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Editor’s Note: Robert Murphy, Director, Property Valuation & Eligibility at Fannie Mae, says appraisers are being held to a higher standard these days, thanks to the Uniform Mortgage Data Program and Uniform Appraisal Dataset, better known as UAD. Here’s what you should know.
Conversation with Fannie Mae
by David Brauner, Editor
Fannie Mae has data from over nine million appraisals, thanks to the Uniform Appraisal Dataset (UAD) and Uniform Collateral Data Portal (UCDP), which is changing the rules of the game for appraisers, according to Robert Murphy, Director, Property Valuation & Eligibility at Fannie Mae.
Speaking at the Appraisal Summit last month and to WRE, Murphy says the new data enables his agency to analyze appraisals in ways not possible before- including finding “self-discrepancies” within a single appraisal report- how often an appraiser disagrees with himself/herself, and comparing data across an appraiser’s entire body of work, on items such as property condition, view, quality and location. According to Murphy, they can pull up the property at “1234 Main Street” and look for patterns and inconsistencies in the way an appraiser reports the property in one or multiple reports, as well as the way every appraiser handles the property across all reports.
“If a property is a ‘C3’ in one report, it has to be a ‘C3’ in all of the reports for that specific transaction,” Murphy said. He acknowledges that a particular rating may change on a subsequent appraisal if more reliable data becomes available to the appraiser in the course of their research. In these instances a change would be reasonable and acceptable, he said, but what is not acceptable are multiple changes just to fit the property being appraised.
Murphy, who is currently responsible for Fannie’s Mae’s collateral valuation policies, as communicated through the Selling Guide, Announcements and Lender Letters, says that some appraisers were taught that condition and quality are relative, while others learned they are absolute but with UAD, the reporting must be absolute.
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Murphy said appraisers should be aware that they are being held to a higher standard. He said that one particular sampling of Fannie Mae data indicates the following: one self-discrepancy occurs within a report about 17 percent of the time; two in one report occurs about seven percent of the time.
Other red flags are also easier to spot given the new data, Murphy said, such as a “high” volume of property inspections- appraisals being completed with the same effective date, within a certain time frame. “If an appraiser has the same effective date for 15 properties one day and 13 the next, we suspect that something is going on, especially when also considering time and distance, i.e. properties that are geographically spread out. For one appraiser to accomplish this is pretty impossible,” Murphy said.
Murphy also mentioned that in the last few years Fannie Mae has tried to clarify some of its guidelines with lenders and appraisers. He said there is confusion and misinterpretation of the guidelines causing too many unnecessary “hard stops” on appraisal reports, when only an explanation was needed from the appraiser about why the guidelines were exceeded. Murphy mentioned two issues in particular: the date of sale of comps that an appraiser can use and the net/gross adjustment percentages allowable.
Murphy said that if you need to exceed the guidelines, just provide an explanation. He said his team is currently looking at these types of issues for a future update of the Selling Guide.
According to Phillip G. Spool, ASA, Fannie Mae states the following regarding a comp that is older than six months: “Generally, comparable sales should have been settled or closed within the last 12 months. However, you may use older comparable sales if you believe that they are appropriate for the situation, and the selected comparable sales are the best indicators of value for the subject property. You must comment on the reasons for using any comparable sales that are more than six months old.”
Regarding adjustments, Spool says 15 percent represents the “net” adjustment guideline and 25 percent represents the “gross” adjustment guideline. But Fannie Mae states: “If your adjustments do not fall within our net and gross percentage adjustment guidelines, and you believe the sales are the best available, provide an explanation.” They also state: “We do not have a specific guideline for individual adjustments, but we do require that you explain individual adjustments that are excessively high.”
Spool says that only FHA has a guideline for individual adjustments and that is 10 percent. However, many appraisers believe the 10 percent “rule” also applies to Fannie Mae but it does not.
About the Author
David Brauner is Editor of Working RE magazine and Senior Broker at OREP.org, a leading provider of E&O Insurance for appraisers, inspectors and other real estate professionals in 49 states. He has covered the appraisal profession for over 20 years. He can be contacted at firstname.lastname@example.org or (888) 347-5273. Calif. Insurance Lic. #0C89873.
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