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FHA Adopts Fannie Mae 1004MC Market Conditions Addendum

Effective April 1, 2009, the Federal Housing Administration will require appraisers to use the Market Conditions Addendum (Fannie Mae 1004MC, Freddie Mac Form 71). According to Mortgagee Letter 2009-09 released on March 23, 2009, this will ensure greater transparency and accuracy of appraisals performed for FHA-insured financing. Properties located in declining markets must include at least two comparable sales that closed within 90 days of the effective date of the appraisal. A lack of available market data must be accompanied by a detailed explanation.

FHA states that a declining market is any “neighborhood, market area, or region that demonstrates a decline in prices or deterioration in other market conditions as evidenced by an oversupply of existing inventory or extended marketing times.” The 1004MC form will identify a declining trend in the market. FHA reminds Direct Endorsed lenders that both the lender and the appraiser are equally responsible for the integrity, accuracy, and thoroughness of an appraisal submitted to FHA.

Comments
  1. david

    That’s not all they adopted. The residential report should closely resemble a commercial report when you’re finished.
    Pay close attention to that last paragraph folks (I call it the hangman’s clause).
    1. The Market Conditions Addendum (Fannie Form 1004MC/Freddie Form 71).
    2. At least 2 comparable sales within 90 days of appraisal date.
    3. A minimum of 2 active listings or pending sales in addition to the 3 closed comparables.
    4. Bracketed listings using both dwelling size and sales price when possible.
    5. Adjust active listings to reflect the List To Sales Price Ratio.
    6. Adjust pending sales to reflect contract sales price when possible.
    7. Include original list price and any revised list prices.
    8. Reconciliation of adjusted values of active or pending sales with adjusted values of closed comparable sales.
    9. Absorption Rate Analysis.
    10. Known or reported sales concessions on active and pending sales.
    FHA also is restating its warning that…”Direct Endorsement Lenders are reminded that if the appraiser they selected provides a poor or fraudulent appraisal that leads FHA to insure a mortgage at an inflated amount, the lender is held responsible equally with the appraiser for the integrity, accuracy and thoroughness of an appraisal submitted to FHA.”

  2. Mark

    As both an appraiser and a realtor it time for me to get out of the appraisal business. With fees controlled by AMC’s additional work heaped on the appraiser and all the blame placed on the appraiser with reduced compensation due to splitting the fees with management companies the industry is being killed.

  3. Now if anybody really thinks the form will be helpful in any way, shape or form, I have a good deal on some swamp land. The most obvious thing this should accomplish is a higher appraisal fee for the consumer. Typically an increase of 15 – 20% seems common, although we have seen increase requests for as much as 50% more. In some areas this is necessary because of the increased difficulty of providing new information, not readily available in the normal course of business.
    The form not particularly well thought out, was changed 3 weeks prior to the requirement to use the form.

  4. The reality is that the 1004 MC form is ill-conceived and the data necessary to complete the form is not readily available, thus giving the residential appraiser an out on fully completing the form. FNM and the MLS have provided supportive statements or comments that render the form useless. Form reports and an quick examination of an MLS data set does not provide complete insight into a market’s price trend; local, knowledgeable, experienced and well-trained appraisers use that data and draw on local realtors and past experience. FNM added a new form to the 1004 appraisal form along with a $30-$75 increase in the appraisal fee.

  5. Rolf Kleven

    License of appraiser’s was suppose to solve all the problems. Now the 1004MC report will make every think perfect. The use of current comparables reflects the market. We really don’t care what happened 6 to 12 months ago. Are trends in marketing reflect the time of the year (wisconsin’s winters) more than anything. This adds lots of time to my reports, but my final value isn’t affected by trends, its determined by good comparables.

  6. Rolf Kleven

    License of appraiser’s was suppose to solve all the problems. Now the 1004MC report will make every think perfect. The use of current comparables reflects the market. We really don’t care what happened 6 to 12 months ago. Are trends in marketing reflect the time of the year (wisconsin’s winters) more than anything. This adds lots of time to my reports, but my final value isn’t affected by trends, its determined by good comparables.

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