Thursday, July 1, 2010

New Appraisal Rules to Love and Hate

Fannie Mae appraisal rules are changing. Here's what you need to know:

-- If an interior inspection is required, the following photographs must be included in the appraisal:
-- Kitchen
-- All bathrooms
-- Main living area
-- Examples of physical deterioration, if present
-- Examples of recent updates, such as restoration, remodeling, and renovation, if present

-- If an underwriter thinks the appraisal does not support the value indicated in the report, they will not be able to arbitrarily reduce the value. They must follow the following process:
-- Contact the appraiser to address the report deficiencies.
-- Order a desk review appraisal or a field review appraisal. The appraiser performing the review appraisal must be licensed in the state where the property is located and must have the knowledge and experience to appraise the subject property with respect to both the specific property type and geographical location (in other words, the appraiser performing the review must be a local appraiser).
-- The lender can also order a new appraisal instead of ordering a review appraisal.
-- If they order a review appraisal or a new appraisal, it must be performed by a local appraiser and the value in the new appraisal must be used. The lender cannot average the values of the old appraisal and the new appraisal.

-- Appraisers who do not have the knowledge or experience to perform an appraisal in a specific area cannot be used for Fannie Mae appraisals.

-- If a foreclosed property is used as a comparable property in an appraisal, the appraiser must account for any differences between the foreclosed property and the subject property, such as the condition of the property.

-- Appraisers are not allowed to say they are prohibited from discussing the appraisal with the lender, as long as the lender contact is not someone who is involved in loan production (loan officers, processors, etc.), or someone who is paid on a commission basis, or someone who reports to anyone not independent of the loan production process.

-- Appraisers cannot deduct a dollar for dollar amount from the value of a comparable sale because of seller concessions. They can only deduct the amount that they believe resulted in an increase in the sales price.

Some of these changes take effect immediately and some take effect on September 1, 2010. The changes are only for loans being sold to Fannie Mae.

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