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Fannie Updates Appraisal Policies

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Fannie Mae (FNM) updated its selling guide to provide additional appraisal-related guidance. The government-sponsored enterprise's (GSE) post-purchase reviews of mortgage loan files identified issues with appraisals. The new policy clarifications address those issues. Fannie will now require interior photographs of specific rooms and areas of the house in the appraisal report. The GSE provided guidance on when an appraisal is considered deficient and when a lender can make changes to the opinion of market value based on underwriter judgment, automated valuation models or other methodology. The policy changes take effect for all mortgage loan applications dated on or after Sept. 1, 2010. Additionally, the GSE provided guidance on appraisers' use of foreclosures, short sales and builder sales as comparable. Fannie clarified that appraisers must be selected based on knowledge of specific geographical markets, access to appropriate data and sufficient experience. It also clarified that neither the Home Valuation Code of Conduct nor Fannie requires the use of a third-party vendor. The GSE also clarified other appraisal-related guidance, including the policy that some forms of communication between lenders and appraisers are appropriate under HVCC. Specifically, Fannie said, a qualified employee of the lender may contact the appraiser to provide additional information or explanation about the basis for a valuation. Write to Diana Golobay. Disclosure: the author holds no relevant investments.

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