Reminder: Key UMDP Requirements Go into Effect December 1
Fannie Mae is reminding you about key Uniform Mortgage Data Program® (UMDP®) requirements that go into effect on Dec. 1, 2011. With this important milestone, you are entering the final phase of Fannie Mae and Freddie Mac’s joint efforts to implement uniform appraisal and loan delivery data standards that support enhanced data accuracy and a more efficient exchange of mortgage data among all industry participants. View more information about this important reminder.
Archive for November, 2011
November 22, 2011, 10:57 a.m.
* NY attorney general may pursue state law fraud claims
* Case originally brought by Andrew Cuomo
* CoreLogic disappointed in decision
(Adds company, NY attorney general comments; adds byline)
(Reuters) – New York’s highest court allowed the
state to pursue a lawsuit that accused First American Corp and
its eAppraiseIT unit of colluding with the former Washington
Mutual Inc to fraudulently inflate home values.
The Court of Appeals Tuesday said federal law did not
preclude New York State Attorney General Eric Schneiderman from
pursuing claims alleging fraud and violations of rules meant to
ensure independent real estate appraisals. It upheld a June
2010 ruling by an intermediate state appeals court.
The eAppraiseIT unit is now part of CoreLogic Inc,
which was created when First American split last year into that
company and First American Financial Corp.
Andrew Cuomo, Schneiderman’s predecessor and now New York’s
governor, accused First American and eAppraiseIT in a November
2007 lawsuit of caving to pressure from Washington Mutual to
Copyright © 2011, Reuters
“So what can you do to lessen the chance that a botched appraisal will torpedo your transaction? Here’s a quick guide.
Be proactive. Federal rules allow you to provide the appraiser your own comps, or recently sold properties of a similar size, condition and amenity levels in your market area. Your realty agent can help you pull them together before the appraiser arrives. Or for a fee of $200 to $300, you can hire an experienced local appraiser to assist you.
Sara W. Stephens, president-elect of the Appraisal Institute, the largest group in the industry, said that “if you know there are comparable sales in the neighborhood” where the price was affected by a divorce, financial distress or heavy seller concessions to the buyer, “make sure you call the appraiser’s attention to” these factors. And give the appraiser a list of all the value-enhancing upgrades and improvements you’ve made, including dates and costs.
Accompany the appraiser during his or her inspection of the house. Ask questions crucial to competency: Where are you based? How long have you been in the business? What type of certifications and professional designations do you hold? Are you a member of the local Multiple Listing Service — an essential source of data for any accurate appraisal? Do you know local agents or brokers who can supply you with pending sales information and guide you on neighborhood price trends?
If the appraiser doesn’t have good answers, you are much more likely to end up with a poor appraisal. Alert the lender to your concerns as early as possible.
After the appraisal is completed, always ask for a copy to review — it’s your right under federal law. If the value comes in low, check everything in the report, including the selection of comps and the accuracy of property measurements. If you find serious mistakes and the appraiser refuses to make corrections, appeal directly to the lender. Most have procedures to follow regarding “reconsiderations of value.” Ask for a second valuation by a locally competent appraiser, even if that costs you more money.
Finally, if the lender stonewalls you and the deal falls apart, consider filing a complaint with your state appraisal board. The boards don’t have the power to rewind your transaction, but they can discipline, fine, suspend or kick bad appraisers out of business.
Distributed by Washington Post Writers Group.
Copyright © 2011, Los Angeles Times”
From the Desk of The Appraisers Research Foundation
Inadequacies in Appraisal Body of Knowledge, Professor Says
HOUSTON, Texas — In a world energized by change and technology, should appraisers change the way they gather and calculate data as well?
The answer is emphatically yes, according to a new research report by Real Estate Professor Donald Epley of the University of South Alabama.
The 27-page report — titled “Areas in the Current Appraisal Body of Knowledge in Need of Revision” — was funded by The Appraisers Research Foundation (TARF).
