1004mc argument with reviewer

[residentialguy]

And appraisers get stipped for ambiguous comments. Would it have been so tough to include this from your post above: "Fannie acknowledges that the data in the grid alone may be insufficient for trend analysis." ?

Fannie admit a screw up? Come on DTB, you know only the appraisers screw up.

Actually, better idea yet. Add another 1004MC type form for a macro analysis of the neighborhood (that page one was designed for), so that you can have enough data for a reliable indicator of trends. Keep the orig 1004MC make it specifically for comps only, (no other data) allowing the trend boxes to be left blank.

Micro and macro activity & trends in the neighborhood so that the lender knows everything that's going on in the Neighborhood and how it's influencing the subject.

So simple, a caveman could do it. Apparently that's above Fannie's pay grade.

 

[Jim Onderisin]

Whether we like it or not, DW is correct. The 1004MC is Fannie's form. Its intended purpose is to support the appraisal's market conditions conclusions. Based on local appraisal reviews, only a small percentage of appraisal 1004MCs satisfy their intended purpose. Insufficient or unreliable data? Then the form should discuss data limitations and whatever alternative analyses the appraisal relied on to support its conclusions.

 

[sailorboy]

I have given up on strict compliance with what the MC is asking for, which is the subject neighborhood as described on page 1. As stated, often there would be no data because all comps are in the subject market but often not within the subject neighborhood boundaries. Tried to explain this so many times that I finally just put in the subject market data. The way the MC is set up is a complete waste of time and provides nothing of value to the report or the appraisals process in my opinion. This data set should be from the market rather than just the neighborhood to be of any use. My issue with many reviews is that the appraisers put neighborhood boundaries that are really a region rather than the actual neighborhood. I report this all of the time. It is amazing how many appraisers do not understand the definition of "neighborhood".

 

[hastalavista]

I have given up on strict compliance with what the MC is asking for, which is the subject neighborhood as described on page 1. As stated, often there would be no data because all comps are in the subject market but often not within the subject neighborhood boundaries. Tried to explain this so many times that I finally just put in the subject market data. The way the MC is set up is a complete waste of time and provides nothing of value to the report or the appraisals process in my opinion. This data set should be from the market rather than just the neighborhood to be of any use. My issue with many reviews is that the appraisers put neighborhood boundaries that are really a region rather than the actual neighborhood. I report this all of the time. It is amazing how many appraisers do not understand the definition of "neighborhood".

Why not just give them what they want and then do what you think is necessary for credible results (i.e., a supplement to the MC)?
That's what I do and it seems to work well.

 

[Howard Klahr]

Yes; for it is willed where what is willed must be! (according to them).

Until they change the report form I contend that to conform to their arbitrary edict results in a misleading report. Despite their erroneous beliefs, USPAP trumps Fannie. And that is my stand on the page one issue.

 

[hastalavista]

I didn't know that I had already replied to this post earlier.

Good thing I didn't contradict myself!

Howard: I agree that Fannie doesn't trump USPAP. But, I don't see any contradiction or a risk of misleading anyone if within the appraisal report one (a) gives Fannie what they want and (b) supplements the analysis as the appraiser feels is necessary (that's why I put the definitions of neighborhood and market in my reports).

In specific regard to the 1004MC, the biggest complaint I hear (and I make it myself) is that by simply following the instructions on how it should be completed, the results are meaningless and useless.... except that the instructions also state that if the appraiser believes it needs to be supplemented, then the appraiser should supplement it.

I've heard no one complain (or, if I have, I've missed it) that an analysis which includes the 1004MC with supplementation when needed is meaningless and useless.


So what we have in the 1004MC (IMNSHO) is a market analysis protocol that many times returns useless results for its intended use. Without supplementation, it is defective. With supplementation, it works. If we use it and supplement it when needed, then the results are credible and no one is mislead.

 

[Howard Klahr]

Denis, my issue is that Fannie claims that the neighborhood section on page 1 needs to conform to the results listed on the 1004mc. My position is that page one reflets neighborhood data, all of the data in the neighborhood while 1004mc represent comparable data. As a result these two distinct sets may and should contain common data points but usually reflect distinctly different results. Therefore by definition the information will almost never be the same.

 

[hastalavista]

Denis, my issue is that Fannie claims that the neighborhood section on page 1 needs to conform to the results listed on the 1004mc. My position is that page one reflets neighborhood data, all of the data in the neighborhood while 104mc represent comparable data. As a result these two distinct sets may and should contain common data points but usually reflect distinctly different results. Therefore by definition the information will almost never be the same.

I agree with you and made the same argument (many times) when the 1004MC first came out.

As you will recall, FHA disagreed with Fannie on page 1 vs. 1004mc value range (FHA said the 1004MC was the submarket, and page 1 should reflect the entire market within the neighborhood). I think FHA has since changed their position to conform with Fannie (I'm not sure; I haven't done an FHA appraisal in a while).
(I also take exception to how the GSEs define neighborhood; their use of neighborhood sounds more like what the Dictionary of Real Estate Appraisal defines as a market area than a neighborhood to me.)

But, the GSEs don't listen to me. So, if I want to do GSE work, I have to give them what they want and then supplement it with what I think is necessary so that (a) my results are credible and (b) no one is misled.
And, that is what I do.
That is also why I do very limited GSE work anymore (only for 3 clients that I really like).

 

[Howard Klahr]

I knew for the most part we were on the same page. See my comment in the thread We Are Our Own Worst Enemy Post #153 in that much of that argument applies here as well.

 

[timd354]

I agree with you and made the same argument (many times) when the 1004MC first came out.

As you will recall, FHA disagreed with Fannie on page 1 vs. 1004mc value range (FHA said the 1004MC was the submarket, and page 1 should reflect the entire market within the neighborhood). I think FHA has since changed their position to conform with Fannie (I'm not sure; I haven't done an FHA appraisal in a while).
(I also take exception to how the GSEs define neighborhood; their use of neighborhood sounds more like what the Dictionary of Real Estate Appraisal defines as a market area than a neighborhood to me.)

But, the GSEs don't listen to me. So, if I want to do GSE work, I have to give them what they want and then supplement it with what I think is necessary so that (a) my results are credible and (b) no one is misled.
And, that is what I do.
That is also why I do very limited GSE work anymore (only for 3 clients that I really like).

I will throw my two cents in as a former Freddie employee...I agree with both you and Howard (and the FHA's original interpretation) that the 1004 MC should reflect the subject's submarket, while page 1 of the 1004 should reflect the entire market in the neighborhood, but Fannie decided differently.

In defense of the GSE's regarding the definition of neighborhood, we looked at that term very closely when we put together the UAD and determined that there really is not any good, commonly accepted definition that applies on a nationwide difference. We found that market participants define "neighborhood" using their own criteria, which may be different from city to city, neighborhood to neighborhood, region to region etc. Often, residents/market participants in a particular area don't even agree on he boundaries of their own neighborhood or what the defining characteristics of their own neighborhood are. Its a very tough issue that we tried to address as the data guys at Fannie were salivating about the possibility of tracking defined/standardized neighborhood data. The other problem is that neighborhood boundaries can change over time