraisal how about trimming some of the BS out of the current URAR and supplemental forms. I know they have tried to get rid of the MC however almost every client wants it. How about leaving the comp photos portion of the requirement be left to the appraiser. Want to drive your comps? Go ahead. Been to that specific neighborhood everyday for the past 15 years and feel a file photo is adequate, use it. Just my 2 cents but those two items could trim the time a fair bit.

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  4. Avatar E.J. says:

    Counting down to retirement ! After 33 yrs looks like May 10th when my software renewal is due.

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    • Avatar Koma says:

      I hear that. My wife finishes school in less than 2 years and depending on how much more this can get messed up I’ll probably be out to pasture myself. HaHa

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  5. Avatar Don Orttenburger says:

    It’s my belief that this is a naïve idea to form a giant data base so that appraisals will no longer be needed, just a few keyboard taps and the subject and comparables are loaded into a spread sheet that tells the value. Typical desk jockey logic. And appraisers are no longer needed. As we all know properties don’t change by adding additions, heating enclosed porches-the database will be absolutely reliable. And I would love to see an attorney submit a desktop appraisal as evidence of value-good luck with that.

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  6. Avatar ShenValley Appraiser says:

    Any seasoned Appraiser that doesn’t realize that FNMA is asking us to become Instructors/Trainers of EACH individual at EACH property in ANSI, Building Codes, (for example, measuring basement egress windows), Appraisal basic principles, Septic system failure signs, Drainage concepts, Water, Mold, Termite damage, etc etc, with EACH REQUEST. Not to mention, not being able to hear the House system noises, smell the odors nor walk across floors to check for settlement/soft areas (“Appraiser senses” formed with experience).

    Think about it – you are taking on a brand new completely “green” Trainee with EACH ASSIGNMENT and not being allowed to use your well-honed “Appraisal senses”. The Liability is astronomical on top of the extra time required.

    Who would take a position with increasing levels of Liability, increasing fees for software, databases, etc, and no additional monetary compensation for their extra Instructional time? Rather being asked to take a reduced fee because someone who has no idea what a Site Visit means thinks it will save time training a NEW INDIVIDUAL for EACH PROPERTY versus doing it firsthand using all 5 senses and years of experience? Yes, I am being facetious in presenting a scenario any Professional would think came from a fiction writer.

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  7. Avatar Raymond says:

    I haven’t done much lender work for some 15+ year. But this Desktop Appraisal idea is really an attempt, yet again, to accommodate mortgage lenders for faster turn time. Heck, the lenders have already banged the appraisal fee to slave fees. Now appraisers have to work faster using someone, else opinion of market data. Wow, pretty amazing….

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  8. Avatar SGH says:

    Everyone can make money in the real estate transaction except the appraiser. We have the most qualifying and continuing education in the industry, along with the most liability, all for the least amount of pay. Once the Desktop becomes the norm, more appraisers will quit, retire, or choose not to go into the profession at all.

    Desktop valuation products are not the answer. Appraisers are being sold the ’emperors clothes’ in that we’ll make more money and not leave your office. They will take the same amount of time just to gather, verify, and analyze the data provided to us by people who are not qualified. Do I want to do 7 desktops products a day for $100/each, or 1 VA appraisal for $800? Pretty easy answer all things considered.

    These changes will iceberg that hits the Titanic. I just hope the boat won’t sink for another 3 years before I can retire.

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  9. Avatar Mary says:

    Not doing Desk Tops! Telling all the lenders I know Appraisers will not do them and telling Realtors to BEWARE of them and tell the lenders they use NOT to order them OR they will be called upon to sketch the home for us while we watch and train them virtually! Have had a few lenders advise they will not be ordering them. It is impossible to think they are okay with having ANYONE just download an APP and then have us walk them thru the process online. Are you kidding me? NO time saved there, only more time training them each and every time how to do OUR job. Fannie, Freddie get a clue…This is not going to work. Talk about losing Public Trust you just succeeded in doing just that. Now get ready for the whole BIAS impact on our profession. If you are close to retirement, the proposals for this will put you over the edge!

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  10. Avatar JDGarth says:

    TO MUCH unknown-remains UNANSWERED.

