Fannie Mae Plans Massive Changes to Appraisal Process


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Fannie Mae Plans Massive Changes to Appraisal Process

by Isaac Peck, Editor

In its March 21, 2019 Appraiser Update, Fannie Mae revealed that it is currently testing a concept called Property Data Collection (PDC), where a property data collector, not necessarily a licensed appraiser, would inspect a home and report back on the condition of the property.

This concept includes “mobile apps that guide a property data collector to generate a robust and accurate set of data elements, photos, and floor plan.” Fannie Mae would then decide if an appraisal is needed, or if it is willing to accept the loan without an appraisal. As part of its exploration of this concept, Fannie Mae is also testing “which elements are most important for measuring collateral risk and who does the best job of collecting accurate data.”

At the ACTS Conference in April, hosted by the National Association of Appraisers and Appraiser eLearning, Lyle Radke, Director of Collateral Policy and Strategy at Fannie Mae, expounded on this, explaining that Fannie Mae is testing appraisers, real estate agents/brokers, insurance inspectors, and home inspectors, among other professionals, to try to determine who collects data most accurately and effectively. In other words, non-appraisers are very likely to be included in the list of “approved providers” who will be allowed to serve as property data collectors.

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Under Fannie Mae’s new concept, after a property data collector submits a report on the property’s characteristics and condition, Fannie Mae will decide if it wants to (A) accept the loan without any appraisal whatsoever, (B) require a desktop (hybrid) appraisal that uses the property inspection from the property data collector, or (C) order a full appraisal. Fannie also has a name for its new “hybrid” desktop appraisal, the 1004P. This would be a desktop appraisal that is performed by a licensed appraiser after a property data collector has inspected and reported on the property in question. But even the 1004P will not be required in every instance.

In a direct answer to critics of hybrids that cite USPAP or liability concerns, Fannie writes, “The important thing to keep in mind is that the property data collection happens prior to, and completely independent of, the appraisal assignment. In fact, the property data collection is finished and delivered to Fannie Mae before we determine if an appraisal is required.” Fannie also points out that appraisers rely on many other data sources and professionals in the scope of preparing a report, writing, “As we see it, surveyors, FEMA flood engineers, listing agents, architects, zoning officers, tax assessors, etc., are not disclosed as providing significant appraisal assistance in the scope of work because (1) they work completely independently of the appraiser, and (2) they do not participate in developing the appraiser’s opinion of value. Property data provided to the appraiser works exactly the same way: it is strictly observation, measurement, and fact.”

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From Fannie Mae’s latest update, as well as Radke’s presentation at the ACTS conference, it is clear that Fannie is planning to adopt a model where four different approaches are available with a given property and loan. Depending on the property’s characteristics and the perceived risk, Fannie will offer the lender (and the borrower) one of four options, including (1) a full appraisal waiver, (2) a property data collection, (3) a property data collection + a desktop appraisal, or (4) a full appraisal.

The decision tree looks like this: if the property does not qualify for an appraisal waiver, Fannie might start by requiring a property data collection. Once the property data collection is complete, Fannie will then decide whether it needs to order a full appraisal or a 1004P (a hybrid appraisal that involves the appraiser), or if it will accept the loan based only on the property inspection and without a desktop appraisal.

Fannie’s risk models might mandate a hybrid or full appraisal from the start, if a particular property warrants it, but the process suggests that the work appraisers have done traditionally when preparing appraisals will be broken up into parts, with analysis being perhaps appraiser’s last stand. This is a developing story; please visit for the latest appraiser news and information.


About the Author

Isaac Peck is the Editor of Working RE magazine and the Vice President of Marketing and Operations at, 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 or (888) 347-5273.

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Comments (37)

  1. I can understand how they may streamline the data they mainly got from us and just use appraisal waiver. Likely these people are not qualified inspectors for use of valuation purposes, sure they may hire new real estate agents, they won’t likely pay an experienced agent or broker who makes a good commission. So if it doesn’t meet their expectation for a waiver, eliminate all the third parties that holding up process through bidding and get rid of the stipulations that have nothing to do with an appraisal and just order from us directly, yes direct since your are already cutting regulations anyway. Dress up a form however, it really doesn’t matter. A good appraiser will let you know everything that has a reflection on value and creating a credible opinion of value. We can turn it around in a timely fashion agree on a due date and don’t contact us back unless it’s late. I can promise Fannie if they did this it would be well streamlined as far as getting report back quickly. As far as risk is concerned just hire other people with same certifications and credentials if you feel like it needs additional scrutiny. Appraisers didn’t create the regulations in this century nor did they make process of ordering and submission take longer. Just deal with us directly.

