Editor’s Note: The following is reaction to our story: Fannie offers Cert #23 “Fix” & More.

Appraisers Respond: Cert #23

Big Bad Fannie
If you play Family Feud and one of your partners gives a stupid answer to a question, most everyone on your panel knows its stupid but they applaud, scream, and cheer anyway.

If you ask Mark Simpson about Certification 23, all of Fannie Mae applauds and cheers, even though they all know it’s a stupid answer and trying to force it on appraisers doesn’t make it right. The real answer is forwarded by the Appraisal Foundation and the Appraisal Standards Board. We as appraisers have to follow the rules and regulations handed down to us and just because it’s Big Bad Fannie, doesn’t exclude them from the same rules and regulations. – John Rothermel

Cert #21: They DON’T have that right
Thanks for the work on FNMA’s Certification #23. Now, I wonder what you (or others) can do about Certification #21.

No data collection agency has the right to any data in any appraisal report. The certifications are for the appraiser to certify what has been done in arriving at value.  I am not appraising for a data collection agency and they are not an intended user, nor a client, implied or expressed.

FNMA and the Appraisal Institute (AI) have no right to use any data in my report to build a database, a database that most likely is designed to put me out of business, or at the very least, to cut my income by providing guesses at market value in the form of AVMs. They can purchase the data or do it the out-fashioned way- do it themselves.

I don’t take data out of another appraiser’s reports and put it into mine for my own use. If I did, I would have to obtain permission, pay them for their work and acknowledge in my work that someone else provided assistance. Why do FNMA and AI think they are above the Code of Ethics?

I am tempted to add a Condition to my 1004s stating that no one, including FNMA and AI, have the right to use any information in my report to build their database.

I believe Cert #23 is less damaging to appraisers than #21, as appraisers do have the obligation to provide accurate values, regardless of who ultimately reads the report. We should be responsible for the value, should FNMA find a faulty reported value caused a foreclosure. But we should have a concern about what use the report is being put to. A data collection agency has absolutely nothing to do with the quality and accuracy of my reported value. – Ken Cavender

Re-Certs?
Today’s article, combined with your previous article on the AARO Resolution, is very much appreciated.

I have always recognized that parties other than the specific client have an interest in my opinion of value. Since USPAP started using the terms “Intended Use” and “Intended User” instead of “Purpose” and “Function” of  the Appraisal Report, I have included a statement that identified the “above named client and their correspondent investor” as the intended user(s). I figured that would include the funding lender if my client was a mortgage broker and/or the secondary market participant.

My problem with Cert #23 is the first two identified parties who may “rely” on my report– “the borrower, another lender at the request of the borrower.”

Here in Washington, state law for real estate escrow requires that the PURCHASER be provided with a copy of the appraisal report three days prior to closing. If the purchaser does not receive the appraisal report, they can delay closing without adversely affecting their rate lock or other rights until they have time to review the appraisal report.

However, in refinance transactions, RESPA applies and the borrower only has a right to a copy of the report if requested within 30 days after closing. Since I have been appraising under that state requirement for several years, I have no problem with the “borrower” being able to rely on my report for that lending decision. However, once a decision is made to either make or deny the loan, the transaction should be over and the borrower should not be able to take the appraisal to another lender, which would appear to be in violation of FIRREA.

According to USPAP, the appraiser’s responsibility is to a client and the client relationship ends when the lending decision is made. Under FIRREA, the lender can transfer my appraisal report to another lender without my permission, but, per USPAP, I cannot re-type or reassign the appraisal to another lender even with the permission of the first lender/client. However, once my client relationship is over for that specific lending decision, I can reappraise the property for another client.

Whether I charge full fee or provide a discount because most of the information can be reused is a business decision on my part. I do revisit the property so I can state that it was in existence on the new date of value which is always after the date of the request.