Some approaches to valuation have “serious flaws which question the results,” Prof. Epley says. “The bodies of knowledge used by appraiser candidates to qualify for designation need revising.”
In the report, Prof. Epley details the six most pressing issues:
— The need for a better market conditions measurement.
— The use of population data vs. sample data. “In this age of technology,” he says, “the complete population of all sales is available and produces a better analysis of price trends.”
— Deductive vs. inductive or inferential reasoning.
— The need to recognize that accounting and finance professionals view depreciation as an operating expense.
—The first-year estimate of net operating income differs between the Certified Commercial Investment Member Institute (CCIM) and the Appraisal Institute.
— The need for an operational definition of “fair value.”
After proposing the issues in need of revision, Prof. Epley offers these recommendations:
— Assure that the revevant trade organizations create and maintain a Body of Knowledge Committee.
— Authorize the Body of Knowledge Committee to oversee the appraiser licensing and accreditation material.
— Create special topic study groups within the Body of Knowledge Committee with the authority to investigate and recommend changes in the assigned specialty.
— Make it a priority to integrate modern technology into the required course work for accreditation and the post-accreditation education requirements. An example would be the use of all courthouse information in lieu of samples.
— Assure that the revevant trade organizations create and maintain a Body of Knowledge committee.
— Ask the Advanced Studies Institute of the Appraisal Institute to investigate and evaluate these topics as research projects.
— Ask The Appraiser’s Research Foundation in Houston to place these topics of their priority list.
— Communicate to all practicing appraisers the value of continual reading of the Appraisal Institute’s text, all required books and material in relevent AI and CCIM classes, and continuing education courses.
The full report is available here: http://www.appraiserresearch.org/research-results/body-of-knowledge-issues.html
Prof. Epley is also director of the Center for Real Estate Studies at the university’s Mitchell College of Business in Mobile, Ala. He has served on the Education, Body of Knowledge, and Liaison Committees with the Appraisal Institute. He was elected as a Trustee to the Appraisal Foundation and was appointed to the Executive Committee. He is the author or coauthor of ten textbooks and 100 journal articles. He is a frequent contributor to the journal and serves on the Academic Review Panel.
To see other studies funded by The Appraisers Research Foundation, go to http://www.appraiserresearch.org and click on Research.
In addition to the six issues identified in Prof. Epley’s research report, the Foundation iscurrently seeking proposals for research projects to fund. Selected topics of interest include:
• Alternative uses of contaminated properties.
• Conversion of big box properties.
• Trends in golf courses that affect value.
• Appraisal fraud.
See all topics of interest at: http://www.appraiserresearch.org/topics-of-interest.html.
For information on applying for a research grant, go to the Foundation’s website at http://www.appraisersresearch.org/grants.
For more information on this report, contact the author at firstname.lastname@example.org.
