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Editor’s Note: We moved this edition up a week to fill you in as quickly as possible on the new language issued by Fannie Mae intended to “fix” the Intended User conundrum created by Cert. #23 on their new form. More like a patch than a fix, the new language was issued November 4. Here is the language with background.


Fannie offers Cert #23 “Fix” & More
By David Brauner, Editor WRE

Just days after the new forms took effect and in the midst of widespread confusion and fear among appraisers nationwide regarding their increasing liability and responsibility under the new forms, and especially Cert. #23 (Intended User), Fannie Mae’s Mark Simpson, speaking to appraisers at Valuation 2005 in Las Vegas, reinforced his agency’s policies while announcing new language intended to “patch” the Intended User conundrum.  (story continued below)  

(story continued)
In his most recent in a number of appearances before appraisers at the Valuation conference series, coinciding with implementation of the new forms, Simpson, Director Property Standards, Single-Family Credit at Fannie Mae, unveiled new language developed with the Appraisal Institute and issued November 4, 2005, intended for use when an appraiser believes the Lender/Client is the only Intended User.

At issue is language in Cert. #23 on the new Fannie Forms which extends responsibility for use of the report beyond the Intended User (only) to anyone who may “rely” on the report in the future- opening a gaping hole of liability and responsibility for appraisers.

According to Simpson, this is just the way Fannie wants it. (story continued below)

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Simpson said too many appraisers get off the legal hook for faulty appraisals by claiming that they are accountable only to their lender-client. Cert #23 is intended to close the loophole, making appraisers fully accountable for the quality of their work, for not only the Intended User but to anyone who may rely on it as part of a mortgage finance transaction.

Fannie Q&A
The following is excerpted from Fannie’s November 4 Q&A: 

"The appraiser’s accountability for the quality of his or her appraisal should not be limited to the Lender/Client and/or Intended User identified in the appraisal report. Fannie Mae believes that parties to a mortgage finance transaction that are not the Lender/Client or Intender User should be able to rely on the accuracy of an appraisal report prepared by a state-licensed or state-certified appraiser and the appraiser should be held accountable for the quality of that appraisal because their reliance is customary and reasonable. We are committed to overcome the prevailing feeling in the appraisal and lending communities that appraisers are too often not held accountable for the quality of their appraisals.” (story continued below)

Related stories Q&A from Fannie Mae (11/04/05)- Cert. #23, the nature of an “inspection,” “as-is” versus “as-repaired,” “Scope of Work” and more. Industry News - AARO speaks out on new Fannie forms Fannie Tussle - Appraisal Standards Board comments on Fannie's new forms. Fannie's New Forms: Something to Talk About - in the opinion of appraiser Denise M. Siegel, there is definitely something to talk about. Free Book Download: 143-page book entitled Appraising in the New Millennium: Due Diligence & Scope of Work,      NEW - Help Wanted/Available - Trainees-Mentors (bulletin board)

(story continued)
The Fix
Acknowledging confusion about the distinction between parties who “use” and parties who “rely” on appraisal reports, but not backing down from its stated goals of appraiser accountability, Fannie says the following language is acceptable when an appraiser believes the Lender/Client is the only Intended User.

“The Intended User of this appraisal report is the Lender/Client. The Intended Use is to evaluate the property that is the subject of this appraisal for a mortgage finance transaction, subject to the stated Scope of Work, purpose of the appraisal, reporting requirements of this appraisal report form, and Definition of Market Value. No additional Intended Users are identified by the appraiser.”

Simpson said Fannie Mae will NOT accept appraisals with additional notices or statements that may conflict with Cert. #23.

If it Ain’t Broke
Far from a “fix,” Simpson stresses that nothing is broken with Cert. #23. He acknowledges confusion but calls on The Appraisal Foundation and its Appraisal Standards Board (ASB) to issue clarifying langue about Intended Use and Intended User.

For its part, the ASB, in a Q&A of its own said, “The language in the Appraiser’s Certification Item #23 (on the new Fannie form) confuses the matter.”  (See Fannie Tussle)

The complete “Fannie Mae Q&A” (11/4/05) can be found at www.workingre.com (or at Fannie’s site), covering Cert. #23, the nature of an “inspection,” “as-is” versus “as-repaired,” “Scope of Work” and more. Look for WRE to cover all these issues in coming weeks and months.

About the Author
David Brauner has covered the appraisal industry for over 14 years. He is editor of Working RE Magazine and a senior insurance broker at OREP (www.orep.org), specializing in E&O for real estate professionals nationwide. He can be reached at dbrauner@workingre.com

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