FHFA Slows Bifurcated Appraisals
by Isaac Peck, Editor
Many appraisers took Fannie Mae’s new Value Verify pilot program, featuring bifurcated appraisals, as the beginning of the end of the profession. Now Working RE has learned that part of the Value Verify process has been put on hold.
Fannie Mae, which is still in conservatorship, is currently regulated by the Federal Housing Finance Agency (FHFA). Starting in 2017, FHFA tasked Fannie Mae with “Modernizing the Appraisal Process.” The result is Fannie’s bifurcated appraisal pilot program, which it calls Value Verify. Over the last few months, rumors circulated that Value Verify was “dead.” Well, not exactly, as Working RE (WRE) learned, but the news does indi-cate there is a watchdog in place.
Fannie Mae tells WRE: “In early 2020, at the instruction of FHFA, we will adjust the Value Verify process to pause the Data and Done option (our bifurcated valuation process that does not ultimately result in the delivery of an appraisal). We will continue to offer the Data & Appraisal option within Value Verify on a limited pilot basis as a means to evaluate possible improvements to our collateral risk management and create a more efficient appraisal process.”
FHFA confirmed that it asked Fannie Mae to pause any bifurcated valuation process that doesn’t result in an appraisal, telling WRE: “While FHFA continues its review of Enterprise pilots, including those related to the appraisal process, the Agency is directing the Enterprises to focus on activities necessary to sup-port their core guaranty business mission, enhance safety and soundness and facilitate ending the conservatorships. Accordingly, the Enterprises have been asked to redirect their efforts and pause testing any bifurcated valuation process that does not ultimately result in the delivery of an appraisal.”
In other words, Fannie’s Value Verify program of testing bifurcated appraisals is continuing but in a modified, more prudent fashion. WRE reached out to FHFA for clarification and elaboration on future plans for the program and for appraisers, but at press time, no response has been received.
To understand what has changed, we first have to understand Fannie’s Value Verify initiative. Under Fannie Mae’s initiative, a property data collector, not necessarily a licensed appraiser, would inspect a home and report back on the condition of the property (For more, visit WorkingRE.com; search Bifurcated Appraisals).
Based on the characteristics of the property indicated by the Property Data Collection (PDC), Fannie’s Value Verify initiative offers the lender (and the borrower) one of two options:
• Data and Done (an appraisal waiver based on PDC data).
• A desktop appraisal (Fannie’s new 1004P).
So while Fannie’s Value Verify pilot continues, beginning in early 2020, FHFA instructed Fannie to pause the “Data and Done” option, that completely waives the 1004P desktop appraisal and allows loan approval based only on data collection.
Lyle Radke, Director of Collateral Policy and Strategy at Fannie Mae, presented the Proposed Solution Framework slide (Figure 1) in his presentations at various appraiser conferences through-out 2019. FHFA is essentially halting Option #1: Data and Done, while allowing Fannie to continue with its bifurcated pilot model #2: Data & Appraisal.
Appraisers believe this is good news for consumers because the non-biased eyes of a professionally trained and licensed appraiser will continue to be part of the process.
About the Author
Isaac Peck is the Editor of Working RE magazine and the Vice President of Marketing and Operations at OREP.org, a leading provider of E&O insurance for appraisers, inspectors and other real estate professionals in 50 states. He received his master’s degree in accounting at San Diego State University. He can be contacted at email@example.com or (888) 347-5273.