Fannie Mae's New Highest and Best Use 2020

[Mike Kennedy]

Fannie Mae’s New Highest and Best Use

Fannie Mae seems to have a problem with appraisals that involve excess land, and the appraiser’s characterization of Highest and Best Use.

www.workingre.com

 

[The Warrior Monk]

I'm of the opinion that some assignments are not worth taking, such as this. Ultimately, the appraiser is responsible for the appraisal, and when the assignment conditions become nonsensical, it might be time to move on to the next assignment.

 

[Mark K]

It will be amazing to watch all of those extra lots suddenly become surplus instead of excess land.

 

[Carnivore]

What seems to be missing is the Solution to the Problem when it comes to using the FNMA Series Report forms.

Lee & Rich have certainly Identified the Problem, But offer no solutions. That's OK, because it is the Power Player FNMA job to do that. Right, we can not modify the forms to fit the Valuation solution.

That's the conundrum. Specifically related to FNMA/Lending. I said this before and I will say it again; This is not a Development Issue, No, this is a Reporting Issue. No one has challenged me on that point.

The second issue is this problem may or may not be that wide spread. That could be why FNMA may be ignoring the problem. FHA has it right, because of their Mandate, they are in the business to provide low cost flexible loans for Home Ownership. They are not in the business of making loans on a mini-farm or ranch. That's the USDA/FMHA Job/Mandate..and others.

Lee & Rich identified the Problem as being two or more legally defined lots. It gets far worse when you go beyond two lots that each have their own HBU. What if it is one 2 acre lot defined with metes n bounds and is recorded and Its not divided. If it can be divided, then you have the potential for two or more separate lots. Same Problem just a little twist to it. FHA would make a loan on that individual site, even though it could be divided. but its not. For what ever reason they will not make a loan on a home with an Excess Lot.

Back to the Reporting Problem. The MV you opine on Page two is auto-populated in all the Lending loan forms.

 

[Carnivore]

It will be amazing to watch all of those extra lots suddenly become surplus instead of excess land.

That's funny and I bet they won't turn anyone in to the State Board if that happens. OTOH if you don't meet a certain LTV for the Borrower REFI and he gets PO'd and files a complaint because you did not give credit for his upgraded Garbage disposal. The the State Board gets your report and the First question is about the HBU and why you said what you said. I had that question on one complaint filed on me. Luckily my extra lot was surplus and I said so in the report.

Lee & Rich made apoint in the article about checking NO on the HBU and FNMA will not take the loan. I think that is incorrect. When something like that triggers a fail it goes into manual Underwriting and there they can waive that issue.

 

[George Hatch]

IMO, the problem isn't the bundle of rights. The problem is that the market value of a property is determined in the market.; what the property is worth to those buyers and sellers. MV does not mean what the property is worth to a mortgage lender or what the value is subject to a lender's program.

Fannie is basically telling appraisers to do one thing (develop an opinion of Mortgage Value) whilst calling it something it isn't (Market Value).

It seems to me that any appraisers who want to play it safe could mostly offset the risks involved by reporting the value both ways and let their readers make up their own minds.

"The value conclusions reported on the bottom line of pg 2 are based in part on Fannie's instructions of what they'll accept for their usage. However, in my opinion the market value of the improved SFR parcel if marketed separately is $200,000 and the market value of the additional vacant parcel is $35,000."​

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But don't do be doing that in one breath and then in the next be resorting to "land-value-by-I-backed-into it" for your land valuation. That's just insulting the reader's intelligence.

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[sputnam]

Last time I checked, the Client gets to define the appraisal problem.... i.e., market value. They don't get to redefine appraisal concepts nor get to tell the appraiser what opinion he/she must have. The distinction between surplus land and excess land has been well defined and hasn't changed for years. Deciding which it is in a particular assignment is a conclusion that the appraiser must make... and, is supposed to support. The Client, and any GSEs, do not have to agree with your conclusion and they don't have to make the loan. As the appraiser, that's not our job.

 

[J Grant]

Excess land does not stop being excess land just because it sells along with the house next door / encumbered by one mortgage for both. I believe everyone here knows that ? And realizes Fannie is not instructing to pretend it is surplus land... ?

Groundhog day - haven't we had marathon threads on this already....

 

[Zoe]

Excess land does not stop being excess land just because it sells along with the house next door / encumbered by one mortgage for both. I believe everyone here knows that ? And realizes Fannie is not instructing to pretend it is surplus land... ?

Groundhog day - haven't we had marathon threads on this already....

I see your point. The client, which is not fannie just wants it as one single unit. The problem is that is more "use value" than "market value" if it can be sold separately and maximally productive. Value definition is huge. I say no on page 1 of 1004 and do hypothetical condition. I don't have a problem with that.

 

[Zoe]

In many cases with "market value" definition, it could be worth more sold together than separately. But that is key on "market value" definition which is in the 1004.