Fannie Mae And Freddie Mac Will Require “Electronic Appraisals” For Home Loans Originated After Dec 1, 2011 Featuring “Standardized Condition And Quality Ratings” For Properties

13 04 2011


  • Fannie Mae and Freddie Mac will roll out a new electronic appraisal system on June 27, 2011
  • The Uniform Collateral Data Portal (UCDP) has been in development for several years
  • All Fannie Mae appraisals delivered on or after March 19, 2012 must be submitted to UCDP if the loan was originated after Dec. 1, 2011
  • Lenders are being given nine months to adopt the system
  • Lenders and agents will access the system through the web to upload and browse files
  • Many lenders will interface the UCDP through their own systems
  •  As part of the new UCDP system, properties will be rated based on a “Standardized Condition and Quality” basis:


    Real Estate Appraisals: Home Values Will Increase Only If Homeowners Renovate, Upgrade And Maintain Homes Prompting Neighbors To Do The Same

    13 01 2011

    “Inflation alone does not result in higher real estate values,” Lenny said. What do are “continued maintenance, upgrades, and a community mind-set that knows it is well worth making upgrades to existing homes when they see their neighbor’s upgraded home sells for a higher price than one nearby with fewer upgrades.”

    Sales comparisons are limited to three to four months, rather than six, and within one mile, Lenny said. (His own neighborhood is more than one square mile in size.) Inclusion of a listing in the report is required, meaning that a house for sale is compared with those that have gone to settlement.

    Michael Lenny of Cherry Hill, N.J., has 49 years in the real estate industry, more than 30 of them as an appraiser.

    “I have seen, over the years, a general breakdown in the lender/appraiser relationship from a trusted and respected one to what appears to be happening today – ‘Do the appraisal our way, or you’re off our list.'”

    If the lender insists, however, that an appraiser cannot appraise a property for more than the highest price paid in the neighborhood, then “I ask how will home values increase if attention is also not given to upgrades, not to mention square footage, lot size, lot location, and the list goes on for items that are and have been typical adjustments by an appraiser in the appraisal report?” he asked.

    That is “truly sad,” Lenny said, because “the most important aspect of getting an appraisal in the first place is to have an independent and professional opinion.”

    Mortgage appraisers are being told there is no need for the “cost approach to value,” he said. The income approach is rarely used in residential appraisals unless the property is considered a rental. “That leaves just the sales-comparison approach, and that is where the rules and guidelines come into play in an appraisal report,” he said.

    Under these conditions established by lenders – those selling to Freddie Mac, Fannie Mae, or FHA – home values will never increase, Lenny said.

    Because of these rules, even a buyer who can put down 40 percent “still falls within the ‘guideline’ that the subject property cannot appraise for a price higher than exists on record.”

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    Real Estate Appraisals: Computerized Real Estate Appraisals Have Been Criticized As Producing Low Home Valuations

    30 12 2010

    “…criticism is being leveled at computerized real-estate appraisals, which depend on models that use prices from home sales and other data to determine the value of a house. Because of the volatility in the housing market, they are underestimating prices, some homeowners, real-estate agents and fee appraisers say…”

    Lenders use computerized appraisals primarily for home-equity loans, preapprovals for mortgage refinancing, loan modifications and mortgage originations of less than $250,000. Automated appraisals are cheaper and faster than in-person appraisals. They run as little as $20, whereas appraisals done by people can cost hundreds of dollars.

    The computerized models are used as a check on in-person appraisals, which often were too generous during the housing boom, according to federal banking regulators and state attorneys general. The regulators said banks often held sway over appraisers, encouraging them to value homes at certain prices in exchange for future business. In the wake of the housing bust, regulators imposed tough new rules, prohibiting banks from picking individual appraisers for individual properties.

    “The selling point was that [computerized appraisals] were faster and not prone to bank pressure,” says Steven Kane, a Colorado commercial and residential appraiser who is the author of two books on how to apply automated valuation models.

    Computerized appraisals calculate a home’s value by using an index derived from historical repeat-sales data, or sales records of homes with similar property characteristics, such as square footage and the number of bedrooms and baths. In-person appraisals don’t incorporate as much transactional data as a computer model.

    For more: Home Appraisal Update: FHA Appraisals Are Very Comprehensive And Require Appraisers To Perform A Thorough Property Inspection

    12 11 2010

    FHA appraisers do an inspection bordering on what a home inspector would do for potential buyers, Burnett said. FHA loans require appraisers to check electrical systems, look for water stains and do other work that would not be required for a conventional loan purchase. Burnett said he’s seen appraisers working on FHA purchases use binoculars to see if roof shingles are curling. “It’s to that level,” he said.

