Conversation with Fannie Mae

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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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Higher Standard
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, 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 or (888) 347-5273. Calif. Insurance Lic. #0C89873.

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Comments (14)

  1. AVMs will cause the next housing crisis. I am in a county
    that had a recent reassessment. Every piece of vacant ground
    was miscalculated. Ten thousand sq. ft. “goat paths” were valued at $2.00psf.
    The model thought every lot was “table-top” and buildable. The problem is the majority of appraisals go to the lowest bidder. As others have said, as long as AMCs are allowed “broad cast orders” the SRA designation is meaningless. Less than 100 takers this year. Where is the AI?

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  2. Kidding; what’s the alternative? AVMs? Zillow or ZAIO style “accuracy” for all users of appraisals? Trulio? Just as doctors and nurses have to adapt to the new business paradigm of the ACA, we have had to adapt to the post Cuomo -Countrywide/WAMU settlement (HVCC & title co. AMCs) that destroyed the nations appraisal model. We will all have to adapt, train for new careers, or retire. I’ve got too many miles and years on me to start a new career and no interest in retiring.

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  3. Geo, Not one of the many articles I could find and read on Kellerman’s death suggested or hint at anything less than suicide. The TWO tidbits of information that remain unexplained are: (1) What reason did he offer for his resignation tendered and refused by the head of HR the day before he died? (2) His excessive weight loss could be health related. Stomach cancer causes similar symptoms and its ultimate death is a painful prognosis. Unanswered or not provided anywhere are the autopsy results. Also unanswered is why his successor resigned after only six months. Reports of extreme political pressure on CEOs and CFOs of Freddie are reported throughout the period ranging from 2003 through 2009. Unfortunately, the high level of partisan politics involved in the FNMA / Freddie debacles precludes there being any kind of honest unbiased congressional investigation anytime soon. Its a given that Frank; Dodd and Waters all mislead the nation about the health of Freddie for years. Kellermann worked there long enough to know the inside scoop, but he was never tainted by the scent of scandal or wrong doing himself. Can’t see how you conclude murder.

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  4. Carol-you are absolutely right! Some of what FNMA wanted to do CAN be achieved, but they did not need UAD to do it. All they needed was an address and appraiser name field and date that could be compared. ANY appraisers doing 2 a day gets their reports pulled for review.

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  5. I also took ‘offense’ (at first) on the comment that ‘some appraisers’ were taught to compare relative conditions rather than absolutes. ALL appraisers SHOULD have been taught that. However, UAD and FNMA specifically require an “absolute” stand alone condition analysis in accordance with their definitions. Nothing wrong with that as long as the UAD explanations addendum is included within the report, so that a misleading report does not result.

    UAD has MANY things wrong with it, but this article at least points out some of the things that are being accomplished through its use. In the end, the sole purpose is to encourage appraisers to perform better quality work. MOST of the work I review fails to meet USPAP requirements. Fully MORE than 50% is deficient. It used to be about 15% to 30% over the 27 years I have been appraising. When the FDIC investigated the quarter million appraisals involved in the Countrywide and WAMU investigations they found 97% to be deficient and 90% to be egregiously deficient!

    Until FNMA addresses that aspect, neither UAD nor URAR nor narrative reports will solve the problem of poor appraisal reports. The focus should have been on USPAP compliance, rather than mega data review capability. You did not need UAD to find out if appraisers are “inspecting” 10 houses a day!

    Assuming in all cases it is NOT an integrity issue, appraisers still fall short of USPAP. Ex: When is the last time you did a real highest and best use analysis on a non conforming land use? Do you ALWAYS actually extract land values in a repeatable manner, where most other appraisers results would approximate your own-or are you simply using boilerplate saying “land value derived by extraction?” Are you implying, or worse-claiming ‘paired sales’ adjustments where no paired sales exist? Do you claim Marshall & Swift as your cost source, but then fail to supply the update date, section and page numbers? (FREE online cost data service is available at IS your text addenda commentary limited to the form report itself?

