Appraising for the Secondary Market  and understanding the new required forms:

Fannie Mae’s regulations and laws have been adopted by Freddie Mac and 90% of all other secondary market investors.  So adherence to Fannie Mae’s guidelines by lenders is a must even when the loan is not sold directly to FNMA as over 90% of loans are sold to the secondary market.

There are 11 new forms that FNMA has created.  Condo, URAR, Income and Review reports are the ones that most affect us.  All these new forms MUST be used by appraisers as of 11-1-05 for FNMA/GNMA and by 1-1-06 for Freddie Mac (which handles most conventional loans).

 As of these dates:

The 2055 will be for exterior inspections only with the cost/income approach no longer applicable to the 2055 assignment (in the past it was even though there was no spot for them).

All interior inspections must be done on a 1004 or a condo form.

FNMA does not say when the cost approach is applicable however HUD states only for properties under 1 year of age and USPAP states it is up to the appraiser to determine if the approach is applicable NOT the lender.

FNMA sets no standards or rules on the following (although lenders might):

1. Line item adj
2. Distance of the comparables
3. Does not keep a list of disapproved appraisers
4. Does not require an economic Life  - this has not been req. since 1993.
5. Does not require an outside condo comp for all condos.  Only for newly converted condo developments is this required.
6. We can go over 15% net and 25% gross if we comment.
7. Gives no value bracketing requirement however should comment if value is over or under the predominant price within our neighborhood boundaries.
8. Does not require photos for final inspection.
9. Does not require comp photos on new 2055 exterior.
10. Rentals are not required to be on Map per Fnma.
11. FNMA and UUPAP do not require explanation of “markets increase” in values.    
12. Can not do a 2055 exterior if can not verify room count, bed/ba's etc.
13. Will not purchase a loan with the subject built prior to 6/15/76.

FNMA does require the following:

1. Site value documentation retained in the work file.
2. Cost Appr cost number calculations retained in the work file.
3. Requires new subdivisions to have 1 comp outside the subdivision OR must have 1 re-sale comp inside.  Different builder inside the subdivision is not allowed as the 3^rd comp.  This pertains to new subdivisions and recently converted condo developments.
4. Must put site value on all 1004 reports even if do not do the cost approach. 
5. Requires lender to request an exterior  re-inspection on all appraisals over 4 months in order to go to settlement.
6. Update is no longer considered an extension of the old report but a new assignment.
7. Must keep a copy of plans and specs in file for all new construction/addition or any hypothetical condition you are appraising.  Lender is supposed to supply.  If not provided then we are in violation with FNMA (just looking at builder specs does not suffice).  Instructor felt that writing the exterior dimensions from builder specs on the floor plan is sufficient.  Or if model home is the same model as the subject we can use this instead of “plans and specs”.
8. FNMA states that a final inspection is required on all “subject to completions”.
9. Photos from MLS are acceptable however FNMA requires an exterior street inspection of all comparables.
10. New manufactured home form is called 1004C and is required.
11. New Review from for FNMA is 2000 form and for Freddie is 1032 form.  Same form.
12. Final inspection certificate is required for lenders work file.
13. Must put in new 1004 form “owner of public record”.  If county updates slowly or name change, must still list what county states and comment on reason for “old” info.  Very important due to fraudulent lending practices.
14. Prior transfers of comparables are 1 year from the DATE OF THEIR SETTLEMENT not the date of the appraisal.
15. HUD is intended user for FHA loans and should be noted in scope of work for FHA appraisals.

Other interesting facts:

Lender is responsible to provide the appraiser with the ALL pages of the contract.  In the new 1004 form the contract info is stricter and you have to X a box stating that you read the complete contract.  From now on please forward me all pages if you have otherwise I will complete assignments once the agent/owner gives me a readable copy.

Appraisers have to state in the new form any “financial assistance, loan charges, sale concessions, gift or down payment assistance, non realty items included in sale”.  I asked if the Home Warranty offered by the seller would pertain and he said best to list it just in case.

FDIC as of 3/2005 no longer allows estimated values on their banks appraisal order forms.

There is now a box in the new form to be checked for any 1 unit property with a “kitchenette” area that can be (does not have to be currently occupied) rented separately from the rest of the structure.  This includes in-law suites, bsmts, rooms over garages etc.

In the new form the last section is a long detailed PUD section similar to that of the 2055 and 1004 combined.  We only need to fill this out if the builder is still in control however (even though the form does not state this).

That’s it!  I hope this has been helpful!!!!