FNMA and Permits and Extraordinary Assumptions

[Mark K]

Specific to the FNMA Series formats; When does an Ordinary Assumption cross the threshold to an Extraordinary Assumption?
How Far do you go back?

To me, that's the main question. In some areas the lack of a permit is a big deal, in others, not so much if at all. That tells me that in some areas it would be an EA, in others with lax or non-existent enforcement, just an OA (ordinary assumption).

Also, I've always been curious just how far back some appraisers (those that advocate the Permit Police concept) go in doing their diligence. Back to the original permit, back 50 years to see if that elec box conversion from fuses to breakers had a permit, maybe back 10-20 years to see if a permit was pulled for the last roof shingle replacement, or how about that old coal to nat. gas furnace conversion? And that room addition 50 years ago...was there a permit pulled and more to the point, was a permit required back then? When they check for permits do they also research the zoning/permitting requirements in place at the time? I'd submit that if an appraiser decides to check for permits, he should check for ALL permits and not do a half-azzed job.

In this area the lack of a permit for various items (window replacement, kitchen/bath remodel, new roof, updated electrical, new patios or decks, yard barns, etc.) is so common to be a non-issue due to non-enforcement. The only times I've checked for permits is when the loan officer at the bank suggested that they would be happy if I could find a reason for them to turn down a loan on some POS house. No problem.

 

[glenn walker]

NO

So with that thought in mind, adding FHA as an intended user on an FHA assignment on an FNMA 1004 is a no-no.

No because FHA - VA both requires use of a Fannie Mae Forms and neither they or Fannie allow Assumptions other than whats in there Pre-Printed certifications or on there check boxes.

 

[andrew81]

An extraordinary assumption can be used to manage uncertain information that, if found to be false, could alter appraisal results. USPAP states that extraordinary assumptions are assignmentspecific. This might explain why appraisers don’t normally employ extraordinary assumptions when relying on uncertain information, such as MLS and public records. Those sources are so widespread that the assumption of accuracy, although not always valid, is at least common, not assignmentspecific. USPAP no longer defines the ordinary assumption, but for those of us who’ve been in this profession a while, you will recall that not all assumptions are extraordinary.

That is from the September 2019 FNMA Appraiser Update Newsletter and addresses the use of extraordinary assumptions in the completion of Desktop Appraisals. More specifically the use of property data collected by someone other than the appraiser.

 

[glenn walker]

Actually almost all Assumptions made by appraisers are ordinary its just many think they can EA there way out of liability when in fact the know something they just don't want to report it or own up to.

 

[Sadie]

That is from the September 2019 FNMA Appraiser Update Newsletter and addresses the use of extraordinary assumptions in the completion of Desktop Appraisals. More specifically the use of property data collected by someone other than the appraiser.

So you agree that FNMA allows extraordinary assumptions? The statement was FNMA does not allow extraordinary assumptions. Show me where extraordinary assumptions are NOT allowed by FNMA.
The boiler plate on the 1004 Limiting Conditions only refers to modifications in the Scope of Work. I don't think FNMA would prohibit an extraordinary assumption and then put it the form. Here is the full paragraph the refers to assumptions (note that extraordinary is not in the verbiage). Where does it say you can't make an extraordinary assumption?

This appraisal report is subject to the following scope of work, intended use, intended user, definition of market value, statement of assumptions and limiting conditions, and certifications. Modifications, additions, or deletions to the intended use, intended user, definition of market value, or assumptions and limiting conditions are not permitted. The appraiser may expand the scope of work to include any additional research or analysis necessary based on the complexity of this appraisal assignment. Modifications or deletions to the certifications are also not permitted. However, additional certifications that do not constitute material alterations to this appraisal report, such as those required by law or those related to the appraiser’s continuing education or membership in an appraisal organization, are permitted.

 

[Terrel L. Shields]

If the lack of permit creates a lien or encumbrance on the property, and you include that; then are you valuing the fee simple absolute

I see an amazing amount of even residential property where buried up in the deed is a statement saying that the mineral rights or half of the mineral rights are retained by the seller, or a caveat that it is subject to prior reservations of record, etc. Especially in coal, oil, and mineral property areas, the fee simple is encumbered and you are valuing something less than fee simple. You have fee in surface only.

A few years ago, a sink hole appeared in a Tulsa, Oklahoma housing development. Turned out that there was underground coal mines from the early 1900s there. And the deeds all had it that some long extinct coal company held title to the mineral rights. Not a person in the area knew they didn't own "fee simple."

 

[James Micozzi]

NO

No because FHA - VA both requires use of a Fannie Mae Forms and neither they or Fannie allow Assumptions other than whats in there Pre-Printed certifications or on there check boxes.

I asked about the modifying the intended user. You should re-read the statement on page on of the preprinted addendum. I copied and pasted it here for your convenience.

"This report form is designed to report an appraisal of a one-unit property or a one-unit property with an accessory unit; including a unit in a planned unit development (PUD). This report form is not designed to report an appraisal of a manufactured home or a unit in a condominium or cooperative project.