    Home appraisals involve paperwork and physical property inspections, and buyers should know the Federal Housing Administration is stricter about them for its government-backed loans than are brokers using conventional mortgages.

    An appraiser inspecting a property under a conventional mortgage usually takes some measurements and photos inside and outside the home and, after a brief look, leaves, said Bill Burnett, president of the Virginia Association of Mortgage Brokers and of Homestead Mortgage in Lorton. It’s not that fast for an FHA loan.

    While appraisal rules are much tougher with FHA loans, the credit and qualification requirements are less stringent when compared with a conventional mortgage. Homebuyers can get FHA loans with down payments of 3.5 percent, while most private and conventional lenders seek down payments of 10 percent, Burnett said. The trade-off makes sense, said Frank Donnelly, vice president of the Mortgage Bankers Association of Metropolitan Washington.

    Part of the FHA mission is helping first-time buyers and low-to-moderate-income buyers, and it is a bad idea to put buyers with lower levels of savings into a home needing major repairs. Burnett said first-time buyers not only need to be ready for a more stringent process, they also need to know what their rights are, including their options if the appraised value of the property comes in low. “Today, with values in some areas continuing to fall, they better know about that,” he said. For conventional and FHA loans, appraisals must be ordered through an independent third party. The cost for appraisals on conventional and FHA loans has increased as much as $100. “It’s greatly slowing down the process,” Burnett said.

    For more: Mortgage Lending: FHA Appraisals Are More Detailed And Comprehensive In The Inspection Of The Interior And Exterior Of The Home

    14 09 2010


    • They check to see if the appliances are functional. In other words, if there is a dishwasher or stove, it must work.
    • Whatever heating the property has it must be in good working order. If it is oil heat, then the outside tank unit must be safely away from the home.
    • For all homes built before 1978, the indoor paint must be in good order. In other words not chipping, peeling, or flaking. For all homes built after 1978, the exterior paint must be in good order. So there would not be any exposed surfaces. If there is a problem with the paint in either the interior or exterior you cannot just paint over it. You must go through the process of scrapping the problem areas and then painting.
    • They also check the water pressure by flushing toilets and turning of faucets checking to see if the hot and cold water is working properly.
    • They check to see if the water heater is working properly.
    • They check the attic for proper ventilation, look for exposed or frayed wires, and evidence of a previous fire. They also check for any light coming in the attic which would give evidence of weakness in the attic.
    • They also check the crawl spaces for debris or evidence of standing water. While there they look for any foundation support problems.
    • They inspect the roof for leaks.
    • They look at the interior flooring to be sure there are no safety or health issues.
    • They then inspect the windows and doors. They cannot be broken, although the windows can have cracks as long as those cracks do not pose any safety or security issues.
    • Are there any revealed wires? Do they pose a risk? Are they dangling? That is something they will look at.
    • They will take a close look at the foundation for any cracks. That is an indication of an unsafe foundation and that will not pass.

    For more: Appraisal Fees Vary Due to Distance, Difficulty, Complexity And Type

    6 09 2010


    • Location/distance of the home – depending on where the property is located, the appraiser may have to set aside several hours just to get to the property.
    • Difficulty obtaining property information from public sources – some sources (county recorders office) will even charge the appraiser to obtain information necessary to complete the appraisal.
    • Complexity of the home – the research and time required to complete the appraisal, as well as the appraiser’s liability increases significantly with the complexity of the assignment. This is the reason fees jump significantly with properties that are more complex.
    • FHA or Conventional Financing – A borrower may be receiving a quote based on our Conventional Financing Fee Schedule. However, an FHA order will be quoted at a higher fee, due to the additional inspection and report requirements.

    Home Purchase And Refinance Appraisals: Dodd-Frank “Financial Reform” Act Eliminates HVCC And Allows Fannie Mae And Freddie Mac To Accept Appraisals Selected By Loan Originators

    26 07 2010

    The “appraisal independence standards” will be written over the next 60 days. The newly enacted bill, unlike HVCC, allows Fannie Mae or Freddie Mac to accept any appraisal report completed by an appraiser selected or paid by a mortgage loan originator.

    When President Barack Obama signed the Dodd-Frank Act this week to reform the financial markets, the Home Valuation Code of Conduct (HVCC) was officially set for elimination in 90 days.

    The Federal Housing Finance Agency (FHFA) implemented HVCC in May 2009 in an attempt to improve the independence of appraisers by prohibiting lenders and third parties from influencing appraisals. It’s a controversial regulation, leading to an increase in demand for appraisal management companies (AMCs) and complaints from independent appraisers who claim they’re being cut out of the market.

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