FNMA Making it Harder for Lenders to Cut Appraised Values

There's some relief for homebuyers, real estate agents and loan originators frustrated with appraisal issues negatively impacting transactions.  How much will FNMA's announcement really rein in underwriting departments though?

On June 30th FNMA issued SEL 2010-09, "Selling Guide Updates and Additional Guidance on Appraisal-Related Policies".

What a mouthful!

The updates are effective for all loans originated after September 1, 2010.

Here's what FNMA had to say in this announcement:

In the past, Fannie Mae did not provide requirements concerning lenders making changes to the opinion of market value reflected in the appraisal report. During Fannie Mae's post-purchase reviews, cases were identified where the lender had reduced the opinion of market value in the appraisal report based upon underwriter judgment, automated valuation models, or other methodology. Therefore, Fannie Mae has updated its appraisal policies to address the practice of lenders changing the appraiser's opinion of market value and also to provide specific guidance when an appraisal is considered deficient.

So what updates did they make to their appraisal policies?

Well, we've got to go to FNMA's Seller's Guide for that answer, specifically page 571, which is titled,

"B4-1.4-21, Appraisal Report Review: Valuation Analysis and Final Reconciliation (06/30/2010)".

Here FNMA finally gets to the issue:

The lender is responsible for ensuring that appraisal reports are complete and that any changes to the report are made by the appraiser who originally completed the report. If the lender has concerns with any aspect of the appraisal that result in questions about the reliability of the opinion of market value, the lender must attempt to resolve its concerns with the appraiser who originally prepared the report. If the lender is unable to resolve its concerns with the appraiser, the lender must obtain a replacement report prior to making a final underwriting decision on the loan. Any request for a change in the opinion of market value must be based on material and substantive issues and must not be made solely on the basis that the opinion of market value as indicated in the appraisal report does not support the proposed loan amount.

All right, so what in the world does that all mean?  (No wonder the government owns forests - they need the trees for all this paper!).

For one, it means a lender's underwriter can't just over-ride an appraisers value.

If the underwriter doesn't like the value, they have to address the issue with the appraiser.  If the appraiser holds their ground, then the underwriter must order a new appraisal.

There's a whole lot more blah, blah, blah in the announcement, but that's the gist of it.

Thoughts

Is this really going to make that much of a difference?

I don't think so.

We'll just see more review appraisals ordered which borrowers will have to pay for and everyone will have to wait on the delays.

It is a step in a positive direction, so maybe that's cause for a little confetti toss.

Michigan, Mortgage, Expert, Birmingham, Bloomfield, Detroit, Rochester, Royal Oak, Troy

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Drew Sygit: CMPS, CMC, CRMS, CMLO, CALO, MBA, NAMB/MAMP Instructor & Speaker
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