Correct Form for REO work

[Tony Bamert]

Having read through some of the posts and newsletters, it seems pretty clear that the current 1004 is not to be used on anything except for a mortgage financing transaction. I am wondering what the State's opinion (and the rest of the readers) is on doing REO appraisals on the 1004. Pretty much every REO assignment I receive, including two this week, require the current 1004 form with the REO addendum. HUD and Fannie Mae also require this form for their REOs.

The current 1004 cert does specifically say "mortgage finance transaction". However, I am not sure I am in the mood to tell Fannie/Freddie or Secretary Shaun Donovan at HUD that he is using the wrong form. I would rather have my tounge cut out than maket that phone call to the Atlanta HUD Field office. It seems absurd that you would get in trouble from your state agency for using a form which was required by a Federal agency and is generally required nationally for all REO work. Thoughts...

 

[Brian Weaver]

It's Fannie's form. If they say to use it...then it's okay to use it for THEIR deals.

 

[Tony Bamert]

excellent, thanks

 

[Thern Newbell]

Technically, it is still a mortgage finance transaction as it involves the collateral used to secure the mortgage.

 

[23Degrees]

Technically, it is still a mortgage finance transaction as it involves the collateral used to secure the mortgage.

This does not seem correct. Which mortgage do you refer to, the one already issued that is related to the foreclosure or the one that presumably will occur at a later date, possibly issued by a different lender, and issued in conjunction with a new appraisal completed for that intended use?

It is understood that "everyone does it", even Fannie asks for it this way, and so it is "OK" to use the 1004 for these but the intended use conflicts with the intended use statement in the 1004. Whether or not this is cause for concern is open to debate as there are no known casualties to date from completing these with an incorrect intended use statement in place.

 

[Thern Newbell]

http://www.appraisalinstitute.org/library/bok/reosup.pdf

Check out the link above. I am not sure if non-AI members can view or not, but it talks about REO appraisals. In summary the author (William G. Steinke, SRA) refers to "REO analysis" as "an extension of the mortgage finance transaction." The article is titled "The REO Supplemental Addendum—Square Pegs and Round Holes."

 

[23Degrees]

Thanks Thern - that is a good link

Yes there is that wiggle statement about the REO analysis having been "determined" to be an extension of the mortgage finance transaction but this paragraph in the "Round Holes" section goes on to state the "actual" intended use of REO appraisals and how this remains a "discretionary" clarification. Contrasted to the "Square Peg" and later sections this seems like somewhat of a criticism of how the intended use issue is currently handled in these situations.

The article does end up being somewhat of a bash on the REO appraisal format where a number of modifications are suggested and they include a modification of the intended use statement.

It would be interesting to see what others think but my take from an initial read is that he is saying we have this "round hole" - the current REO appraisal format, which includes the intended use conflict that he points out needs modification, that is being matched with a square peg. It seems his opinion of the current format and the results of its implementation are not very high to the point of indicating that the current situation precludes appropriate analysis and promotes sloppiness and misleading results.

 

[Mr Rex]

The REO appraisal is the ultimate "closure" of a specific "Mortgage Related Transaction".