The weapon of mass property devaluation is finally getting shot down a notch or two. Effective September 1st, Fannie Mae (conventional loans) issued a new directive to lenders addressing concerns on today's appraisals. Fannie Mae issued announcement SEL-2010-09, "Selling Guide Updates and Additional Guidance on Appraisal-Related Policies."
The following are the highlights:
· Short Sales and Foreclosures cannot randomly be shoved into a report without stating the condition of the properties. The trashed foreclosure down the street will no longer hold the same merit as a seller's well-kept property. "The appraiser must conduct the proper research in order to complete the assignment and provide an accurate opinion of market value." Although, if the neighborhood is a composite of foreclosures and short sales, the value of the awesome home will still be compromised.
· Underwriters cannot alter the appraised value. Corrections or additional changes are required to be made by the appraiser. If the opinion of value is still fuzzy, another appraisal can be ordered. Although there was no directive on whether the lender can take the value of the second appraisal if it were to come in higher.
· Fannie Mae added verbiage that will apply to investors purchasing properties and immediately selling them for a quick buck. "Lenders must pay particular attention and institute extra due diligence for those loans in where the value of the property has experienced significant appreciation in a short time period since the prior sale." Please call your investors and ask them to take a chill pill. If they are refusing FHA buyers because of the "two appraisal rule," take heart in knowing conventional financing may require the same.
· "Appraisers must provide the sales and financing concession information that was available and verified for the comparable sales." Translation: concessions come straight off the top of value. That home comp for $200,000 with a $6,000 seller concession is actually only a $194,000 comp.
· Fannie Mae is backing away from demanding the use of Appraisal Management Companies. This is hysterically funny because Lindsay Lohan will have a better chance of staying out of a bar than a loan being purchased by Fannie that does not use an Appraisal Management Company. At least for today.
Unfortunately, Fannie Mae does not rate the year old appraisal process or HVCC (home valuation code of conduct). Until that time comes, homeowners are stuck with appraisal roulette determining our property values.
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