Changes from Fannie Mae
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.