Does the Code change any of Fannie Mae's requirements regarding the role of the appraiser?
No. The Selling Guide
requirements for the appraiser remain at their same high level. Fannie Mae requires the appraiser to provide complete and accurate reports; to report neighborhood and property conditions in factual and specific terms; to be impartial and specific in describing favorable or unfavorable factors; and to avoid the use of subjective, racial, or stereotypical terms, phrases, or comments in the appraisal report. The opinion of market value must represent the appraiser's professional conclusion, based on market data, logical analysis, and judgment.
Additionally, it is important to note that when an appraiser signs Fannie Mae's residential appraisal report form, the appraiser is also certifying the following:
"I have knowledge and experience in appraising this type of property in this market area."
"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."
May lenders rely on appraisals ordered by settlement service firms?
Yes. Settlement service firms may order appraisals if they comply with the Code, Sections IV.C.(1) and (2).
When selecting an appraiser, may lenders use a pre-approved appraiser list or panel?
Yes. Lenders may use a pre-approved list or panel to select a residential appraiser, provided that (1) any employees of the lender tasked with selecting appraisers for the list are independent of the loan production staff; and (2) the loan production staff is not involved in selecting appraisers off the list for particular appraisal assignments.
If a lender or appraisal management company maintains a legacy appraiser panel for which loan production staff may have recommended or influenced the selection of appraisers, is the lender required under Section III.B of the Code to reselect such panels prior to the May 1, 2009 effective date?
No, the Code does not require the lender to reselect appraiser panels; however, any legacy appraisal panel must comply with the provisions of the Code.
How does Section I.B.(8) impact how lenders may remove appraisers from a list of qualified appraisers?
Section I.B.(8) addresses the removal of an appraiser from a list of qualified appraisers in connection with influencing or attempting to influence the outcome of an appraisal. Any such removal would be subject to the requirements of the process outlined in that section. However, Section I.B.(8) does not preclude the management of appraiser lists for bona fide administrative reasons based on written, management-approved policies. Also, Section IV.B.(6) provides for lenders to have written policies and procedures implementing the Code including rules on appraiser independence, and to have mechanisms in place to report and discipline anyone who violates these policies and procedures.
May a servicer use an affiliate company to order appraisals for borrower-initiated private mortgage insurance cancellation based on current value?
Yes. The Code does not apply to appraisals for cancelling mortgage insurance based on current value. The Code is specific to "a mortgage financing transaction," and cancellation of mortgage insurance is not "a mortgage financing transaction." The Fannie Mae Servicing Guide states that "To determine the current appraised value of the property, the servicer must select an appraiser, order a new appraisal (which must be based on an inspection of both the interior and exterior of the property and be prepared in accordance with our appraisal standards for new mortgage originations)."
Some lenders have proprietary automated origination systems that include a process for ordering appraisals. How does the Code impact those systems?
The lender must review its systems to ensure that the selection of appraiser process is in compliance with the provisions of the Code.
Who should be considered the "loan production staff" for purposes of achieving appraiser independence?
The term "loan production staff" is not defined in the Code. However, the FAQs prepared by federal agencies on the agencies' appraisal regulations specify as follows:
"The loan production staff consists of those responsible for generating loan volume or approving loans, as well as their subordinates. This would include an employee whose compensation is based on loan volume or the closing of a loan transaction. Employees responsible for the credit administration function or credit risk management are not considered loan production staff."
Are processors, closers, secondary marketing employees, underwriters, etc. permitted to order appraisals if they do not receive commission or incentives to close loans, but they ultimately report up to a senior-level employee who is responsible for loan production?
The Code states that members of the lender's loan production staff who are compensated on a commission basis or who report to any officer of the lender not independent of the loan production staff and process are not permitted to order appraisals or influence the selection of appraisers. Ideally, a Seller should establish complete separation of appraisal activities from loan production activities. At an absolute minimum, the degree of separation should be no less than one level up in the reporting structure. To mitigate any potential conflict of interest due to reporting relationships, Sellers should establish, maintain, and enforce written policies and procedures that are designed to reinforce independence.
May a person on a lender's staff who is not part of the loan production staff and does not receive a bonus or commission based on loan closings provide an AMC a list or panel of appraisers to use for loans involving a specified mortgage broker, real estate agent or loan officer?
No person may provide an AMC a list or panel of appraisers to be used for loans involving a specified mortgage broker, real estate agent, or loan officer. The Code specifically prohibits lenders from accepting appraisal reports completed by an appraiser selected, retained, or compensated in any manner by mortgage brokers and real estate agents. Mortgage brokers and real estate agents must not be involved in the selection of appraisers for an approved panel or specific assignments under any circumstances. Please refer to Section III.A of the Code for further information regarding who is authorized to select and retain appraisers.
What is the definition of a "correspondent" lender?
A "correspondent" is a third-party entity that may originate and underwrite the mortgage. The correspondent closes the mortgage in its own name with its own funds, and sells it to the lender. The mortgage is sold to Fannie Mae by the lender.