Confusion with Exterior Only Appraisals....

[PrincessLeia]

When the purpose is for servicing/REO/pre-foreclosure, that provision doesn't apply. Just be sure those are the uses...sleazy lenders will occasionally try to slip them by your where that provision should be observed. I put an addendum page on the front of my report and include something like the following statement on that page:

I see what you're saying here. And others have said the same thing. But I don't understand why.

Where are you getting this idea: "When the purpose is for servicing/REO/pre-foreclosure, that provision doesn't apply." Is it because REO/pre-foreclosures don't have to conform to FNMA since it's not going secondary market?

If we put it on a FNMA 2055 form, [to MY knowledge, and PLEASE correct me if I'm wrong], it HAS to adhere to FNMA guidelines because of the pre-printed certifications, and because that's the form we're using. It doesn't matter what the intended use is if we use a pre-printed form where we are certifying that we had sufficient information and shouldn't be using EAs. Wouldn't the more appropriate action be to use a GP 2055 form instead (that doesn't have those limitations/certifications)? And if we propose that to the client, how do we get around the fact that a lot of times these are for loans that were originally FHA/HUD and they want an FHA 2055....?

For the record, I'm really not trying to be combative here... I'm really trying to understand. The crux of it is: What is written? If the state ever comes after an appraiser for one of these, and the appraiser says: "the pre-printed certifications on the form I used don't apply because this wasn't for FNMA, it was for REO/servicing." That'll never fly because in using that form, you signed/agreed to those pre-printed certifications.

I SINCERELY appreciate this discussion everyone! I think it's a super important topic!! I think REOs/Foreclosures are going to be on the rise, in fact, I think it might be the vast majority of business for most of us for the next year or two (especially those of us who deal exclusively in mortgage lending). I think there's a lot of appraisers out there who have SERIOUS confusions or uncertainties on this topic, just like I did. And by discussing this, I think we're honestly helping our profession and helping each other. So thank you all. Truly.

 

[Mark K]

My basic question is in regards to the intended user, as others have stated.

Does the report have to conform to F/F guidelines when the report is completed for quality control/pre-foreclosure for a mtg servicing company? Just because they order a 2055, if it does not have to conform, simply cross out the part of the Cert that is causing the problem and EA to your heart's content.

They order a 2055 because that's probably the only exterior-only form with which they are familiar.

 

[Bobby Bucks]

 

[Bobby Bucks]

I used to occasionally utilize the older version of the 2055 and modify the certs which was permitted on that form. A few times I tried to convince clients ordering pre-foreclosure assignments wanting the current 2055 that they should be using that old form instead of the most recent 2055, however; trying to convert them to that way of thinking was like getting a dedicated progressive to watch an entire episode of Ron Paul’s Liberty Report. I have attached a sterile version of the old Water Danger pre-foreclosure amendment. In the meantime, thousands of us peons will be faced with the choice of using the current 2055 form or “educating” the client/AMC and feeling good about it and watching them simply reassign the order.

 

[PrincessLeia]

Just because they order a 2055, if it does not have to conform, simply cross out the part of the Cert that is causing the problem and EA to your heart's content.

How do you cross out a pre-printed certification? You can't.

I suppose the more important question is: If we put something on a FNMA form... does it HAVE to comply with FNMA standards? Since we can't X out the pre-printed certifications, I think it DOES have to comply.

They order a 2055 because that's probably the only exterior-only form with which they are familiar.

I agree with this 100%.

So is the BEST action to recommend a GP 2055 to the client instead? That way we can "EA to our heart's content"

Honestly asking here.

 

[PrincessLeia]

I used to occasionally utilize the older version of the 2055 and modify the certs which was permitted on that form. A few times I tried to convince clients ordering pre-foreclosure assignments wanting the current 2055 that they should be using that old form instead of the most recent 2055, however; trying to convert them to that way of thinking was like getting a dedicated progressive to watch an entire episode of Ron Paul’s Liberty Report. I have attached a sterile version of the old Water Danger pre-foreclosure amendment. In the meantime, thousands of us peons will be faced with the choice of using the current 2055 form or “educating” the client/AMC and feeling good about it and watching them simply reassign the order.

A bit defeatist. But unfortunately, you're totally right. This is the most probable outcome.

**If** using a GP form would be the correct way to approach this (so we can make EAs about the interior Quality / Condition, that is the next question, how to successfully "close" the client/intended user to accept something other than the FNMA 2055 form....