    Are you one of those appraisers that continue to insist (for the past 25 years) that “the market says” a half bath is worth $2,500; a common room is $5,000 and a full bath is $5,000? GLA is adjusted at $35 sf yet your depreciated replacement cost is $125 sf? IF so PLEASE show me just ONE sample of a paired sale demonstrating this. Email to Seriously.

    Do you adjust GLA as $40,187 or some equally misleading unrounded result? These issues do not always result in an incorrect result (more than 5% ‘off’)-though they often do so. What they DO show is that the appraiser is not following professional appraisal principles and practices. Unless you can PROVE your subject market recognizes a set amount for a purported room count difference, separate from GLA, why make that adjustment? Unless you can prove that the room adjustment does not overlap the GLA adjustment, why make it?

    Do you always adequately explain the WHY part of an adjustment (or its absence) and the HOW part adequately in the text section? I mean, WHY you did or not adjust-other than restating the obvious inferred reasons (IE “It was superior” instead of – “The local market recognizes a cul de sac location as being superior due to a perception among most buyers that it is a quieter street location. Additionally, in some cases it allows for kids to play at the end of the cul de sac. Local agents (names and numbers available on written request) advise the impact on value is approximately 5% to 10% of the sale price.”

    The key to sustaining most adjustments is simply adequate explanations. Reviewers do not have to agree with you, they just have to determine if what you did is “reasonable”. I frequently disagree with other appraisers, yet IF they provide a reasonable explanation, I would not normally mark ‘disagree’ on a review. Different than the way I would do something does not mean ‘wrong’.

    Lastly, UAD’s basic design has an exceptionally bad flaw. By the Q3/C3 or “0” formatting appraisers are discouraged from making the long winded text explanation I provided above because it is simply easier to let it go at “0”.

    The ‘old’ FNMA disliked “average to good” type descriptions allowed for graduated or incremental adjustments with minimal explanations since the reasoning was obvious.

    Design ‘type’ is the most ignorant of the standardized adjustments, as well as being the most difficult and time consuming to accurately report. Developers constantly ‘create’ new hybrid designs. I defy most appraisers to show me the difference between a true Tudor and an Elizabethan Half-Timber design. Or a true cottage style design. THEN prove your subjective adjustment for either. There ARE some ‘comparative’ design and appeal differences in localized markets that have clear premiums or penalties such as a two foot thick walled Spanish Stucco typical in California, (NOT “Mediterranean”) as opposed to a typical low cost slant roof, FHA slab floored 1950’s “bungalow or pseudo ranch.” A “Box Spanish Stucco” would not have the same localized appeal, yet BOTH would be called “Mediterranean” under UAD. We have allowed being ‘PC’ in OUR phrasing to replace MARKET DESCRIPTIONS. I submit a rating of “Good/Good” compared to Fair/Average or Average/Average” would be more self explanatory for the above design variances when compared and analyzed with the pictures we all provide.

    From this post readers can tell I am verbose. My reports read the same way OUT OF NECESSITY! Appraisers are hired to perform thorough analyses on complex ownership interests in complex markets. That rarely lends itself to ‘only’ 4 to 6 page form reports.

    While UAD clearly has some benefits to FNMA, I respectfully submit its negative impact on appraisal quality more than offset these limited ‘benefits’. Now with the mismo /xml transmission requirements, the clients can choose to see only portions of what WE intended to be a complete appraisal report. They may ignore the text explanations completely. Neither FNMA nor Wall Street should expect USPAP compliant appraisals; and then selectively butcher their reports before investors are given abbreviated ‘summaries’ of our summary appraisal reports – minus explanations.

    One appraiser (EJB) is absolutely right though in his final sentence. No appraiser fee TO THE APPRAISER should be less than $400. I submit it should not be less than $650 for a conforming loan limit, non complex property, to do everything actually being reported in the appraisal reports. That includes MEANINGFULL 1004MC analysis and then reporting why it was completely disregarded after being completed due to an inadequate number of ‘comparable’ transactions to be meaningful.

    FNMA should also use its influence to encourage (dictate?) that certified appraisers can use trainees (and certainly licensed level appraisers) for inspections and preliminary analysis and report writing Appraisers should also be allowed from three to up to five trainees. The economics of current appraisal / AMC business relationships dictate this.