    I do not NEED to purchase ADDITIONAL software to do MY diligence but MAY BE FORCED to do so via a “floorplan” & that Virtual Inspection.

    Do I TRAIN the homeowner whilst they walk around their home? HOW MUCH am I liable FOR? Lets play that old game “telephone”. Placing the BIASED homeowner who has NO appraisal EDUCATION: WHO will the Lender SIDE with??

    Currently Inspector A is not OR is not KNOWN to have ANY license, E&O, MAY NOT follow ANSI, etc.

    SO is THIS THE WAY GSE’s are FINALLY getting RID of the Appraiser? IS this their PLAN??

    Diligent Documentations through their LENGTHY process for their DESKToppy will take longer.

    Does ANSI only apply to the Subject Property (not the SCA sales)? YES said Fannie Man (that’s part of the ANSI Roadshow -CE & via a BLOG @elearning. As was said: the #1 reason for E&O Claims is square footage. So, If it’s ANSI will the Part A Inspector (hired by the lender or by the AMC) be “a Rider on THEIR errors & emissions Policy”??

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  11. For a Fannie Mae / Freddie Mac 1004 Desktop Appraisal to be valid, the appraiser must have a “Floor Plan” which shows all interior walls to help assess the functional utility of the home. Fannie Mae defines a “sketch” as typically displaying only exterior dimensions. So the appraiser CANNOT proceed with a Fannie Mae 1004 Desktop appraisal if the appraiser is not given an interior FLOOR PLAN which shows ALL INTERIOR WALLS. This requirement alone will substantially limit the number of properties which qualify for 1004 Desktop Appraisal underwriting.

    Source: https://singlefamily.fanniemae.com/media/30361/display

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  12. Avatar DAK says:

    I already seen No Class Appraisals looking for people to do the inspection on Indeed at $50 each. It more than likely is a nationwide push. Sorry, I will not sign off on this Crap! Thats all they want is our E & O and Signature! Cold day in HELL!!

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    • Baggins Baggins says:

      Holy crap it’s true! Thanks Dak. Next time just post the link. “3d property scanner”. All you need is 1 to 2 years experience in the hospitality industry and have a drivers license. Calling all bus boys! Ain’t nobody bringing a 3d scanner into my home dude! Time to get out the frequency jammer.

      https://www.indeed.com/jobs?q=class+valuation&l=
      https://www.indeed.com/viewjob?cmp=Class-Valuation&t=Scan+Property+Inspector&jk=ec758beb1da4664c&vjs=3

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      • Avatar Koma says:

        HaHaHa…Thanks Baggins I needed that one!

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        • Baggins Baggins says:

          https://craft.co/invision-app#
          https://www.classvaluation.com/digital-appraisals/

          That is the provider, the company furnishing the 3d app. It’s all cloud based. Is this what mortgage consumers need, their complete 3d model and high definition imagery of the inside of their home and all their belongings sitting in a cloud account and the data managed by a hundreds of millions of dollars tech company? In what country are those servers hosted pray tell? The residents whom allow this into their home may get more than they bargained for as their home will have a brand new ‘fingerprint’ in the technical cloud world. Taking bets now for how long until exploits are discovered or residents become aware they’ve allowed their private spaces to be accessible to a myriad of technical company interests. If other ‘big tech’ ventures are any indication, the supposedly proprietary access to the data will be exploited sooner rather than later. A simple tape measure and a simple low resolution camera will suffice and is preferable for affordability, privacy, and avoiding ewaste. 3d modeling is equivalent to thousands of interior photos, perhaps more. Couple that with whatever failed security the individual phone users may be unknowingly experiencing. This looks like a privacy and data security nightmare. I’m glad to know about this ahead of time, 3d modeling software is prohibited in my house starting today. I can see this technology being especially useful on the default management side. No more guessing whom the easy target is. Does the right to the digital file also transfer with portfolio management? They’ll lose track of it or indexing will have organization and recognition faults, someone will eventually exploit the storage realm, the data will have infinite shelf life, expanded accessibility as time goes by. There will be more data outside of the appraisal report as opposed to contained within and the appraiser will not be involved in the chain of data custody or chain of data security. You will be shown only what they want you to see.
          The more I learn about advanced tech, the more I do not want advanced tech in my life. If you’re on firefox check out ublock, adblockplus, and privacy badger. They’re super fun and easy to use. Then if you’re up for a challenge to see how much behind the scenes scripting there is try script blocker and umatrix which is a really interesting accompaniment to ublock. You don’t even want to know how much privacy you relinquish on an iphone or an android, best just not to look.

