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Appraisal Requirements & Responsibilities For Conventional Loans

By
Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

Appraisals play a huge role in obtaining financing for a property.  Therefore, everyone in the Real Estate and Lending Industries needs to be informed and have a basic understanding of Appraisal Requirements & Responsibilities For Conventional Loans

The last opportunity I had to attended a seminar on understanding appraisals and the appraisal process, was a couple of years ago, and even though I have been a Loan Originator for several years, there was a lot I was not aware of before.  Even though this seminar was a couple of years ago, the information I will share in this blog remains the same.  

All the information presented at the seminar was important, but what stood out to me the most were the requirements and responsibilities Fannie Mae & Freddie Mac require from Lenders and Appraisers.  Fannie Mae & Freddie Mac require Lenders be accountable for:

  • The selection of an Appraiser qualified to perform an appraisal of the subject property, without attempting to influence the Appraiser's results.
  • Provide the Appraiser with a Sales Contract and other information about the subject property and the transaction, including whether funds are paid on behalf of the Borrower come from a contribution from an interested-party and are within allowable contribution limits.
  • Reviewing the appraisal to ensure the Appraiser's opinion of value meets all the Fannie Mae or Freddie Mac definition of "Market Value", the appraisal is accurate, and is fully supported, and in compliance with Secondary Market guidelines.
  • Effective May 1, 2009 the Lender must also verify that the appraisal was ordered and completed in accordance with the Code of Conduct.

In sellecting the Appraiser the Lender MUST follow and meet the following criteria.  The following is right out of a Fannie Mae Announcement 2010-09:

"Lenders are reminded that appraisers must have the requisite knowledge to perform a professional quality appraisal for the specific geographical location and particular property types.  The use of an appraiser who has the appropriate knowledge of specific geographical markets, access to the appropriate data sources, and experience in appraising specific property types within those markets will help to ensure that valuations are accurate and that appraisal practices are appropriate.  Although the Uniform Standards of Professional Appraisal Practices (USPAP) allows an appraiser who does not have the appropriate knowledge and experience to accept an appraisal assignment by providing procedures with which the appraiser can complete the assignment, Fannie Mae requires that lenders only use appraisers who have the appropriate knowledge and experience, and does not allow the USPAP flexibility. Consequently, the Selling Guide has been updated to state that appraisers who lack the requiste knowledge, experience, and access to appropriate data must not be utilized.

 Additional revisions have been made to clarify that the lender is responsible for the appraiser's qualifications and quality of the work, and to provide guidance for determining an appraisers's qualifications"

 Besides the above requirements and responsibilities of the Lender, Apprasers are requrired to Certify and Attest to a number of things on the Appraiser's Certification Section of the appraisal. There are 25 statements the Appraiser Certifies and agrees to on the Appraiser's Certification Secection of the appraisal.  I have seen the two pages which make up the Appraiser's Certification Section of the appraisal many times but never took the time to read them, as I expect most Realtors and Loan Originators have not as well.  If you have never read what Appraisers have to attest and agree to on EVERY appraisal, I suggest you do so.  All of the 25 statements are important, but there are two that I think Realtors and Loan Originators will find very interesting.  The two statements that I am refering to are statements 11 & 12.  They read as follows:

11)  "I have knowledge and experience in appraising this type of property in this market area."

 12)  "I am aware of , and have access to, the necessary and appropriate public and private data sources, such as multiple listing services, tax assessment records, public land records, and other such data sources for the area in which the property is located."

Prior to attending this Seminar I was not aware of any of the above, so this was very enlightening for me, as I am sure it will be to many others who read this blog.  These requirements as well as other Appraisal Requirements & Responsibilities For Conventional Loans required by Fannie Mae & Freddie Mac are all available to the public.  So if we educate ourselves and become aware of the required responsibilities, we will be better prepared to ask the questions on an appraisal we may have an issue with.

 

 

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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Posted by

George Souto
NMLS# 65149

C (860) 573-1308
CALL 7 Days/Wk
Fax (860) 760-6891

Email Me
About Me
My Blog

I am a Mortgage Loan Officer who can assist you with all your mortgage & refinancing needs in
CT, and RI

I can assist you with your Conventional,
FHA, CHFA, VA, USDA, & 203K loan programs.

I reside in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Haddam. E. Haddam, Higganum, Chester, Essex, Deep River.

 

Comments (24)

Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

George Souto - now hopefully, out of area appraiser may not be a choice...used to happen a lot around 2010-11, I remember.

Apr 23, 2015 12:34 PM
Ed Silva, 203-206-0754
Mapleridge Realty, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

Good insight as to what the appraisers were doing before HVCC came into play. Now a second party sends out the appraiser and may not be doing due diligence to make sure those standards are met.  No longer does the lender pick a qualified appraiser

Apr 23, 2015 01:04 PM
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

Hmm - so interesting.  We have had appraisers from outside the area that have no clue about fire ponds, septic and wells.... Also, we don't have large large subdivisions in NH this has raised a lot of challenges as well.  

