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Special Reports
Mortgage Fraud
Fannie Revises Industry Standard for Appraisals
By Jennifer Harmon
Fannie Mae recently revised the industry standard for appraisal forms, making
changes geared toward making appraisers more accountable.
DeAnna McCann, vice president of valuation consulting at eAppraiseIT here, said
companies are preparing internally to deal with these changes, many of which require appraisers to do more sales
analysis of listing history and comparable properties. This is combined with other forms for final inspection and
updates. "There are a lot more detailed questions on the form. That's coming from a lot of changes in the
industry," Ms. McCann said. "We're seeing a much more serious focus from regulatory agencies to really
analyze mortgage lenders and the lender appraisal assignment process."
eAppraiseIT is a national appraisal management company with 800,000 appraisers
nationwide. The company offers products and services to meet every phase of the loan process from the origination
side to foreclosure. "We are a one-stop shop for mortgage lenders and servicers. Brokers, community banks,
savings and loans, credit unions, and most of the top mortgage lenders in the country contract with us to place
appraisal orders."
Regulatory agencies are saying it's not acceptable for lenders to use an appraiser
with whom they share a working history. Appraisers have complained in the past about the pressure they sometimes
get from real estate agents and lenders to bring in a property value that supports the purchase price against which
money is to be lent. "It's typical to use someone they have a relationship with. This can create an environment
that puts the appraiser under a tremendous amount of pressure to make sure the value comes in high for a loan officer
to do the loan. Regulatory agencies want you to show them full proof of the rotation of appraisers. That is one
of the biggest changes," she said. "A lender must pick the next appraiser on the list and look at three
appraisers per market area. Another option is a lot of lenders are coming to companies like ours to outsource the
appraiser process."
The industry is also seeing significant changes through lenders who have stopped
giving estimated values on appraiser reports. "It's a very common practice to assign a report. Lenders are
beginning to say we better stop giving those, because it can be construed as guiding an appraiser. They don't get
paid a commission if the loan doesn't close. It continues to be a common practice but mortgage lenders are really
looking at that," Ms. McCann added.
Some states allow an apprentice appraiser to work with a license of any kind as
long as they are working for a licensed appraiser. Others have certain requirements and continuing education credits.
"Nationwide there is a movement in place. States are drafting regulations to require more education background
to get an appraisal license. Some are talking about having the minimum of a bachelor's degree. State registries
and our approved panel of appraisers require being licensed first with the state. The Appraisal Foundation maintains
things like a list of a appraisers who are being disciplined," she said. "Lenders should be monitoring
their licensing and performance on a regular basis. We check a number of sites before we approve an appraiser and
we get weekly updates from our appraisal subcommittee to discuss if there are any disciplinary actions."
A lot of these changes to appraiser regulations take time to filter through the
business. "In some ways, mortgage lenders are holding their breath while some are being proactive. The majority
is still holding out to see how serious regulators are."
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