Lender Changes to the Appraised Value and Guidance on Addressing Appraisal Deficiencies for Fannie Mae


In the past, Fannie Mae did not provide requirements concerning lenders making changes to the opinion of market value reflected in the appraisal report. During Fannie Mae’s post-purchase reviews, cases were identified where the lender had reduced the opinion of market value in the appraisal report based upon underwriter judgment, automated valuation models, or other methodology. Therefore, Fannie Mae has updated its appraisal policies to address the practice of lenders changing the appraiser’s opinion of market value and also to provide specific guidance when an appraisal is considered deficient.

 Changes to the Appraised Value
The lender is responsible for ensuring that appraisal reports are complete and that any changes to the report are made by the appraiser who originally completed the report. If the lender has concerns with any aspect of the appraisal that result in questions about the reliability of the opinion of market value, the lender must attempt to resolve its concerns with the appraiser who originally prepared the report. If the lender is unable to resolve its concerns with the appraiser, the lender must obtain a replacement report prior to making a final underwriting decision on the loan. Any request for a change in the opinion of market value must be based on material and substantive issues and must not be made solely on the basis that the opinion of market value as indicated in the appraisal report does not support the proposed loan amount. For information concerning the process lenders must follow to address a change of the opinion of market value, see Guidance on Addressing Appraisal Deficiencies, below.

Lenders must pay particular attention and institute extra due diligence for those loans in which the appraised value is believed to be excessive or where the value of the property has experienced significant appreciation in a short time period since the prior sale. Fannie Mae believes that one of the best ways lenders can reduce the risk associated with excessive values and/or rapid appreciation is by receiving accurate appraisals from knowledgeable, experienced appraisers.

Who/What is Fannie Mae?

How does this affect my loan or home purchase?

Your lender orders the appraisal. The market value on the appraisal comes back at or above contract price, which means the lender is ready to move forward and loan you money based on their collateral (the property) and its value. Later in the process your file goes to underwriting. An underwriter reviews the appraisal, performs an automated valuation model or other methodology, and based upon underwriter judgment decreases or lowers the value of the property. This means that there is then a discrepancy to the property’s value (according to the lender’s underwriter and to the parties involved buyer & seller). The buyer and seller would then ultimately be responsible for negotiating the terms of the sale price to reach the underwriter’s opinion. There is a process with most lenders for a dispute.

Updated Selling Guide Topic

B4-1.4-21, Appraisal Report Review: Valuation Analysis and Final Reconciliation (Lender Changes to Appraised Value, Guidance on Addressing Appraisal Deficiencies)

 Effective Date
This policy change is effective for all mortgage loan applications dated on and after September 1, 2010.

Brandi Wells – Realtor®
Cell (404) 402-1489 | Fax (770) 860-0305
Brandi@BrandiWells.com | www.brandiwells.com

Contact Me     
Prudential Colony Realty | 7197 Hwy 278, Covington, GA 30014

Ofc (770) 786-2000 | Ofc Fax (770) 786-1777

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