Fannie Mae's new URAR 1004: an overview.
There is now one appraisal report form for each property and inspection type for both Desktop Underwriter and manually processed mortgages. As a result, lenders and appraisers should be able to determine which report form should be used based on the type of property and property inspection required, according to Fannie Mae.
The forms include
* Uniform Residential Appraisal Report Form 1004
* Exterior-Only Inspection Residential Appraisal Report Form 2055
* Manufactured Home Appraisal Report Form 1004C
* Individual Condominium Unit Appraisal Report Form 1075
* Exterior-Only Inspection Individual Condominium Unit Appraisal Report Form 1075
* Individual Cooperative Interest Appraisal Report Form 2090
* Exterior-Only Inspection Individual Cooperative Interest Appraisal Report Form 2095
* Small Residential Income Property Appraisal Report Form 1025
* Appraisal Update and/or Completion Report Form 1004D
* One-Unit Residential Appraisal Field Review Report Form 2000
* Two- to Four-Unit Residential Appraisal Field Review Report Form 2000A
Each form includes the purpose of the appraisal, scope of work, intended use, intended user, definition of market value, statement of assumptions and limiting conditions and appraiser's certification. The appraiser's certification on each of the forms was expanded to more clearly communicate Fannie Mae's expectations of the appraisal and appraisal reporting process. In addition, new certifications were developed to affirm that the appraiser has the appropriate knowledge and experience to appraise the particular type of property in the market area; clarify the permitted disclosure or distribution of the appraisal report; and acknowledge that any intentional or negligent misrepresentation may result in civil liability and/or criminal penalties.
The revised format enables the appraiser to report the results of the valuation in a brief but comprehensive manner, which will be more efficient for reviewing and processing than existing forms, according to Fannie Mae.
Because the sales comparison approach is generally the most reliable indicator of value for one- to four-unit properties, Fannie Mae does not require appraisers to develop the cost and income approaches for all appraisal assignments. However, if the cost and income approaches to value are applicable under USPAP and are not developed, appraisals reported on these forms will be considered limited appraisals. On the other hand, when the omission of the cost and income approaches is not a departure from USPAP an appraisal reported on the forms will be considered a complete appraisal. According to the Fannie Mae lender announcement, the Appraisal Standards Board has clarified that appraisers are not required to identify an appraisal as "limited" or "complete" in the report. However, the appraiser is required to disclose any departures from USPAP, such as the valuation approaches not developed that would be applicable to the particular appraisal assignment.
These appraisal report forms reflect Fannie Mae's requirements, which are supplemental standards to USPAP requirements. According to the Fannie Mae release, an appraiser will be in full compliance with its requirements if he or she addresses all of the information on the report forms and presents the data accurately and completely. However, the announcement goes on to point out that appraisers should go beyond any limitations of a particular form by reporting any additional research or analysis they have performed or conclusions they have reached to support the appraisal.
Accept no alternative
More information on the form can be found at www.efanniemae.com/sf/formsdocs/forms/1004.jsp?from=hp. Actual copies of the report forms may be downloaded from www.efanniemae.com/sf/formsdocs/forms/pdf/sellingtrans/1004.pdf. And a complete overview of the form was printed in the Summer 2005 issue of The Appraisal Journal. Appraisal Institute members can download a copy of that article from the Lum Library's online catalog, at www.appraisalinstitute.org/resources/lum.asp. Nonmembers can contact the library at 312-335-4467 or TAJ at 312-335-4447 for a reprint.
In its March release, Fannie Mae stated that the more consistent presentation of the appraiser's research, analysis and conclusions will help appraisers more clearly present the results of their valuation, and will enhance the lender's review of the appraisal. However, while providing clearer guidance on their needs, the new form makes it abundantly apparent that these forms are very specific and hard to use for non-mortgage lending purposes. For more information on AI Reports[TM] forms being developed for other purposes by the Appraisal Institute, see page 8.
"Intended User" clarified
The new forms went through an exhaustive series of testing and comment periods, in which the Appraisal Institute and its members played a major constructive role. "We are gratified by the degree to which Fannie Mae took into account concerns raised by our members, and we are pleased that the new forms reflect our input," said Don Kelly, Vice President of Public Affairs for the Appraisal Institute.
One such concern was over the "intended user" elements of the URAR. Fannie Mae recently issued a clarifying statement, based in part on input received from the Appraisal Institute. Mark Simpson, Fannie Mae's director of property standards said, "Recognizing that there may be confusion in the appraisal community about the distinction between parties who 'use' and parties who 'rely' on appraisal reports," Fannie Mae has developed the following additional notice or statement that it will accept when the appraiser believes the Lender/Client is the only Intended User:
"The Intended User of this appraisal report is the Lender/Client. The Intended Use is to evaluate the property that is the subject of this appraisal for a mortgage finance transaction, subject to the stated Scope of Work, purpose of the appraisal, reporting requirements of this appraisal report form, and Definition of Market Value. No additional Intended Users are identified by the appraiser."
