By Daniel A. Bradley, SRA, CDEI
Fannie Mae recently announced changes to its Selling Guide by issuing Announcement SEL-2011-11 on October 25, 2011.
Most of the changes outlined in this announcement pertain to loan documentation and delivery issues between originating lenders and Fannie Mae, and are not important for appraisers. However, there are three appraisal-related changes to the Selling Guide that will change the way appraisers prepare reports for Fannie Mae lenders.
Item 1: Reporting Contract and Settlement Dates. Appraisers are now required to provide two dates for each comparable sale; the contract date and the settlement (or closing) date. Only the month and year need be provided. In the Selling Guide, Fannie states “For example, appraisers may use ‘s04/10,’ ‘c02/10′ where ‘s’ reflects the settlement or closing date and ‘c’ reflects the contract date.” If the contract date is unavailable to the appraiser in the normal course of business, the appraiser must enter the abbreviation “Unk” for unknown, in place of the contract date. For appraisers who are accustomed to working with the Uniform Appraisal Dataset (UAD) reporting requirements, this is not a change. This two-date format is already required by UAD for the 1004, 2055, 1073, and 1075 forms. This requirement to report for contract and settlement dates has now been extended to all Fannie Mae form types, including the 1025 and 1073.
Item 2: Reporting Proximity to Subject. Appraisers are required to report each comparable sale’s proximity to the subject in terms of miles, and must include the applicable directional indicator (for example, “1.75 miles NW”). As with Item 1 above, this is already a requirement for the four UAD forms, so most appraisers should be somewhat familiar with this requirement. No longer will it be acceptable to Fannie Mae for appraisers to provide distances in blocks or other measurements. Fannie has stated that when appraising condominiums and using a comparable sale in the same building, it is acceptable to report the distance as “0.00 miles”.
Item 3: Adjustments for Actual or Effective Age. Fannie Mae does not require adjustments for actual or effective age, and does not place a restriction on the actual age of the dwelling. When an adjustment is made in an appraisal for “year built” – whether the adjustment is made for actual age or effective age – the appraiser must provide an explanation for the adjustment.
One interesting side note is that Announcement 2011-11 contains an apparent error regarding the requirement for contract and settlement dates, which has already generated some online buzz. Page 2 of the Announcement states: “This topic also requires the lender to provide the month and year of the sales contract and settlement or closing for comparable sales.” Subpart B4-1.4-18 of the Selling Guide establishes no such requirement for the lender. Rather, it is the appraiser’s responsibility to provide this information, if available. As appraisers know, the lender is not in a position to be able to provide contract and settlement dates of comparable sales. Stay tuned to see if a correction is issued.
In summary, for appraisers who appraise only single-family homes and condominiums, the impact of these changes will likely be minimal because two of these “new” requirements already exist within the UAD. For appraisers who complete 2-4 family and manufactured home appraisals for Fannie Mae, these may be new requirements.
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