Are You Ready For The New Appraisal Forms?

Fannie, Freddie will require newly redesigned URAR, 2055 and other appraisal forms starting November 1

Starting November 1, 2005, Fannie Mae 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. FHLMC and FHA have set a required use date at January 01, 2006 but have announced that they will accept the new form after November 01, 2005.

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.

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 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.

FHA changes

 

FHA (after a review of the new FNMA URAR form with its new reporting requirements on condition) has announced that it will be eliminating the need for the VC sheet. 

 

This is significant for several reasons: 1) FHA believes the expanded reporting requirements of the new FNMA form now covers the items formally covered by the VC sheet and 2) its likely that appraisers will begin reporting property deficiencies similar to those required by FHA.

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.

New representations

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 required 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.

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.

Questions?

Please don't hesitate to contact me 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.