Lenders and appraisal management companies, which are all answering to an onslaught of new rules from various regulatory agencies, are closely monitoring appraisers and appraisal reports.
Fannie Mae’s lender letter published in December 2013 as a response to this new regulatory landscape came as no surprise to the industry. It noted that with the millions of appraisals that have been submitted by lenders and their authorized agents through the Uniform Collateral Data Portal, Fannie Mae has the ability to not only review individual appraisals, but can also pull and review every appraisal submitted by an individual.
Fannie Mae’s authority to review each report for consistency, accuracy and its correlation to other appraisers working in the same market is holding appraisers more accountable than ever for the precision of their work.
Consistency is Crucial
It is vital for each appraisal assignment to have a level of consistency from report to report, as well as each and every comparable provided. Every appraiser should note that the assessment of the quality, condition and other market influences will be now be more closely measured against peers using that same comparable. Although consistency within an appraiser’s own reports is one of the measured components of the review, equally important is the location, view, condition, quality and gross living area figures as they relate to others using the same comparable.
Appraisers must also adhere to the Uniform Appraisal Dataset definitions for condition and quality, and view interior mortgage listing service photos to support the ratings they provide. Adverse location influences are tracked by global imaging maps and view influences are tracked as well. Appraisers need to check and double check the tax card and MLS information for all bedroom, bath, garage and GLA figures, and if the figures do not concur with peer consensus and cannot be corroborated during review, they will be flagged.
If there are a number of inconsistencies throughout the report as they relate to these components, the report may be flagged for a full review. Lenders certainly do not want their appraisers showing up on the full review list—it is a negative mark that impacts everyone—the appraiser, appraisal management company and the lender.
Attention to Detail
Avoiding these issues requires a large, but necessary effort from appraisers. They can no longer rely on boilerplate comments that provide a “one-size-fits-all” description of a property. Similarly, depending solely on public records can be problematic as well, as these facts change over time. Discrepancies in GLA, room and bath count during an inspection that do not align with public records must be documented and specifically addressed. Appraisers need to research local city/county departments and indicate exactly why the observed and reported information does not align with public records. These detailed narratives that support the subject information, comparables selected and the adjustments made will be increasingly critical to appraisers’ success.
It is a new world for the appraisal industry. Fannie Mae’s letter spelled out a portion of the scrutiny lenders, appraisal management companies and individual appraisers face—and what it boils down to is the need for appraisal professionals to be more self-critical of their work. With every single appraisal submitted subject to review, they must be committed to taking the time to carefully review their own work and include extremely detailed narratives to support their assessments for every single assignment. By remaining consistent of how comparables were used in the past and ensuring that their documentation practices are consistent, appraiser’s can satisfy existing review criteria, as well as those changes in the review process yet to come.
Brad Froelich is chief appraiser at USRES & RES.NET.