This appraisal report is subject to the following scope of work, intended use, intended user, definition of market value, statement of assumptions and limiting conditions, and certifications. Modifications, additions, or deletions to the intended use, intended user, definition of market value, or assumptions and limiting conditions are not permitted. The appraiser may expand the scope of work to include any additional research or analysis necessary based on the complexity of this appraisal assignment. Modifications or deletions to the certifications are also not permitted. However, additional certifications that do not constitute material alterations to this appraisal report, such as those required by law or those related to the appraiser’s continuing education or membership in an appraisal organization, are permitted."

So I ask you the question about adding FHA as an intended user on the FANNIE form. According to the above statement, the answer is no.

 

[glenn walker]

So you agree that FNMA allows extraordinary assumptions? The statement was FNMA does not allow extraordinary assumptions. Show me where extraordinary assumptions are NOT allowed by FNMA.
The boiler plate on the 1004 Limiting Conditions only refers to modifications in the Scope of Work. I don't think FNMA would prohibit an extraordinary assumption and then put it the form. Here is the full paragraph the refers to assumptions (note that extraordinary is not in the verbiage). Where does it say you can't make an extraordinary assumption?

This appraisal report is subject to the following scope of work, intended use, intended user, definition of market value, statement of assumptions and limiting conditions, and certifications. Modifications, additions, or deletions to the intended use, intended user, definition of market value, or assumptions and limiting conditions are not permitted. The appraiser may expand the scope of work to include any additional research or analysis necessary based on the complexity of this appraisal assignment. Modifications or deletions to the certifications are also not permitted. However, additional certifications that do not constitute material alterations to this appraisal report, such as those required by law or those related to the appraiser’s continuing education or membership in an appraisal organization, are permitted.

I asked about the modifying the intended user. You should re-read the statement on page on of the preprinted addendum. I copied and pasted it here for your convenience.

"This report form is designed to report an appraisal of a one-unit property or a one-unit property with an accessory unit; including a unit in a planned unit development (PUD). This report form is not designed to report an appraisal of a manufactured home or a unit in a condominium or cooperative project.

This appraisal report is subject to the following scope of work, intended use, intended user, definition of market value, statement of assumptions and limiting conditions, and certifications. Modifications, additions, or deletions to the intended use, intended user, definition of market value, or assumptions and limiting conditions are not permitted. The appraiser may expand the scope of work to include any additional research or analysis necessary based on the complexity of this appraisal assignment. Modifications or deletions to the certifications are also not permitted. However, additional certifications that do not constitute material alterations to this appraisal report, such as those required by law or those related to the appraiser’s continuing education or membership in an appraisal organization, are permitted."

So I ask you the question about adding FHA as an intended user on the FANNIE form. According to the above statement, the answer is no.

FHA requires the appraiser to include them as an-Intened user and their Federal Guidelines over-rule what a form says and the same with VA as they are like FHA an intended user and insurer of the loan. and both require use of the 1004 and its Certification.

 

[Carnivore]

Whats great about this thread and the entire discussion within it; No one injected it with comments about Covid-19, Ole Joe and/or Afghanistan.

Thank God were back to normal squabbling about the nuance of FNMA Formats/Selling Guide and the Intricacies of USPAP.

 

[glenn walker]

The

I asked about the modifying the intended user. You should re-read the statement on page on of the preprinted addendum. I copied and pasted it here for your convenience.

"This report form is designed to report an appraisal of a one-unit property or a one-unit property with an accessory unit; including a unit in a planned unit development (PUD). This report form is not designed to report an appraisal of a manufactured home or a unit in a condominium or cooperative project.

This appraisal report is subject to the following scope of work, intended use, intended user, definition of market value, statement of assumptions and limiting conditions, and certifications. Modifications, additions, or deletions to the intended use, intended user, definition of market value, or assumptions and limiting conditions are not permitted. The appraiser may expand the scope of work to include any additional research or analysis necessary based on the complexity of this appraisal assignment. Modifications or deletions to the certifications are also not permitted. However, additional certifications that do not constitute material alterations to this appraisal report, such as those required by law or those related to the appraiser’s continuing education or membership in an appraisal organization, are permitted."

So I ask you the question about adding FHA as an intended user on the FANNIE form. According to the above statement, the answer is no.

Fannie Forms do not have anything on them about who the Client or who the other Intended users are including themselfs. FHA-VA-USDA and other Numerous agencies use the Fannie Forms for uniformity and so they dont have to develop there own. The Appraiser Names the Client and The Intended users in the report. Its just a form and nothing more. If you read the Certification it lays out in it CERT#23 Lays it out that any Goverment Sponsored Enterprises may rely on the report as part of any mortgage finance transactions.

My Note: The Fannie Forms can be used by any Government Agencie and that agencie can have their own Guidelines which can be followed using Fannie Mae Forms. Also in Conventional loans where the lender is going too sell the loan to Fannie or Freddie they automatically become a Use-Where FHA and some other Agencies require the appraiser to include them in the report as an additional user.

For FHA on the1004 it goes something like this in the reconciliation : The Lender-Client Is Bigger Bank USA and the Intended Use of this report Is solely to assist FHA/HUD In assessing the risk of the property securing A FHA insured mortgage and both FHA/HUD and Bigger Bank Corporation are the Intended users of this appraisal report .