I don’t think any appraiser would have a problem with the following wording for Cert #23:

“23. The mortgagee or its successors and assigns, mortgage insurers, government sponsored enterprises, and other secondary market participants may rely on this appraisal to the extent that they are involved in the mortgage finance transaction for which the appraisal was requested.”

Someone buying the loan five years after funding should be able to rely on the appraisal report, but the borrower should not be able to get an 80 percent LTV loan from one lender, then take the report across the street to another lender to get an equity line of credit. And that could happen with the current wording. – Barry C Wilson

Going Fishing
Keep on the good work on coverage of the new Fannie Mae forms!  These new forms are an E&O can of worms. Thanks. – Lee Steidel

Never Having to Say You’re Sorry
I enjoyed reading your article about Cert#23. I’ve had a statement similar to this in my appraisals for the past two years. My thinking is that FNMA simply goofed on Cert #23 and is unable to admit its mistake.

In order to avoid looking foolish, it intends to stick to the story that this verbiage was intended to hold appraisers accountable for their reports. Apparently, FNMA realized that they and their lenders are not able to control poorly performing appraisers, so they are now declaring open season on appraisers. While appraisers should and must be held accountable for their reports, opening the tort arena to anyone who wishes to enter it is not the way to do it.

Usually, the only person or entity who can understand the appraisal is the user. Certainly, a borrower is entitled to know the opinion of value of the subject property and if there are any defects or conditions that should be addressed. But beyond that the borrower or (almost) any other reader of an appraisal report is ill-equipped to understand the report.

The user of the report, the loan officer and underwriter in most cases, should have the ethical wherewithal to determine whether an appraisal report is misleading or poorly researched and written. Obviously, this is wishful thinking. There are too many appraisers who operate as loose cannons and this is how the appraisal profession, as a whole, has gotten a bad rap in the past few years.

FNMA paid lip service to the appraisal profession and to the Appraisal Standards Board when it invited comments on the new form. It should be inherently obvious, even to the most casual observer, that few comments, opinions or suggestions were taken to heart when the new form was finalized. So this is the fresh hell for appraisers. Do your best but don’t expect your best to protect you when anyone can claim that they relied on your report. Also, make sure your E&O is up to date.  – Greg Hartley

Just let me Appraise
Thanks for the great article. My frustration with Fannie Mae is that while they are trying to make the appraiser more accountable for the appraisal report, their own guidelines cause me to alter the write up of the report and sometimes the valuation.

For a Fannie report I cannot put a confirmed pending sale in as comp #1 and rely on that sale even if it is my best comp. I have done this for a divorce appraisal many times and in one case I testified in court as an expert witness and the value stood without question.  Fannie requires 3 closed sales; what if there are only 2 relevant closed sales? You have to add an irrelevant closed comp to meet Fannie guidelines. There are other situations where Fannie guidelines alter the report write up from common sense appraisal practice.

I am very unhappy with Fannie dictating my liability while promoting guidelines that affect my report write up and occasionally my value conclusions.  All I ask from Fannie is to let me follow USPAP and perform real appraisal work without all the BS Fannie guidelines.

Otherwise alter the Limiting Conditions and Appraisers Certification to add verbiage that the report meets Fannie Mae guidelines, which are intended to protect the interests of the lender and investors.  Fannie Mae guidelines can alter the report write up and final value conclusion, which may result in a value conclusion that differs from “market value.” – Anonymous

Who protects us?
Who is it exactly who comes up with these forms?  I can not believe that with so many appraisers, we allow forms like these to be created and that we are obligated to use them. Who protects us? The new forms open appraisers up to much more liability, when we should not be held responsible for such items as: “Did you review the Condo Association budget?”

It is difficult enough to get the required building information. If we are now to become accountants and spend weeks or months trying to obtain a copy of budgets, who is going to pay $500 and up for a condo appraisal to compensate us for our work? – Donna Halfpenny

You want Clarity?
You write: “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.”

Good luck with The Appraisal Foundation clarifying anything. – Rick Neighbors