A new appraisal review process being launched by Fannie Mae has appraisers worried they could end up blacklisted, potentially sending their business crashing to a halt.
Back in 2011, Fannie Mae and Freddie Mac began collecting appraisal records from lenders and appraisers through its Uniform Collateral Data Portal. Appraisals for loans which a lender hopes to sell to Fannie or Freddie must be submitted to the UCDP, and many lenders now require submission through the portal for their loans even if they plan to keep them on their balance sheet.
Fannie announced in a letter published earlier this month that starting in January it will begin using the UCDP appraisal data to identify appraisers who produce conflicting reports or other errors – for example, if an appraiser identifies a property being used as a “comparable sale” (comp) as being in “good condition” in one report, marking that same property as in poor condition in a different report would send up a red flag.
Appraisers who were dinged for what Fannie deems “a pattern of minor inconsistencies, inaccuracies, or data anomalies” will be notified by Fannie and their reports would be monitored to see if they improve.
But if an appraiser’s reports have “egregious issues,” then Fannie will send a letter to both the appraiser and the lenders they work for notifying them that “either 100 [percent] of the loans submitted with appraisals from the identified appraiser will be reviewed in the post-purchase file review process or that Fannie Mae will no longer accept loans with appraisals completed by the specific appraiser,” the policy states.
No Worries
Since having to have an appraisal reviewed post-purchase costs lenders extra time and money, ending up on the list is essentially “a death sentence for a residential appraiser,” said Jonathan Asker, CEO of North Atlantic Appraisal in West Bridgewater.
Nevertheless, Asker’s not too worried about the move. “I just had a conversation with one of my appraisers. He said, ‘Do you think we have to worry about being blacklisted?’ And I said, ‘Look, buddy, you don’t have to worry, because you’re a good appraiser.’”
Asker thinks that when Fannie says “egregious” that’s what they mean. “Are they going to blacklist half the people? Who’s going to do the work?” he said. “I think they’re going to be looking for that five, ten percent of people who aren’t following the rules and don’t want to follow the rules and [tell them], ‘You aren’t going to appraise for us.’”
Others are less sanguine. The letter issued by Fannie mentions nothing about an appeal process for an appraiser who feels they’ve been put on the list in error.
“There just seems to be no means for redemption for an appraiser who ends up on that list. It’s a startling thing for the appraisal profession,” said Steve Sousa, executive vice president of the Massachusetts Board of Real Estate Appraisers.
“It could have quite an impact,” he believes. “The number of appraisers continued to go down. In Massachusetts there’s only a little over 2,000 appraisers, and that includes trainees.” If 10 percent of the existing appraisers were to end up on the list, backlogs and higher appraisal costs would ensue, he said.
Richard Goulet, president of The Appraisers Group in Belmont, said he also sees the potential for problems when there’s a conflict between what’s in assessors records and the appraiser’s own experience. For example, an appraiser may be evaluating a property and realize that the assessor’s record differs slightly from his own square footage measurements. If that same property previously had been used as a comp in other reports, then deferring to the fresh measurements could trigger a flag under the new Fannie system, Goulet believes.
“Maybe the computer will recognize that there is a difference in the square footage, maybe it won’t. That could be a problem,” he said. “They don’t give you any information about what to do if you believe [you are now] reporting correct information.”
If appraisers are made skittish by fear of being blacklisted, it could be an impediment to many closings, especially in a market like Boston’s, where prices have been rising strongly in recent months, he said.
“This year it’s been a terrible concern,” he said. “If you’re an appraiser, and you’re struggling with a value, you have to not only track down a couple of under agreements, you also had to make sure that you talk to a broker and track down an actual sale price, because [just having under agreement prices] wasn’t good enough,” to support the sales price and get the bank to close the loan.
Email: csullivan@thewarrengroup.com