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  2. Definitely send the person out to inspect a property who has absolutely nothing to lose. If they don’t have an appraisal license, who are they going to report them to? If they have a real estate license, great! But who are they going to report them to for errors or omissions in an inspection. This literally opens the door for so much fraud its not even funny. I can see it now, the person sen to inspect the property will be paid $1,000 cash to report back with whatever the borrower wants them to report back with. People who commit fraud ALWAYS learn how to work the system and will figure out pretty quickly how to avoid any further inspections or a full appraisal. This is probably the dumbest idea Fannie has come up with to date.

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  3. During the downturn I picked up some work as an “insurance inspector” for a company that is likely to be doing these inspections (Mu____ Reports).

    A week of on-line training then I was in the field with a supervisor for a few days. When I went to do some of the things taught in training I was told “we don’t actually do all that you were taught in training as you will never get done in the allotted time and won’t get paid for it”. I quit that day.

    There are hundreds of bad comments about this company and the inability of the inspector to make money as they do not pay fairly for mileage and overhead. Thus, they have incredible turn-over.

    But yeah, they will stay there until the job is done right and go the extra mile for your appraisal inspection.

    How to Perform the 1004P
    1. Purchase shredder
    2. Insert license

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  4. by Anthony Breeding

    Unfortunately this inevitability has been broadcast for many years now. It is plainly apparent to those of us in the industry this has nothing to do with a desire for an increase in quality. The reasons are solely based on cost and time (cost of time). I personally fail to see how any perceived shrinking of the time required to close a loan is supposed to add value, increase quality, or maintain public trust. I can understand the desire to automate the system and utilize big data. Its a trend across all facets of all industries. I can understand not wanting to be ridiculed (regulators & politicians) for not moving forward with the times so to speak. But trying to throw out the baby with the bathwater almost never ends up being the right answer. A previous comment asked (paraphrased), why aren’t they trying to find ways to utilize the appraiser more instead of less? Thats a great question. There are a multitude of ways to incorporate “big data” into the appraisal process using the appraiser.
    1. Require the appraiser to use graphs and charts compiled using approved sources.
    2. Require the appraiser to analyze what the graphs and charts say
    3. Require the use of mobile appraising software with an abbreviated “data collection” portion to be uploaded within 12 hrs of inspection or from the field at the end of the inspection (not an appraisal, just the data they claim to want to make immediate decisions)
    4. Create ways for all appraisers to access CU data to incorporate into the report and/or be able to double check themselves to make sure they are consistent with what others are saying about a market or property and be able to explain up front why they agree or disagree.
    5. Allow the use of MLS photos and/or third party photos for comparables.
    6. Allow appraisers to see the specific property data and commentary from previous appraisals of the subject that they have already data mined from reports. So the appraiser can justify what is different between then and now or was omitted.
    These are just a few ways to consider instead of having newbie Realtors collect data and not know how the spell the word fascia when describing wood rot or not knowing the difference between an attached garage and a built in garage.

    Unfortunately the future of appraising looks very different from my first day 23 years ago and from what it looks like today.
    When reading the tea leaves, this is what I see.
    The eventual outcome will be changing of terminology first and foremost from “Market Value” to “Lending Value”
    They will take the data mined data to create an AVM Lending Value (already happening) and close the loan on that info.
    Once closed they will upload the “property collection” data with the sale price and date, and voila they have another comparable to utilize in the AVM.
    Difficult or complex properties will always require a human appraiser (if we are smart that will cost them dearly)
    Random cookie cutter subdivision transactions will require a human appraiser to keep a percentage of the data true to a baseline.
    I expect it will take 1-1.5 years for Fannie to implement their current idea, another 1-1.5 years for full adoption. I think we can expect our volume to decrease by 30-40% in the next 3-4 years and another 20% in the 5 years that follow. All the while the anemic level of new appraiser trainees we have now will fall back to Zero like in the years following 2008.
    So when it implodes and they figure out we are needed…..We will not be there to pickup the slack for them.

