GSE’s Finding Problems with Residential Appraisals

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Valuation Management Group is committed to keeping our clients and appraisers informed about the latest information relative to the appraisal industry.

Freddie Mac and Fannie Mae began requiring the utilization of the Uniform Appraisal Dataset “UAD” 2 years ago to standardize the residential appraisal format. Fannie Mae recently conducted a sampling of appraisals and determined 17.6% contained contradictory information. The biggest areas of concern were the condition and quality ratings of the subject and comparables. They now have the ability to determine if appraisers are rating a property the same way every time they use a sale as a comparable.  Appraisers must be careful to consider a specific property the same condition every time. For instance, if the appraiser’s subject is a C4 this month, when it is utilized as a comparable sale in the future it should still be a C4.

While the GSE’s are issuing warning messages today, it is the intent for these warnings to become fatal edits at a point in the near future.  You can read the joint GSE August 27, 2013 Update by clicking on the following link. UCDP/UAD Newsletter. This process helps us clearly understand that the GSE’s are being more proactive today than in the past and will continue their efforts to put processes in place to monitor the appraisal quality and accuracy. Valuation Management Group is also taking a proactive approach and reviews all appraisals for UAD compliance, clears any warnings and uploads to the UCDP for our clients.

Elevated appraised values contributed to the housing market collapse. Appraisers were often pressured or encouraged to hit targeted values. Appraiser Independence laws have relieved most of the pressure to give a “stated value appraisal,” but it is up to the appraiser to ensure they deliver a well supported appraised market value.

Rob Murphy, the GSE’s director of collateral and single family risk policy recently commented that they want accurate data and accurate property values. He went on to say for years, no one was looking at appraisals, but now the GSE’s can see things they could not in the past. They want to make sure a property meets adequate appraisal requirements and that the appraisal accurately reflects market value.

Fannie is expected to give guidance next month to lenders regarding ways to decrease appraisal conflicts. Valuation Management Group will be assisting our clients and appraisers in meeting the GSE’s expectations.

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