Fannie, Freddie will require newly redesigned URAR, 2055 and other appraisal forms starting November 1
Starting November 1, 2005, Fannie Mae and Freddie Mac will require newly redesigned appraisal forms for their loans. Since as you know most lenders use Fannie's forms in all cases, not just loans they're selling to Fannie Mae, you'll be seeing a lot of these new forms.
Some lenders have applied for an extension from Fannie Mae that will allow them to accept the old versions of the forms past November 1. Fannie and Freddie have been allowing the new forms to be used in lieu of the old for some time on a voluntary basis. But starting November 1, the URAR, 2055 and other forms you're used to will begin to go away for good, replaced by new versions.
*** There is an exception to this. For appraisals completed for the FHA, appraisers are forbidden from using the new forms until January 1, 2006. Be advised that between November 1 and January 1 it may be the case that you will need to order and collect two different forms, for example the "old" URAR in addition to the "new" on a property where the loan will be guaranteed by the FHA. ***
We're ready to use the new URAR, 2055 and other redesigned forms (11 in all), whenever you need them. We hope you consider us your valuation/appraisal experts, and we know that you expect us to get you the reports you need, on the forms required by your company and its secondary mortgage market partners.
Since there's a lot new in the new forms that may impact how you find the information you're looking for in our reports, our scope of work and lead times when you order a report, and even our fees, we want to make sure you're up to speed on the major ways the new forms differ from the old. There are literally dozens of ways, but below are the most important.
What's the bottom line? The new forms require more research and analysis, firmer representations on the part of appraisers, and eliminate the cost and income approaches to value. You and your bank will be getting more useful, solid information, which you may find in different places than you're used to. But you'll still be getting the quality, professional service you expect from us. We won't miss a beat with the new forms and we want to be sure you won't, either.
Features of the new Fannie Mae forms, especially the redesigned URAR and 2005 Exterior Only
More comprehensive research required
Formerly the URAR asked the appraiser if there were any apparent adverse site conditions or external factors, like encroachments, environmental issues or land uses. The new version of the URAR eliminates the word "apparent" and may require your appraiser to search recorded deeds and land records.
The new form asks the appraiser to analyze the sales contract for a property being sold (that is, not being refinanced only) and the sales or transfer history of the property for the last three years.
The new form also asks the appraiser to analyze the sales history for the selected comparables for the previous year.
The new form asks how many properties are listed for sale in the subject's neighborhood and in what listing price range. It also asks for the number of comparable sales in the neighborhood within the last 12 months and their sales price range.
The 2055 form now asks for more data than previously, including an extensive sales history of the subject and comparables, like the URAR. The 2055 is now specifically exterior only. For interior inspections, measurements and/or pictures, please order a 1004 URAR.
The new form asks whether any part of the land involved in the mortgage transaction is in a flood hazard area. The former form only asked if the house or any improvements were.
The new form asks whether there are any adverse conditions that affect the livability, soundness or structural integrity of the property. As with adverse site conditions, there's no word "apparent" here, so we are likely to be more thorough in our evaluation.
The new form has the appraiser certify that we didn't use comparables that combined a land sale with the contract purchase price of a house.
There is new, stronger language in the form where the appraiser certifies that we were not subject to pressure to "hit a number," with the current assignment or any future work contingent on achieving a certain value. The language in the form says "written or otherwise," meaning we cannot complete the new form(s) if our client asks us whether we can "come in" at a certain value before assigning us the appraisal, or threatens not to pay for completed work if the value isn't at least $X. This has always been our policy and now we will need to certify to Fannie Mae that our client has not asked us to reach a certain value in the report. We take this new representation on our part seriously.
No more cost or income approaches
The new form does not require the "cost" or "income" approaches you're used to seeing if the appraiser doesn't think it's necessary. So you may only see the more standard (for residential mortgages) "sales comparison" approach. Formerly, Fannie Mae required the appraiser to calculate all three. This helps you better understand the opinion of value you're looking for on single family residential mortgage loans where the cost and income approaches aren't as useful.
Other new forms
In addition to the URAR and 2055, you'll be seeing newly redesigned forms replacing the old 1004c, 1004d, 1025, 1073, 1075, 2000, 2000a, 2090 and 2095.
Please don't hesitate to contact us via our website or by phone if you have any questions about the new forms we haven't answered here. As stated above, these are not the only ways in which the new forms are different, but are the most obvious and important.
Eric Dean Morse, RAA