          2
  13. Avatar John L Daley says:

    The first thing I think about these incompetent ideas extended to us is our wonderful President Biden. A video I saw of him saying in his own words responding to a question….He said I have two reasons why …..and then he went completely blank. I wish there was a video upload option. I think the appraisal industry leaders went blank. Hope you all enjoy the new requirements. Load up your E&O.

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  14. Avatar PJTMC says:

    After reviewing the many great questions and points made by those on the frontline, I have a liability concern in that, for the 1004 Desk-Top to be properly completed, it is suggested by FNMA that the appraiser use individuals who may have a vested interest in the outcome of the assignment (homeowner, Realtor) and may not be qualified to do what is expected. In addition, we sign a report stating the information and value estimate is accurate when we really don’t know about the information, for sure. So now we have a process that is supposed to be conducted by an independent 3rd party in which we swear we have no current or anticipated interest in the property using potential individuals who may have a vested interest. I think this whole thing is a knee-jerk reaction and was not thought out completely. This has nothing to do with reasonable change, I can accept change, it has to do with nonsensical changes that defy USPAP. Also, keep in mind, as a contributor(s) to the appraisal, all the individuals used will need to be named, by person in the report, and you will be guaranteeing the information they are providing can be relied on and hell, you may not even know who they are. I’m not even sure the E&O companies will be willing to cover such an arbitrary process and if they do it will come at a heavy cost. For those willing to do these assignments they (FNMA & lenders) will expect a reduced fee, I predict additional costs of doing these types of assignments will increase to a level that will surpass a full appraisal. And who will suffer, the consumer; that is until the Appraisal Police come knocking at your door.

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    • Baggins Baggins says:

      That’s why I charge amc’s MORE than direct assignment lenders. Increased liability. Well, I used to. I fired every single amc across the board many years ago and deny them all service. Find a new line of work before I go back.

      Are you still buying the line this is for the greater good or to help consumers? Lenders have been pushing that for generations. It’s truly a miracle such propaganda still works, with how steadily and predictably all these changes continue to fleece consumers. And they keep getting back in line for more.

      Did you know you can sell your home tomorrow for all cash, no appraisal necessary!? Yes it’s true. You will not have to pay any service or vendor fees. Call me for details. We are a local investor group whom does not want to resell your house. We only want to make you a fair cash offer the same day.

      0
  15. Avatar Kenneth Smith says:

    Can we appraisers just band together and say no to this latest demand?

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  16. Avatar FR says:

    I appraise a lot of very large luxury homes that have complex designs, curving staircases, octagonal turrets, etc. If you took 10 expert appraisers with the most sophisticated Distos, you would still get ten different GLA’s. It is too much to expect for even the best appraisers to accurately measure a 4,000 to 8,000 sf home with a handheld laser. To the inch? These fools have never had to do it. I will always use an engineered set of plans whenever they are available. I have turned down assignments because the structure was too complex for me to measure accurately. I’ve got a tape measure, a Disto, and an iphone with Lidar and none of them are capable of 100% accuracy on complex properties. Adhering to ANSI will add significant time to the inspection of large homes. I’ll have to pass that cost along.

    3
  17. Avatar Mel Edwards says:

    Currently on Indeed.com

    3D Scan Property Inspector
    Class ValuationJoin the future of the Real Estate Industry!
    Class Valuation is seeking a 3D Scan Property Inspector to join our network of professionals to perform Property Inspections using 3D Scan technology for our mortgage lending clients. Our inspectors enjoy a flexible work schedule while earning additional income! We prefer experience with 3D Scan technology and/or Property Inspection, but direct experience is not required.

    What is a 3D Scan Property Inspection?
    You may have seen a virtual tour of a home online while searching for a new home. The ability to complete a walk-thru of a home without ever having stepped foot in it is the cutting edge of technology. Class Valuation is on its way to using this technology for the purpose of aiding in the process of home valuation for lending purposes.