THERE MAY BE SOME LIGHT AT THE END OF THE TUNNEL
III. What are Some Alternative Value Definitions?
Some appraisers have expressed difficulties in obtaining clear guidance from their clients or 278 from secondary market participants on the correct meaning of terms and applicability of different 279 value definitions. Some clients ask for “market value” but don‟t define or understand the term. 280 Some clients want to adjust the appraisal conclusion by stipulating terms in the analysis, e.g. a 281 sale within 30 days. This usually results in a variance from the commonly-used definitions of 282 value and the appraiser must then define the term within the document to ensure the client and 283 intended users understand what type of value is conveyed in the report. 284
Most value definitions are provided to appraisers within the customary forms, e.g. URAR. Some 285 terms in common use today include market value, liquidation value, disposition value, distress 286 sale, forced sale, forced price, short sale, foreclosures, etc. Other literature may reveal additional 287 terms of importance. (Many are reprinted within a glossary at the end of this paper.) 288
Market Value: The Public Perception –
It is important to understand that most real estate 289 owners, lenders, investors and government officials believe that the term “market value” reflects 290 a gross sale price that an owner of the subject would receive if the subject were put on the market 291 as of the effective date of appraisal. 292
In most definitions, market value assumes a sale to the most probable buyer within the highest 293 and best use opinion. This means the definition of the term is based on a sale from the current 294 owner to a new owner. When an appraiser is asked for a “Market Value Opinion,” the public 295 perception would be that the appraiser will tell the client how much they can sell it for. This 296 necessitates an opinion of “the most probable buyer.” 297
Client Expectations –
It is important to discuss the type and definition of value with a client to 298 ensure the appraiser is not developing an opinion of value that is different than the client‟s 299 expectations and different than the one utilized in the appraisal. This is to avoid any 300 misunderstanding between the client and the appraiser as to the type and definition of value the 301 opinion is based on. Appraisers should match the intended use of the appraisal with the defined 302 value and carefully consider each part of the defined value. For example: 303
An appraiser is asked to use residential comparable sales to provide an opinion of value 304 on a property that has a highest and best use as commercial land. The client says, “Value 305 First Exposure Draft –
Residential Appraising in a Declining Market 13
it as a residence and ignore the commercial land value.” If the appraiser agrees to do this, 306 this appraisal has shifted from market value (commercial) to value-in-use (residential). 307
Some terms that may be significant in this issue are listed below and defined in the Glossary of 308 Terms. 309
Disposition Value – This is a defined value that can be used by appraisers and clients 310 who are attempting to find a value that represents a particular need. This can be used by 311 clients in some markets to represent the value that they might sell the asset for after a 312 foreclosure. For a complete definition of these terms, and others that follow please see 313 the glossary. 314
Foreclosure sale – This is the sale of a property ordered by the court and/or process of 315 law, where the seller is ordered to sell the property at auction or by other means to satisfy 316 the mortgage against that property. In many states, this is called a “sheriff‟s sale.” 317
Liquidation Value – This definition is different than the standard market value definition 318 because it assumes: 319
1. Actual market conditions currently prevailing are those to which the appraised 320 property interest is subject; 321
2. The seller is under extreme compulsion to sell; and 322
3. A limited marketing effort and time will be allowed for the completion of a sale. 323
Market Value – This is the standard definition used in most residential appraisals. There 324 are other value definitions used for relocation and condemnation appraisals. This 325 definition refers to a “fair sale” without “undue stimulus.” This definition is based on a 326 transaction occurring under ideal market conditions. 327
Other Values – Clients may modify existing defined values to suit their current needs. If 328 an appraiser is asked to use an alternative definition, the appraiser must include that 329 defined value in the report and if another defined value is also included in the report, the 330 appraiser must be clear what definition they are using in conjunction with each value 331 opinion. 332
More than One Defined Value – Appraisers may be asked to provide more than one
333 type of value in an assignment. Appraisers should also remember that if they are conveying 334 a value opinion other than market value, the use of standard secondary market forms requires 335 caution. These forms have incorporated the definition of “Market Value” into the form. If 336 an appraiser were asked for “Liquidation Value,” it may be necessary to utilize something 337 other than a preprinted form and include the type and definition of value being utilized. In 338 most cases, preprinted secondary mortgage market forms do not offer an option of a different 339 defined value. It is possible for appraisers to add a second defined value in the report and 340 then give the client two value opinions, e.g. market value and liquidation value. However, 341 both values must be defined within the report and the report cannot be misleading and in 342 violation of USPAP.
Announcement SEL-2011-06 July 26, 2011
Selling Guide Updates
The Selling Guide has been updated to include changes to the following topics:
Uniform Appraisal Dataset and Uniform Collateral Data Portal™ requirements
Qualified participants policy change
Performing modified loans policy update
Nonstandard payment collection options clarification
Housing Goals data update
Miscellaneous Selling Guide updates
Each of the updates is described below. The affected topics (and specific paragraphs) are noted for each policy change. Lenders should review each topic to gain a full understanding of the policy changes. The updated topics are dated July 26, 2011.