For some reason, Fannie Mae was inspired to change ALL the appraisal forms they use, effective November 1, 2005.

This will be a painful conversion process for most appraisers and will generally be met with skepticism for a few reasons:

  • Cost – The new FNMA forms seem to be written to prevent other traditional uses such as appraisals for estate, trust, litigation, divorce and other purposes. The Appraisal Institute, in good faith and possible anticipating a revenue stream, has created AI Reportsâ„¢ Residential Summary Appraisal Report Form. The press release sounds interesting, but Letter Sized formatting for a professional versus legal look? Commercial appraisers generally write letter sized narratives and residential appraisers do not. Think of the thousands of appraisers out there all set up to use legal documents. Once again, the orientation of the AI remains for commercial appraisers. This new form is being developed by all the major software vendors.

Here’s a radical idea. Keep using the old FNMA 1004, 1073, 1075 and other appraisal forms for non-lending use. They are USPAP compliant and appraisers already have the software. I want to see how this shakes out before I consider using the AI form.

  • Liability – The new forms hard code pages and pages of liability pitched back to the appraisers. I call these the silent killers. The text is not that well written creating more confusion to the reader.

  • More data to present – The forms harp on days on market type stats for all of the comps and lots of other detail. In a perfect world, this is great stuff, but the reality is that many markets do not have this level of detail. The added time spent to collect this data warrants a fee increase, yet that likely won’t happen. As a result, we will all get used to inserting Not Available in many of the fields. Again, good intentions by FNMA to catch “flipping” but unrealistic implementation. Bad appraisers will remain bad.

  • More headaches for lenders using OCR software – Some national lenders fought the introduction of these forms, an unprecendented quantity at one time, because all their OCR scanning software and back office systems have to be re-designed to input this information.


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10 Responses to “In Bad Form”

  1. Karen Oberman says:

    Just curious if you have thought about this — you (and others) have indicated that perhaps, a good thing to do, in lieu of using the new fannie mae forms would be to utilize the existing (soon to be “old”) forms. — Have you thought about the fact that software providers may not keep up these forms? Or that as technology changes, these forms will not be adapted or updated to fit with that technology? (how, I don’t know…I’m not an overly technical person, but I do know that as things change, the “old” stuff is likely to be left behind) — Perhaps its better for appraisers to get behind a new form, whether that be Fannie Maes or the AI’s or whoever else is out there with development underway? I would rather see our industry continue to move forward than to utilize antiquatated forms simply because “its easier” — as an industry, we have to move forward together to be the strongest.

    Karen Oberman, SRA

  2. Jonathan J. Miller says:

    Karen, you make a great point. Support for the forms will fade away over time. However, thats probably several years out and a lot can happen between now and then. I am simply waiting to see how things “shake out.” I think we have enough on our plate right now, digesting all the new forms. We may even see other non-lending alternative forms pop up as well from vendors.

  3. Raul Castro says:

    Just an observation; In desiring to remain with the old forms and seeing how the new forms works out, your existing staff will avoid dealing with the current Real Estate Market as it changes. I can guarantee that change later, takes longer, cost more and will come as a harder item to deal with. Also, your staff will find it itself under a time constrain to adapt, perform and keep pace with the everyday work. I would strongly suggest that the office staff convert to the new forms at the time that they are introduce to the market. Working with the forms at this time will get them confortable with the new format, allow them the ability and time to learn along with everyone else in the market, allow for greater understanding of mistakes(they will be made) and provide future flexibility should the forms change. Change is the way of life in any process and item(s) that remain static are quite often overwhelm and swept away.

  4. Jonathan J. Miller says:

    Great points. Although, while we are switching to the new FNMA forms (because it is required) on Nov 1., I was concerned about the additional switch to the new AI forms for non-lending work. I am not sure why we need them, or there is an urgency to make the move? Especially a letter-sized format, since the residential appraisal world is built on legal-sized forms.

  5. Rich Mancuso says:

    I have a number of concerns about the new FNMA forms especially regarding cooperative and condominium reports. The analysis required appears to be extensive and expensive and the ability to do the assignment depends on the availability of the project information (including annual budgets).

    What is your opinion?

    Thanks

  6. brian says:

    Just from a lending standpoint, I have been told that the secondary markets will not buy loans on the old forms for any loan application taken after November 1st. This could be a very big problem if you try to use the old forms.

  7. Jonathan J. Miller says:

    Thats true, the new forms are here to stay. I plan to use the old forms for estates, divorce, bankruptcy and other non-lending purposes. Although its my understanding that the cutoff date is the date of the appraisal (inspection) date for mortgage assignments. Does anyone have a different understanding of this?

  8. Peter M Coulton says:

    There is something you are overlooking about the old forms. the fact that they are on 8.5x 14 legal paper makes them NOT ADMISSIBLE AS EVIDENCE IN COURT. I know this sounds strange. But every time I do an appraisal for a legal matter that is going to court. The attorney requests, that it be reduced to letter size. Besides, There are two other issues we need to stop thinking about, #1: Us vs. Them (the commercial vs. the residential), #2: legal size paper just flat wastes paper resources and costs more. I hate the stuff. You can’t buy binders, folders, combs or cover without paying an arm and a leg for it. I specialize in complex residential work; therefore quite often have to write narrative residential reports. I gladly welcome the AI form. I do wish that they had acknowledged that there are other designations than just the institute granted ones.

    Just My opinion Peter

  9. Jonathan J. Miller says:

    Peter, thats actually not true. My reports are submitted to the New York courts nearly every week and i have been doing this for 20 years. It is not an issue or part of the language of the courts. You must have a particular law or court system that requires it. I suspect its varies across the country.

  10. Brooke says:

    Then what form is more acceptable for a trust. The old 1004 or the new AI.