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  5. It strikes me that over the course of a year, there are a given number of appraisals that have to be completed for mortgage purposes. The public does not understand the mortgage world and they don’t care. Fannie Mae and their policies have absolutely no influence on whether a person sells their house or not. Based on this, it’s simple math: Number of appraisals (or some sort of valuation/inspection) remains the same; amount paid for said services is reduced; result is less money in the appraisal industry to be divided between appraisers. As an industry, we are taking a pay cut. AMC’s sell the 1004P based on “you can make $60/hour”. But when the smoke clears, the industry as a whole still has less money to spread around. What I don’t understand is the incentive on the part of Fannie Mae. Even if it is a more streamlined system, any Actuary can tell you there is an increased risk involved. Since the borrower is paying the appraisal fee anyway and there is a given amount of appraisals to be generated over a year, lenders and Fannie Mae are going to make the exact same amount of money while taking on a greater risk. How is that a good thing?

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  6. Many appraisers send out a fresh trainee to inspect the property and then do not even disclose it in the report. It can only be a step up

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  7. I too have a name for FNMAs new garbage product but I don’t think WorkingRE would appreciate me using it.

    Consider the FNMA reps comments “The important thing to keep in mind is that the property data collection happens prior to and completely independent of, the appraisal assignment. In fact, the property data collection is finished and delivered to Fannie Mae before we determine if an appraisal is required.”

    Absolute gibberish and meaningless! Also, the fact that appraisers ‘rely on’ third parties like engineers, etc. fails to mention that we apply a huge amount of discretion when we do so.

    I’ve seen the 1004P Its about $400+ worth of work IF they hired competent inspectors (they won’t if past experience is any indication). They’ll sell regulators and the public on how wonderful their newest Frankenstein Monster is, but in the end, it will be no better than CU with its phony “peer” adjustments.

    If Congress is going to go along with the 100% complete gutting of FIRREA XI, then why not just do so all at once and get rid of the pretense? Just tell lenders, inspectors, and yes, even appraisers that we can all just go and do whatever the hell we want because nNO ONE has any intention of preventing th next collapse or protecting the Public Trust.

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  8. by Michael Mondello

    You need to actually experience the essence of a property in order to accurately appraise it PERIOD. There’s a human element to the process that they are missing entirely in their quest to fully automate this process. This is going to cheapen the product immensely. As it is, UAD jams square pegs into round holes. I also wonder how the homeowners, realtors, borrowers, etc are going to feel about a non-appraiser spending who knows how long in their house filling drop down boxes and trying to figure out and execute the sketch which ranges from super easy to extremely difficult. 50% of my work is non lender – looks like I’m going to have to step it up with the non lender work because this is not going to least where I practice.

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    Here we go again. And in 10 years of this Appraisers will once again be blamed. Pure garbage this is a product to simply streamline the loan process and when that is the main focus trouble is right around the corner

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  10. I don’t see government backed loans following suite with this regardless of when it takes place. That being said, when is this big push looking to take place with FNMA?

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  11. Trying to understand how a property inspection alone translates to a market value. Isn’t this a more detailed version of the current property inspection report form that meets the lender’s criteria for loan value risk? So now Fannie dictates the to lender what their thresholds for collateral risk are? Will non-appraiser inspectors take note of pet odors, traffic patterns, views, access, unusual floor plans, unusual room sizes, worn shingles, negative drainage, missing rails, or custom vs tract? I went to a regional class hosted by FHA, and their moderators have not even heard of the hybrid form. Right now, they are in opposite worlds.

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    • As usual, they are nowhere to be found. They care little about residential appraisers. I have been appraising for 20 years, and it has been clear to me for 20 years that the appraisal institute would be perfectly happy to let the residential side of the profession, fall off a cliff. Can anyone think of anything they have done in the last 12-16 years to help us, and actually was able to get done? Nope, nothing.

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    • This is why i’m not an AI affiliate Candy. They didn’t advocate for the appraiser 10 years ago and they don’t seem too interested to do it now.

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  12. The actual non existent knowledge here in the comments are amazing. Seriously Gerard? Wow. As an appraiser I expected more. Not everything needs to be a 1004 agreed. But as an appraiser wouldn’t you want good data by a trained person?? Besides when did a judge or more stop a hearing due to words put on a form?? If that’s your protection best of luck cause that’s not protection. You will be thrown into the fire. Hey homeowner. Don’t pay $500 but when you refinance or buy and it’s completely wrong you pretty much are stuck and can’t blame anyone but yourself. Can’t blame the no. Existent appraiser who is a third party. What if the data is wrong by the inspector? Oh yeah you won’t be able to go after them either. Oh and that waiver and you overpay??? Yeah. Umm no one to blame but yourself.

    It’s a shame that this is happening all to save some $$ yet you will so go buy that 60” tv for a couple thousand but not protect your biggest investment. Smh.