 

[TerryRohrer]

I see what you're saying here. And others have said the same thing. But I don't understand why.

Where are you getting this idea: "When the purpose is for servicing/REO/pre-foreclosure, that provision doesn't apply." Is it because REO/pre-foreclosures don't have to conform to FNMA since it's not going secondary market?

If we put it on a FNMA 2055 form, [to MY knowledge, and PLEASE correct me if I'm wrong], it HAS to adhere to FNMA guidelines because of the pre-printed certifications, and because that's the form we're using. It doesn't matter what the intended use is if we use a pre-printed form where we are certifying that we had sufficient information and shouldn't be using EAs. Wouldn't the more appropriate action be to use a GP 2055 form instead (that doesn't have those limitations/certifications)? And if we propose that to the client, how do we get around the fact that a lot of times these are for loans that were originally FHA/HUD and they want an FHA 2055....?

For the record, I'm really not trying to be combative here... I'm really trying to understand. The crux of it is: What is written? If the state ever comes after an appraiser for one of these, and the appraiser says: "the pre-printed certifications on the form I used don't apply because this wasn't for FNMA, it was for REO/servicing." That'll never fly because in using that form, you signed/agreed to those pre-printed certifications.

I SINCERELY appreciate this discussion everyone! I think it's a super important topic!! I think REOs/Foreclosures are going to be on the rise, in fact, I think it might be the vast majority of business for most of us for the next year or two (especially those of us who deal exclusively in mortgage lending). I think there's a lot of appraisers out there who have SERIOUS confusions or uncertainties on this topic, just like I did. And by discussing this, I think we're honestly helping our profession and helping each other. So thank you all. Truly.

There is no requirement to follow FNMA guidelines when that isn't the agreed-on scope of work. The engagement letter and your communications with your client control the scope of work, not the one-size "kinda" fits all form. The current mess is not my preference, or that of most appraisers, but is what it is. Many engagement letters I receive say that an appraiser on the FHA roster must do the assignment, but the report does not have to comply with FHA requirements, particularly pertaining to property requirements. They just want to know, as best they can, the current value of their collateral. Someone mentioned above a use could be for negotiating a short sale. When a borrower with a reverse mortgage dies, and the lender has no other contacts, an exterior appraisal is often ordered.

A long time ago, it seemed to me that all lenders simply bid their total outstanding debt at the Sheriff's sale. After a few cycles of losing their shirts through taking possession and then having the collateral deteriorate further, it is now more common that they bid the current value and hope someone else will outbid them at the courthouse. The balance of the original loan has been lost, so there is no sense in compounding the problem by putting out additional capital that might not be fully recovered.

I get a few where they are ordering a 2055 for a HELOC or refi. When I quote those, I have looked for the subject in the MLS and the Assessor. If there is no reliable information pertaining to the interior, my quote will include a provision that I will likely have to rely on EAs due to the lack of information. Now and then, they will accept that and then accept the report with EAs included. Otherwise, they just keep looking for an appraiser who will ignore all these issues and just collect a fee regardless of the requirements!

 

[TerryRohrer]

A bit defeatist. But unfortunately, you're totally right. This is the most probable outcome.

**If** using a GP 2055 form would be the correct way to approach this (so we can make EAs about the interior Quality / Condition, that is the next question, how to successfully "close" the client/intended user to accept something other than the FNMA 2055 form....

I expect most will want the current, UAD-compliant 2055. Why waste an opportunity to suck more data out of us? I think the odds of closing the deal would be reduced by suggesting the GP 2055. Most won't know what that is and have been told to get the current 2055. While I haven't in most cases, additional protection couild be gained by adding, in your EAs, that the EA supplants the conflicting, preprinted verbiage (and specific which and where). That would alert users and the Board of your intent. If your client agrees and accepts that approach and the report, neither has any basis for complaints (theoretically).

 

[PrincessLeia]

Thanks for this Terry. It was very informative!

But on this statement... I have questions.

There is no requirement to follow FNMA guidelines when that isn't the agreed-on scope of work.

If the agreed upon scope of work does not conform to FNMA guidelines, wouldn't it be more appropriate NOT to use the FNMA form? That way you're not signing pre-printed certifications that don't apply and could potentially mis-lead the client?

 

[Mark K]

How do you cross out a pre-printed certification? You can't.

Yeah, you can. When complete, print to .pdf and then use the editing feature. Very easy. Then send it to the client.

I've done it dozens of times.