Apr 23, 2015 01:11 PM
Larry Johnston
Broker, Friends & Neighbors Real Estate and Elkhart County Subdivisions, LLC - Elkhart, IN
Broker,Friends & Neighbors Real Estate, Elkhart,IN

Hi George Souto , You're right, I have not read those two pages on the appraiser's certification section.  Thanks for all the information.

Apr 23, 2015 01:22 PM
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Good morning George. I'm sure the seminar was an eyeopener. These new and improved regulations are putting appraisers under a scrutiny that is over the top and the only thing that will be accomplished is values will take a hit, I am already seeing it.

Apr 23, 2015 06:19 PM
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Real Estate Agents - Luxury - Divorce

The last appraiser we had for a closing earlier this week is apparently unaware of what you learned...wrong number of bedrooms, baths, ...wrong size lot...and not sure what the recourse is for reporting inaccuracies which almost caused the transaction not to close...urgh.

Apr 23, 2015 08:28 PM
Conrad Allen
Re/Max Professional Associates - Webster, MA
Webster, Ma, Realtor

Hi George.  Having geographically competent appraisers is a real change from a few years ago.

Apr 23, 2015 09:10 PM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good morning George,

I love the change to having geographically competent appraisers! This seminar was an eye opener and thanks for sharing with us.

Apr 23, 2015 09:31 PM
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

Hi George ~ having appraisers who are familiar with the area will be a huge help. I can't tell you how many crappy appraisals I've seen from appraisers who travelled 100+ miles to appraise a home in an area they've never been to. (Happened to me on my last house sale; and he was 2 hours late because he got lost and had never been to south Charlotte!)

Apr 23, 2015 09:53 PM
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

The classic I've had was a home properly priced at $595,000 with a contract for $595,000 and the appraisal came in at $535,000.

The seller, with significant equity, closed and lost a bundle.

Thank goodness I represented the buyer.  My buyer gained a lot of instant equity.

Funny thing.  When the appraisal came in so low, the loan officer asked ME for comps to support the list/contract price.

He must have thought I had lost my mind.

Apr 23, 2015 10:16 PM
Maria Gilda Racelis
Home Buyers Realty, LLC-Manchester, Bolton. Vernon,Ellington - Manchester, CT
Home Ownership is w/in Reach. We Make it Happen!

Hi George: I just had an interesting conversation with an appraiser when I met her at my listing this week.

That was not our first meeting as she did also an appraisal for my listing last year and we did remember each other.

She told me that one of the underwriters rejected or questioned three of her reports this year. The underwriter said, "There was sale on that same street which you did not use? Why?. She said, "Because it is not a good comp."

BTW, you can't convince me that you did not know 11 and 12.

Apr 23, 2015 11:50 PM
Dagny Eason
Dagny's Real Estate - Wilton, CT
Fairfield County CT, CDPE Homes For Sale and Condo

George Souto Good Afternoon George!!  Well said!!  Appraisal is super important!

Apr 24, 2015 02:32 AM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

George, thanks for this valuable information about the appraisal process.     We still see appraisers from other areas and not as experienced. 

Apr 24, 2015 07:45 AM
Ginny Gorman
RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI
Homes for Sale in Southern RI and beyond

George, all very important items for an appraiser to own up to...it is a tough process and all agents should recognize it as so.

Apr 24, 2015 09:05 AM
Debbie Reynolds, C21 Platinum Properties
Platinum Properties- (931)771-9070 - Clarksville, TN
The Dedicated Clarksville TN Realtor-(931)320-6730

We have had 3 sessions with appraisers letting agents know how appraisal requirements are tightening. They were asking agents to help in providing accurate data on the MLS. This industry is constantly changing.

Apr 24, 2015 11:41 AM
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

I would think there are a lot of folks who want these rules more streamlined even if they are more streamlined than before. It just makes that much more sense.

Apr 24, 2015 04:06 PM
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Do you agree with me, Debbie? I mean, we have something more concrete maybe? It may be easier said than done, but totally worth it. Debbie Reynolds

Apr 24, 2015 04:08 PM
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

That being said, it might be wise to wait until next quarter to make a judgment. What say you guys in general?

Apr 24, 2015 04:09 PM
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

George - I think at some point I might have read what the appraisers attest to though if I have it was long ago.

Apr 24, 2015 04:29 PM
Barbara Altieri
Better Homes and Gardens RE Shore and Country Properties - Shelton, CT
REALTOR-Fairfield County CT Homes/Condos For Sale

George -- Fortunately for me ...  and my listings the recent appraisers I have had knew the market and area well. I have had some, though,  who barely knew what town they were in.

Apr 29, 2015 12:41 PM