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  13. not sure if this data collector is going to measure the house or not -there are huge disparities between 2 appraisers sometimes on sq ft, no telling what the guy off the street will do with a 2 story house with all kinds of angles.

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  14. by Ron Schwartz

    Absolute garbage …can’t wait for the next real estate crash… i have never performed a desktop appraisal and this why…can’t fix stupid and that’s the government and all its entities…

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  15. This is already going on. Fannie Mae’s 1004P is active! As an appraiser myself, I am wondering how or why is FNMA allowing a non-appraiser to step in to the appraisers job. Why dont they simply allow appraisers to have their own assistants, trainees, and other staff appraisers to complete the inspections. Actually the whole problem is that they set all these stipulations for the appraiser to follow and now they are looking to fix them by eliminating the appraiser. When all they have to do is stop tying the hands of the appraiser. Here is a wonderful Idea, How about allowing the appraisal profession to operate as a profession again, these are the problems FNMA created in the first place, still blaming appraisers. BTW appraisers how will you enjoy getting paid under 150 dollars for this product. I have been approached to complete them for even less! This will never happen as long as no appraiser is willing to complete these 1004P. Trust me I have personal experience, I have seen this product, this is a terrible idea! I thought the whole point of USPAP and all of the changes to this career since early 2000’s was to further strengthen the appraisal process, with a more thorough approach /practice. With all of that demand, also came a tying of the appraisers “operational business hands.” I mean can anyone tell me what is the point of an appraisal trainee? this is a joke and sadly, its on us. Again Please justify how “other real estate professionals” are allowed to make property inspections when I cannot. Why do we literately have statements required in our reports about that?

    Now these regulators are saying hey were going to start using these other guys over hear to do the job we took from you. Oh btw is this going to mean we share liability equally now with, FNMA, the AMC whose platform this product is currently being preformed on, and with all these other so called property inspectors. Oh that’s right no…. only the appraiser is still left holding that bag. This profession will be dead in 5 years, if appraisers go along with this. AS an appraiser I personally will not complete any of these assignments. To do so, is literately killing your career.

    Appraisers should push for solutions that keep the job of the appraisal to the appraiser, this is how our profession survives. Why not just let appraisers solve these issues. If your willing to try other methods why are they excluding the appraiser?

    the next step is to eliminate all traditional appraisals, then eliminate all human appraiser over site, to all AI completed. They want to see the whole lending aspect be completely automated, no loan officers, no appraisers, no AMC’s, no agents, not title companies, no lawyers, just FNMA and a website.

    Think that sounds great, remember how you feel next time trying to call, oh about 95% of any costumer service/support phone number. Do you like that ROBOT system?

    Thanks for reading, looking forward to further discussion about all of this. While Im prepping my career change parachute.

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  16. GEE!, they complain about appraisals costing to much. How much is it going to cost to engage all the “Non Appraiser” individuals to perform the “inspections”. They complain about appraisals taken too long. How long will it take for the various individuals take to send in their reports? (1 hour is doubtful). If, they decide an Appraiser is needed, how much will this add to the cost & turn time, most every appraisal will be a RUSH, as it will be the last thing to be ordered. How much does the average Appraiser charge for a RUSH order. I don’t perform RUSH orders, as I still have to meet USPAP requirements as well as Lender/AMC guidelines/requirements, Federal & State Statutes as well as sound appraisal theory, in order to deliver a credible report. Once ALL the other methods of “valuation” have not passed muster & the decide an appraisal “IS NEEDED”, I hope that the Appraiser that receives the request will be intelligent enough to charge, accordingly for said assignment. What happened to appraisals costing too much. If all other avenues of avoiding utilizing a Licensed Professional have been exhausted, then “WHAT” should your C&R Fee be?
    Shakespeare in one of his plays, calls for “killing all the Lawyers”. The powers that be are calling for elimination of the Appraiser, which has been going on for the prior 20+ years. Yet, Lawyers & Appraisers’ are still active in todays business professions.
    IF they do manage to “do away with Appraisers”, WHO will they blame when, not if, the next crash comes?
    Happy appraising, Appraisers’ will be around for a few more hundred years. But if the powers that be, get their way, we will be more justly compensated for our effort & expertise.

