New FNMA Forms

Starting November 1, 2005, Fannie Mae and Freddie Mac now 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.

Gardner Appraisals is currently using the new URAR, 2055 and other redesigned forms (11 in all.) 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 that you expect from us. We won't miss a beat with the new forms and we want to be sure that you won't, either.

Features of the new Fannie Mae forms:

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 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 that requires the appraiser to certify 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 very seriously.

No more cost or income approaches!

The new form does not require the "cost" or "income" approaches that 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 to better understand the opinion of value that 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 us via our website or by phone if you have any questions about the new forms that 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.