On October 20, Fannie Mae announced that its proprietary appraisal and analysis application, Collateral Underwriter, will become available to lenders in early 2015. Currently, Fannie Mae uses the tool to “analyze appraisals when a lender delivers a loan,” and the Agency anticipates that by providing greater certainty around repurchase rise, the tool will help “lenders expand access to mortgage credit.” Ultimately, Collateral Underwriter will allow lenders to evaluate the appraisal of a loan, address any potential issues, and then close and deliver the loan to Fannie Mae.
On October 19, Fannie Mae announced four changes: (i) the availability of trended credit data, which may allow a more thorough analysis of borrowers’ credit history; (ii) the availability of nontraditional credit history in Desktop Underwriter; (iii) a new tool, Fannie Mae Connect, which provides a self-service reporting and data analytics portal for customers and business partners; and (iv) the ability to validate a borrower’s income in Desktop Underwriter using data provided by Equifax’s The Work Number®. These changes follow Fannie Mae’s April notification regarding the integration of Collateral Underwriter, an appraisal and analysis application, with Desktop Underwriter and EarlyCheck – an integration intended to help lenders more effectively manage risk, underwrite strong loans, and build their businesses.
On April 1, Freddie Mac issued Bulletin 2014-05, and on March 25, Fannie Mae issued Lender Letter LL-2014-02, in response to directives from the FHFA to clarify certain requirements related to appraisals for properties located in rural areas. In the clarifying documents, Fannie Mae and Freddie Mac state that they do not require the use of third-party vendors such as appraisal management companies to order appraisals or to comply with requirements that the mortgage production function and the appraisal ordering and quality assurance functions remain separate. In addition, both Fannie Mae and Freddie Mac provide a small lender exception to the separation requirement. The guidance documents also state that a residential property in a market that contains properties or land uses that are non-residential in nature, is not necessarily ineligible for sale to Fannie Mae or Freddie Mac. Both entities assert that they will purchase a mortgage secured by a property that is unique or may not conform to its neighborhood, provided an appraiser is able to evaluate and report on how the characteristics of the market area and unique property features affect the value and the marketability of the subject property. The guidance documents also advise sellers that in areas with less real estate activity, such as rural market areas, appraisers may, with documented support, use comparable sales that are older than 12 months, or that are a considerable distance from the subject property or not similar to the subject property.
On March 24, the Federal Reserve Board, the OCC, the FDIC, the CFPB, the FHFA, and the NCUA proposed a rule to implement the Dodd-Frank Act’s minimum requirements for registration and supervision of Appraisal Management Companies (AMCs). While current federal regulations mandate that appraisals conducted for federally related transactions must comply with the Uniform Standards of Professional Appraisal Practice (USPAP), this rule would represent the first affirmative federal obligations relating to the registration, supervision, and conduct of AMCs.
Generally, the proposed rule would establish a framework for the registration and supervision of AMCs by individual states that choose to participate, and for state reporting to the Appraisal Subcommittee (ASC) of the Federal Financial Institutions Examination Council (FFIEC). Although state participation is optional, AMCs would be prohibited from providing appraisal management services for federally related transactions in states that do not establish such a program.
Comments on the proposal will be due 60 days following publication in the Federal Register. Read more…
On December 12, the Federal Reserve Board, the CFPB, the FDIC, the FHFA, the NCUA, and the OCC, issued a final rule supplementing their January 2013 interagency appraisal rule. As described in detail in our Special Alert, the January 2013 rule amended Regulation Z to require creditors to obtain appraisals for a subset of loans called Higher-Priced Mortgage Loans (HPMLs) and to notify consumers who apply for these loans of their right to a copy of the appraisal. Those new requirements take effect January 18, 2014.
The supplemental final rule, which takes effect on the same date, exempts certain transactions from the HPML appraisal requirements. First, all loans secured in whole or in part by a manufactured home are fully exempt until July 18, 2015. After that date: (i) transactions secured by a new manufactured home and land are exempt only from the requirement that the appraisal include a physical review of the interior of the property; (ii) transactions secured by an existing manufactured home and land are not exempt from any HPML appraisal requirements; and (iii) transactions secured by a manufactured home but not land are exempt from all HPML appraisal requirements, provided the creditor provides the consumer with certain specified information about the home’s value. Second, the supplemental final rule exempts streamlined refinances—i.e. refinancing transactions where the holder of the successor credit risk also held the credit risk of the original credit obligation—so long as the consumer does not take any cash out and the new loan does have negative amortization, interest only, or balloon payments. Third, the supplemental final rule exempts “small dollar” transactions of $25,000 or less, indexed annually for inflation.