[Fannie Mae ] Appraisal Regs: They Actually Want To See What The Property Interior Looks Like
Posted by Jonathan J. Miller -Wednesday, September 1, 2010, 11:00 AM
1 Comment
To show you how bad things got, Fannie Mae is now in the process upgrading their appraisal regulations to reflect more prudent risk management. Part of this upgrade was to begin to insist that appraisers have local market knowledge and to now actually take pictures of the interior of a property being inspected and appraised.
They relied on AVMs, computer-aided valuation tools that are wildly inaccurate. Why not just require an appraiser to click a picture?
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.
It begs the question, what kind of appraiser would NOT take photos inside the property? Would a good appraiser not take hand written notes either? The whole logic here is crazy (nothing like setting yourself up to be sued down the road for correctly saying the home was a wreck when the borrower claims it was renovated).
I got a generic email from a lender yesterday that made this announcement seem like a huge deal. How much does a digital photo cost, remembering the reports are rarely printed these days, being delivered as a pdf or electronically.
Dear Sir or Madam: On Wednesday, September 1st 2010 [NAME REDACTED] will require interior photos that meet new Fannie Mae guidelines. (Fannie Mae Announcement SEL-2010-09).
This will effect any appraisal with an effective date of 9/1/10 or later. The guideline is listed below and also each engagement letter you will receive from SLS.
Interior photographs, which must, at a minimum, include:
– the kitchen;
– all bathrooms;
– main living area;
– examples of physical deterioration, if present; and
– examples of recent updates, such as restoration, remodeling, and renovation, if present
Thank you,
Vendor Relations Team
In Fannie Mae’s Announcement SEL-2010-09 Selling Guide Updates and Additional Guidance on Appraisal-Related Policies they want the appraiser to provide interior photos.
Good grief.
We have been providing interior photos since we were founded in 1986. It’s not like we should have received extra credit for doing that.
Based on my experiences in the 1980s, initial reason for not requiring them was the cost to the appraiser for film, photo processing, etc. in ordert to keep costs down. However my firm went digital in 1998 (12 years ago) and I felt the “no photo required” regulation later came to mean that many lenders and the GSEs didn’t want to know what the interior of the property looked like (aka don’t tell, I won’t ask).
I don’t take photos if the client is already familiar with the subject, but I see the point of what if litigation, which really begs the USPAP question of support. I can remember back in the dark days of working on SFR mortgage appraising that rarely somebody up the chain must have looked at the photos because they asked questions. Mostly though I got the strong impression that whether the appraisal supported the loan or the sale was the only thing that really mattered. I get the impression from SFR guys that hasn’t changed and may have intensified as us appraisers maintain we are marching resolutely on toward independence from lenders (place tongue in cheek here). Isn’t it bad form to bite the hand that feeds? Maybe the thing about litigation augers for selectivity of clientèle.