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  17. The 1004P is not new. Fannie has been testing them for quite a while. I have completed many at a rate of $60 per hour which is not far off from my typical fee. When I factor in no setting appointments, not taking photos or sketching, and NO DRIVING it’s really not a bad deal. The form also limits the appraisers liability as it clearly states the appraiser never visited the property and is relying upon an approved third party inspection.
    If you think complaining about changes to the appraisal industry in chat rooms is going to stop Fannie from doing whatever she wants to do think again.
    Follow the money, the appraiser gets paid $200 and the inspector gets paid $50. The 1004P just makes economic sense. Lenders will get what they want and will pay less for it.

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    • by Appraiserlady

      You’re getting $200 to complete the 1004P? Hmmmm…that’s odd…there aren’t any company’s that are advertising that. They are suggesting more like $50-$75 to complete one. I try not to resist change when it makes sense, but this does not make any sense to me. And where are these data collectors willing to be paid $50 to set the appointment, measure, pictures and fill out a form? And what kind of “professional” are they? What liability will they have? How do we know they’ve done a thorough job? I understand using data from known professionals not “data collector” . No thanks….not for me.

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      • I’ve seen sample 1004Ps. It’s essentially a 1004 without an appraisers inspection. Neighborhood opinions; property condition ratings and opinions, legal interest issues (owner occupancy on a loan app doesn’t mean it’s true). The inspectors are being asked to rate or report characteristics that only professional appraisers are qualified to opine on. Considering HBU requirements; zoning verifications, non-conforming issues (no inspector is going to know if parking is adequate or not per code); researching and developing support for specific adjustments (GLA, site area) views that we have not seen; locations that we have not seen, quality that we have not personally verified, etc. I think these are $400 MINIMUM fees as bifurcated desktops. But that isn’t what will be offered. In the end, the same $25 to $75 fee hucksters will want their cut. The AMCs that order the inspections will hire them off the street college student for $8 and mileage and provide a 1/2 day training. FNMA and the other shysters also cite engineers, other appraisers, home inspectors or planners and insurance estimators as their ‘inspector pool’ but when the realities of ridiculously low fees and limited supply of fools willing to do these the ones that get hired are those not qualified to get jobs with Taco Bell or Uber.

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    • You might want to consult an attorney, or better yet, your E&O provider RE the liability issue. The form itself certainly doesn’t limit liability. Only a carefully crafted SOW can (partially) limit your liability, and the onus is still on you per USPAP to determine if the “inspection data” is adequate for credible results.

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    • by James Scholl

      Gerald, if an appraiser does not go to the neighborhoods over time the appraisers expertise will wane. The lenders will recognize this and they may stop using appraisers or they may demand appraisers also do those $50 inspections you describe.

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    • You are the problem Gerard! If no appraisers will take on this crazy so called evaluation, then it would go away, hopefully. But it is guys like you that help kill our industry. How do you even know that the kitchen and bath pictures are actually from that house? You don’t!!!!! The fraud that will go on will be unstoppable.

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  18. It appears much of Fannie Mae’s computer data is stripped from appraisals. Not allowing appraisers to complete the entire process will cheapen their final computer model. As Fannie Mae then further incorporates the watered down product into their algorithms their decision making will also suffer. I have corresponded with Fannie Mae on this and they indicated Fannie Mae believes that appraisers are not always doing thorough inspections. I suggested that if that is true it is probably due to lender pressure. Many appraisers have been requested by lenders to overlook problems with the subject or to artificially increase value. This is not news. It would be more useful to set up a system like the VA’s if quality is really the goal.

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    • FNMA fails to assure that the AMCs working for lenders that sell mortgages to them are paying reasonable and customary fees. So then they act all outraged that quality of field inspections are not adequate. Of course, all they have to support that conclusion is their flawed CU system which was failed from its release 01/15/2015. FIRREA has been successfully bypassed. Completely. Much of the help twoard theat end was from TAF itself, coupled with AARO.

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  19. Well I think this is bs… they have three options before they order a full appraisal. When this shit back fores in there face who are they going to blame it on now. I think all appraisers should not stand for this shit and should never complete a desktop. Hybrid shit or a property inspection… they dont take out job livlyhood seriously…what are you going to do when you get 1 or 2 appraisals a month

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    • I agree.. appraisers need a back bone.. i will not be helping Fannie Mae put me out of business.. We are the only neutral party in the transaction.. i have seen several sales agents over price properties by as much a $40k in the past 6 months..removing the guardrails will open the floodgates for fraud

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  20. by Edward Bedinotti

    NYS AMC Law just took effect and it appears that only a licensed appraiser can complete these types of inspections in NYS now and the fee must be customary and reasonable and an outside fee study, not an internal fee study, must be utilized.

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