Simpson added, "The use of this additional notice or statement may help to clarify the identification of the Intended User as addressed in the Uniform Standards of Professional Appraisal Practice and on the revised appraisal report forms. This statement is consistent with Fannie Mae policies and we will purchase loans with this additional language in the reports." He emphasized, however, that Fannie Mae will not accept appraisals with additional notices or statements that may conflict with Certification #23.
Fannie Mae has released a Frequently Asked Questions document that addresses Intended User and other issues. It is available at www.efanniemae.com/sf/formsdocs/forms/pdf/sellingtrans/appraisalfaqs.pdf.
"Appraisers traditionally have not identified the other parties to a mortgage finance transaction that often rely on the accuracy of the appraisal report as Intended Users based on the current definition of an Intended User in the Uniform Standards of Professional Appraisal Practice. However, if the appraiser believes that any of these parties should be identified as additional Intended Users based on information provided by the Lender/Client or from other sources, he or she should identify them as such in the appraisal report," Simpson stated.
Simpson acknowledged the Appraisal Institute's input on this issue. "Fannie Mae has worked closely with the Appraisal Institute to clarify the meaning of 'intended users' and parties that 'rely' on an appraisal report in conjunction with the certification required in its new appraisal forms," Simpson said. "These clarifications help reinforce [Fannie Mae's] view that appraisers are accountable for the quality of their work," Simpson added.
In its seminars on the subject the Appraisal Institute instructs students that the lending institution, the client, is the "intended user." Despite that instruction, confusion has existed because the form itself asks the appraiser to acknowledge that other parties may receive and rely on the report. Instructor Alan E. Hummel, SRA, stated, "After teaching this seminar it became clear that some clarification was needed. I believe this statement helps clarify the issue as it clearly identifies the lender as the intended user."
The issue had also been subject to comment by the Association of Appraiser Regulatory Officials and the Appraisal Standards Board of The Appraisal Foundation.
The Appraisal Institute also had extensive input on the original form, released in March, at which time Simpson also acknowledged the organization's guidance. "Property valuation is an important part of the mortgage underwriting process. We sincerely appreciate the time and effort that the leadership of the Appraisal Institute and its members took to share their views with us. We are also committed to working with partners like the Appraisal Institute to help provide high quality educational offerings on our appraisal report forms," Simpson said.
URAR book and seminar from Appraisal Institute
In light of the new forms, the Appraisal Institute has released a new book and unveiled a new seminar both aimed at teaching appraisers how to use the new URAR form.
The book, Using Residential Appraisal Report Forms: URAR 2005 (Form 1004) and Exterior Inspection (Form 2055), by Mark Ratterman, MAI, SRA, addresses the reasons for the changes to the forms and their ramifications and provides up-to-date, relevant instruction on completing both the Uniform Residential Appraisal Report (Form 1004) and Exterior-Only Inspection Residential Appraisal Report (Form 2055). Designed for individual or classroom use, this guide can be used as a reference by experienced appraisers and as a training manual by those new to the field. The book provides line-by-line instructions for completing the forms and includes dozens of real-world examples that provide context for the instructions. The examples focus on strategies for achieving best practice and overcoming common mistakes made in the field.
The Appraisal Institute's seven-hour seminar, The Professional's Guide to the Uniform Residential Appraisal Report, outlines the reasons behind the revisions and how USPAP's Supplemental Standard Rule applies. There is a line-by-line comparison of the basic differences between the old and the revised URAR forms, as well as an explanation of the revised limiting conditions and appraiser's certification as well as important liability issues. The seminar also provides newer appraisers with a better understanding of secondary market guidelines. Lenders and underwriters may gain insights on the role the form plays from the intended user's perspective.
The course has been scheduled for a variety of offerings nationwide, including: January 20, 2006 in Atlanta, Ga.; February 1 in Omaha, Neb.; February 17 in San Diego; February 24 in Marquette, Mich.; and three offerings in Balitmore, Md.; February 25, March 29 and September 27.
If there is not an offering close to you in the list above, visit www.appraisalinstitute.org/education/seminars1.asp?id=773 for a complete list of offerings. This program is also available through the Appraisal Institute's online education program.
by Adam Webster, Managing Editor
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|Publication:||Valuation Insights & Perspectives|
|Article Type:||Cover Story|
|Date:||Sep 22, 2005|
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