    One appraiser doing one assignment a day on average) for $300 cannot pay for E&O, software, MLS and public records services, his or her license, mandatory continuing education, voluntary educational materials and texts (14th Edition of Appraising Real Estate costs $145 alone), new USPAP copies every two years, both sides of social security (15%), personal income taxes (28%?) State taxes (5% to 10%?) and now mandatory health care costs, plus cars, gas, vehicle licensing fees, cell phones, faxes, etc. Lease an office? Hah!

    You (FNMA) want to eliminate appraisers “doing” 3 to 12 assignments a day? Mandate professional fee minimums! At a minimum, follow VA panel fees.

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  6. When I was getting into a business of appraising, I was under the impression that since the Real Estate is Very important element of the economy, this profession would be treated with respect.
    Aww, How wrong of me…
    Lenders, Bankers, AMC’s are still on the top with no regulations and responsibility. If anyone wants a change, the one needs to start from the Top.

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  7. what a bunch of crap, I know my market and clients do not. ask the last reviewer I dealt with that said that the subject had a fence and the available comps did not, it must be an over improvement. come on, get with the program. 24-48 hrs to submit the report and then 2 wks later you get this crap and in a rural area the realtors are calling wanting to know why I screw their closing. let me do my job !!! no fees less than $400 !!!

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  8. by You'v got to be kidding!!!

    We are by far the most regulated profession – and I use that term very loosely – in the Country and now FHA want us to work in “absolute” terms!!! This is my 34th year in the Industry and I do not…do not…envision any new blood coming after us old guys are gone. Our fees are reminiscent of the 1970’s…our workload increases hourly…our liability is second to none…our associations are useless…need I continue??? Why is it even important to report this continuing onslaught of bureaucracy? I spend most of my time in appraisal litigation and have done so for the past 25+- years and every time I bring to attention the latest adventure in the wacky world of appraising every attorney within shouting distance fall all over themselves in fits of laughter.
    Don’t you think that this horse/appraisal industry has run it’s last race and should be put down???
    Happy Thanksgiving.

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  9. Everybody that is a “boss” somewhere is looking for consistency in appraising. It hasn’t happened and will never happen. Dude, this is appraising! Everbody’s appetite is different. Some people love a corner lot, those with little children now have two streets to get injured in. Wake-up. You can’t get the qualitative (art) side out of it., no matter how many numerical labels you come with.

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  10. The premise that a property rating, C3, C4 etc should consistently be used is false and really shows a lack of understanding on this so called experts’ part. These terms are relative to the properties being appraised. They are too restrictive even on one report. What do you label an average house condition, then an updated house and finally a house that is remodeled? There is not enough description in the terms. When we used average, average plus or minus, good, good plus or minus it allowed the appraiser to make a statement of variances in the condition and quality. If we could use C3.5 it might help. These bean counters should start with there own company. Typical govbots, strain out the nat and swallow the camel.

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  11. Mr. Murphy: Your one size fits all form…does not.Creating absolutes is counterproductive and infringes on the independence of the appraiser. Maybe you and your form creators should come out west and ride around with some rural property appraisers, you will likely come away with a new perspective. 6 month and older comps in a rural area of little sales activity is typical. (read: worthless MC form.) Appraisers do not need this burdensome UAD and the endless requirements brought on by non-appraisers to do our jobs. Please stay out of the appraisal business! If you really want to do something important, go after the banksters, re brokers and mortgage companies and force them to stop pressuring appraisers to target practice. That single piece of advice would change the quality of appraisals much more effectively than the UAD ever will.

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  12. This is the perfect example of gotcha policies. For years FM/FM have Business intelligence tools and analytic software to audit the appraisers work. All players should be on the same page working with the same tools. How does a 1 person shop keep up with multiple agencies let alone the costs of the tools to help the appraiser build a better product. It seems that this is by design.

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  13. Ask Murphy who he thinks in the government murdered Kellermann as he was about to blow the lid off the biggest FRAUD in US history at Freddie Mac. Fannie and Freddie are the largest SCAMS going in modern history and all who work there should be in jail. Criminal thugs stealing tax payer money. Prison is where all of these pathological, sociopaths working for the Oligarchs should be.

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