There has been a lot made of the new forms released by Fannie Mae. The idea was to make the forms for different housing types similar and therefore easier to complete and review. The new forms require more detail (read between the lines: higher appraisal fees) for their completion.

“We expect these forms will result in more accurate and fully supported appraisals,” [Rutlan Herald] said Joseph L. Minnich, spokesman for Fannie Mae, the nation’s largest mortgage buyer.

Don’t get me wrong. I am a big advocate for full disclosure on appraisal forms. This was a big effort by Fannie Mae and I appreciate that effort. However, providing these new forms for primarily this reason strikes me as naive, indicating they do not fully understand the problems that exist or there is another reason altogether for their implementation.

I suspect its a little of both. Dishonest appraisers or those who “play ball,” will simply keep doing what they have been doing…there is simply more on the form to fill out (and who says it has to be filled out correctly?). Fannie Mae has been under tremendous heat for questionable accounting practices and perhaps this is another way to show they are good citizens. Also, since the housing market has been rising so rapidly, they need to position themselves for litigation against faulty appraisals should the market correct sharply.

The language of the several page limiting condition is written poorly – poor grammar that is – and the language of the disclaimers is written so broadly enough that it doesn’t protect the appraisers and basically paints a bullseye on all of our backs. Lawyers need very specific language in disclaimers to feel comfortable, not generalities. Canned responses can’t address all issues around the country.

Also, why were the new forms made so they can not be used for other purposes? I realize this is not their obligation. However, these forms were the universal standard that everyone knew and trusted. They worked great for non-lending work. I predict that most software vendors will not likely to continue supporting them in the not to distant future.

There will be other forms developed, such as the Appraisal Institute’s version and others but I suspect most will require licensing by software vendors and there will not be one that is unversially adopted like Fannie Mae’s was.

The new forms are definitely a step in the right direction, but a very small step that provides a false comfort against fraud. I would expect very little change in the current status quo.

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