    Using an iPhone 10 – 13 (13 Pro Max is not supported), the 3D Pro Scanner takes 360° images of homes to create a 3D virtual tour and makes note of any condition items that may impact the value of a home. Upon completion of a scan, the information is delivered to an appraiser to conduct an appraisal, assisting borrowers, agents, and lenders across the country in closing their loans.

    A 3D Pro Scanner will receive orders directly on their phone within the data capturing app. From there, they will schedule an appointment to visit the property and complete the scan. When the scan is complete, typically after an hour, the 3D Pro Scanner will submit the order through the app and be on their way.

    Requirements
    Preferred candidate will reside within San Francisco County
    Must own and navigate proficiently an iPhone 10 – 13 (13 Pro Max is not supported) to perform job duties
    Must have or be willing to purchase an unlimited data phone plan
    Must have an active, state issued Driver’s License
    Must have a working vehicle for traveling to each assignment along with proof of insurance
    Must be willing to purchase or provide a Criminal Background Check
    Must be willing to provide or purchase your own tripod and measuring device (laser or measuring tape)
    Must have access to high-speed internet (Cable, DSL or Faster)
    Must be willing to travel and complete assignments in all weather conditions and for extended periods of time.
    Must present and deliver yourself professionally at all time
    Must be positively passionate about technology and innovation

    Job Related Skills and Experience
    Excellent communication, organizational and time management skills
    1-2 Years of Customer Service Experience (hospitality, restaurant, airline, real estate, etc.)
    Ability to work independently
    Motivated to complete assignments as per company performance standards
    3D Scan, Property Inspection and/or Real Estate photography, experience preferred but not required

    What really stands out to me:
    We prefer experience with 3D Scan technology and/or Property Inspection, but direct experience is not required.
    Using an iPhone 10 – 13 (13 Pro Max is not supported), the 3D Pro Scanner takes 360° images of homes to create a 3D virtual tour and makes note of any condition items that may impact the value of a home.
    3D Scan, Property Inspection and/or Real Estate photography, experience preferred but not required.

    NO EXPERIENCE REQUIRED but makes note of any condition items that may impact the value of a home.
    They are basically going to send out anyone that can pass a Criminal Background Check to note of any condition items that may impact the value of a home.

    1
    • Baggins Baggins says:

      When I want to know about property deficiency and how that may impact my home value, I call people living in dense urban NY city and am inclined to trust the guy with the fancy china iphone phone above all others. And we don’t want any Android or Libre users! I noticed MUST prioritize confidentiality and privacy of residents you deal with, that was not on the list. Data sourced in such a way is not subject to the same controls otherwise imposed upon appraisers.

      1
  18. Baggins is spot on, these ”inspectors” not to bash them but are not bound by confidentiality etc. and can sell there data to anyone they want, and we will be blamed as the same data will be in our reports, excuse me correction, i wont touch these with a 10 ft pole, no way no how. same with the bifurcated ones, follow the money find the problem. if these new products are so good why are they trying to make them look like a real appraisal? I am educating all my RE brokers i know about this, as most truly want an honest valuation and let the chips fall where they may fall.

    1
    • Baggins Baggins says:

      Thank you Dave. Getting into the valuation industry is a hook or entry point for these tech companies. The inspector is merely the instrument to get there and they can care less if that is via licensed appraiser or day labor. Amc’s are the useful idiots whom opened the door. These tech companies stand to make far more monetizing peoples private data and 3d modeling of their homes at a later date then they ever will with per diem costs for the lidar 3d inspection services itself. It’s like taking 100,000 photos of someones home. Seriously, on what continent will the cloud based servers be located… Architects are going to lose control of proprietary design methods, targeted marketing will get more data, and even law enforcement will have more tools in the future. I’m still out here speeding past facial scanners with my head turned and avoiding up close interactions with surveillance cameras. Dang! In search of ad free spaces.

      1
  19. Avatar Kenneth Smith says:

    Does ANSI apply to Freddie MAC 1040 appraisals?

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Changes from Fannie Mae

by John Pratt time to read: 3 min
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