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Hot Topics in Appraisal

Hot Topics in Appraisal . John Bredemeyer, SRA President Realcorp Inc. Two Major Changes . Dodd-Frank Financial Reform Bill (HR 4173) . Interagency Appraisal and Evaluation Guidelines. Truth in Lending; Interim Final Rule October 28, 2010. Interagency Appraisal and Evaluation Guidelines

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Hot Topics in Appraisal

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  1. Hot Topics in Appraisal John Bredemeyer, SRA President Realcorp Inc

  2. Two Major Changes Dodd-Frank Financial Reform Bill (HR 4173) Interagency Appraisal and Evaluation Guidelines Truth in Lending; Interim Final Rule October 28, 2010 Interagency Appraisal and Evaluation Guidelines December 2, 2010

  3. Truth in Lending; Interim Final Rule • Lenders and Agents (AMCs) required to pay Appraisers “customary and reasonable” fees • The “customary and reasonable” fee provision, which is now part of TILA, will be in effect as of October 19, 2010 • Dodd-Frank states that evidence for customary and reasonable fees may be established by objective third-party information, such as government agency fee schedules, academic studies, and independent private sector surveys issue interpretive guidance

  4. Truth in Lending; Interim Final Rule • Upon release of the interim final rule, the Home Valuation Code of Conduct shall have no “force or effect • Dodd-Frank grants authority to various agencies, including the Federal Housing Finance Agency, to issue interpretive guidance • States enact AMC registration and supervision laws. States will have until at least 2014 to enact state AMC laws • Nebraska has drafted an AMC law – currently being considered by the legislature.

  5. Truth in Lending; Interim Final Rule • At a minimum, state AMC laws must • AMCs register with and be subject to supervision by the state appraiser licensing and certification entity • AMCs verify that they only utilize licensed or certified appraisers for federally related transactions • Require that appraisal coordinated by the AMC comply with USPAP • Require that appraisals are performed independently and free from inappropriate influence and coercion

  6. Truth in Lending; Interim Final Rule • Broker Price Opinions (BPOs) • H.R. 4173 prohibits BPOs being used as the primary basis to determine the value of a piece of property for the purpose of loan origination in conjunction with the purchase of a consumer’s principle dwelling. • The provision is intended to codify GSE policies that prohibit the use of BPO’s in mortgage loan origination.

  7. Interagency Appraisal and Evaluation Guidelines - Independence of the Appraisal and Evaluation Program • Permitted Communication • Consider additional information about the subject property or about comparable properties. • Provide additional supporting information about the basis for a valuation. • Correct factual errors in an appraisal

  8. Interagency Appraisal and Evaluation Guidelines - Independence of the Appraisal and Evaluation Program • Unacceptable Practices • Communicating a predetermined, expected, or qualifying estimate of value, or a loan amount or target loan-to-value ratio to an appraiser or person performing an evaluation. • Specifying a minimum value requirement for the property that is needed to approve the loan or as a condition of ordering the valuation. • Conditioning a person’s compensation on loan consummation.

  9. Interagency Appraisal and Evaluation Guidelines - Independence of the Appraisal and Evaluation Program • Unacceptable Practices • Failing to compensate a person because a property is not valued at a certain amount • Implying that current or future retention of a person’s services depends on the amount at which the appraiser or person performing an evaluation values a property. • Excluding a person from consideration for future engagement because a property’s reported market value does not meet a specified threshold

  10. Interagency Appraisal and Evaluation Guidelines - Independence of the Appraisal and Evaluation Program • Approved Appraiser List • For residential transactions, loan production staff can use a revolving, pre-approved appraiser list, provided the development and maintenance of the list is not under their control.

  11. Fannie Mae Announcement SEL-2010-14 October 15, 2010 • Fannie Mae has been working with the Federal Housing Finance Agency, Freddie Mac, and key industry participants to develop Appraiser Independence Requirements to replace the Home Valuation Code of Conduct (HVCC). • The revised requirements pose no significant changes to core principles of the HVCC and incorporate language to clarify questions that arose in the implementation of the HVCC.

  12. Fannie Mae Announcement SEL-2010-16 December 1, 2010 Selling Guide Updates • In Announcement SEL-2010-14, Appraiser Independence Requirements, Fannie Mae introduced the Appraiser Independence Requirements that replace the Home Valuation Code of Conduct (HVCC) which has been retired. All Selling Guide references to the HVCC have been replaced with references to the Appraiser Independence Requirements: • A3-2-01, Compliance with Laws • B4-1.1-01, General Information on Appraisal Requirements (Appraiser Independence Requirements) • B4-1.1-03, Appraiser Selection (Use of Third-Party Vendors) • D1-3-05, Lender Post-Closing QC Review of Appraisers and Appraisals (Appraiser Independence Requirements) • E-1-02, Acronyms and Abbreviations

  13. Fannie Mae and Freddie Mac Lender Letter LL-2010-15 December 16, 2010 Uniform Appraisal Dataset and Uniform Collateral Data Portal • In an effort to enhance appraisal data quality and consistency and promote the collection of electronic appraisal data, Fannie Mae and Freddie Mac, at the direction of their regulator, the Federal Housing Finance Agency (FHFA), have worked together to develop the Uniform Appraisal Dataset (UAD) and the Uniform Collateral Data Portal (UCDP).

  14. Fannie Mae and Freddie Mac UAD Appraisal Forms • The following appraisal report forms collectively referred to as the “four UAD appraisal report forms” • Uniform Residential Appraisal Report (Fannie Mae Form 1004) • Individual Condominium Unit Appraisal Report (Fannie Mae Form 1073) • Exterior-Only Inspection Individual Condominium Unit Appraisal Report (Fannie Mae Form 1075) • Exterior-Only Inspection Residential Appraisal Report (Fannie Mae Form 2055)

  15. Fannie Mae and Freddie Mac Uniform Appraisal Dataset Requirements • The UAD standardizes the input values for certain elements (e.g. specific date and dollar amount formats) and standardizes the definitions for select key appraisal data elements (e.g. property condition and quality of construction) on the four UAD appraisal report forms. • The UAD is required for appraisals with effective dates on or after September 1, 2011 that are completed on the four UAD appraisal report forms.

  16. Challenges 2011 • Underwriting requirements • Appraisal Management Companies • Appraisal Fees • Competition • Volume

  17. Thank you! Questions??

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