Fannie Mae’s Selling Guide Updates and Additional Guidance on Appraisal-Related Policies, Announcement SEL-2010-09, addresses many concerns raised by the National Association of Realtors (NAR) regarding the Home Valuation Code of Conduct (HVCC) and the appraisal policies of the government sponsored enterprises (GSE), Fannie Mae and Freddie Mac. The announcement addresses geographic competency, lender changes to the appraisal report, communication under HVCC, and the use of short sales and foreclosures as comparable sales. NAR had previously called on the GSEs to provide additional guidance on these issues.
The guidance states that Fannie Mae requires lenders use appraisers with geographic competency. Although USPAP allows an appraiser who does not have the appropriate geographic knowledge to accept an appraisal assignment, Fannie Mae does not allow this flexibility. Further, the announcement states that appropriate communication with the appraiser is permitted under HVCC and nothing in the Code or in Fannie Mae appraisal policy requires the use of third party appraisal management companies (AMC).
Fannie Mae found that lenders are sometimes reducing the opinion of market value in the appraisal report. Appraisal policies for Fannie Mae have been updated to provide information on steps lenders may take if an appraisal is found to be deficient. The lender may request a field or desk review of the report in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP). The lender may forgo the review and obtain a new appraisal.
Additional guidance is offered by Fannie Mae for the use of short sales and foreclosures as comparable sales. The appraiser is responsible for determining which comparables are appropriate for the appraisal report and must account for all factors that affect value when completing the analysis. According to the guidance, the appraiser may use a short sale or foreclosure as a comparable but must identify and consider differences from the subject property and cannot assume the properties are equal.