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Recertifications

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Ron Schwartz

Junior Member
Joined
Dec 11, 2002
Professional Status
Certified Residential Appraiser
State
Florida
Help!!!

I dont remember were I read it and have contacted several other appraisers who cant seem to remember either. What are the new 2003 laws regarding recertification?
Doesnt the new law say, in every circumstance, we have to reinspect and and add comps. Is this true if we change the value or even if we say it remains stable. I have told my clients that I have to perfom a new inspection and write a new report. Especially, here in South Florida where values seem to be changing daily and most of the recerts are for appraisals that are a few days away from being over six months old. I think the Lenders just want to save a new appraisal fee.
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
First, the term recertifications of value is no longer used in Fannie Mae's newest guidelines that went into effect 6/30/2002 (Section 201 - Age of Appraisal). The words recertification of value does NOT appear anywhere in current Fannie Mae guidelines. For mortgage purposes, recertifications of value do not exist. In USPAP since 1995, recertifications of value have been called Updates to an appraisal because the effective date of the opinion of value has changed. USPAP from 1995 to 2002 considered updates an extension of the original report. Fannie Mae's new guidelines also calls updates an extension of the original report, that changes the effective date of the opinion of value to reflect a current date. Fannie Mae will accept an update reported either in an appraisal report form like a 2055 or 1004 for example or a letter.

Now we get to 2003 USPAP. Make a copy of Advisory Opinion 3 from the link provided in the previous post. USPAP now considers an update to an appraisal a new assignment and not an extension to the original report. The new assignment may be reported in one of three ways.

Option 1. A completely new report could be prepared. That report would contain everything because it is not an extension and does not incorporate a prior report. It could be for example, a 1004 or a 2055.

Option 2. A completely new report could be prepared that could have some items blank because the prior report would be attached to the new report and the information from the prior report would be incorporated into the new report. It could also be for example, a 1004 or a 2055.

Option 3. A report (either a standardized form like the 2055 or 1004) or a letter that would incorporate by reference the prior report because all the original people or firms would be involved. The original client and the original appraiser/appraisal firm would all have copies of the original report. If a letter is chosen as the type of report, the letter is required to have at least the seven items listed included in the letter.

Now to the part about reporting current market activity, regardless of reporting option, wouldn't it be logical to at least drive by the subject (it might have burned down or they doubled the size since the original effective date, personally I like to at least walk through the subject) ? Then to research and select new comparables could be done in office, but how would you know if those new sales/pendings/actives are really comparable to the subject without driving by them? And then to make the determination of whether the value is the same, more or less than before, those comparables would need to be analyzed.

So yes, re-inspection is recommended and if there is new activity it would need to be reviewed. When a lender/client orders a "recert", they are ordering a new assignment, a new appraisal, a new report, etc.

And the most important paragraph of AO-3 is the section on Confidentiality!
 

Charlotte Dixon

Senior Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Delaware
First, the term recertifications of value is no longer used in Fannie Mae's newest guidelines that went into effect 6/30/2002 (Section 201 - Age of Appraisal). The words recertification of value does NOT appear anywhere in current Fannie Mae guidelines.

Stop the Merry-Go-Round! I think I want to get off......I'm going to be honest and admit..I Just Can't Keep UP! Gosh, I wish things would stay the same for awhile! :? O.K., it's back to some intense reading of all the guidelines again.... :x..... Maybe it'll snow tonight and I'll get to snuggle up with some of those interesting rules. :roll:
 

Austin

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Virginia
Jo Ann
That last paragraph adds a new twist I haven’t noticed before: A recertification with a changed date of valuation. I read AO-3 and that is what it says, but in my mind statements like that only serve to add confusion to an already foggy situation. Now explain what is the difference between doing a new assignment to update a prior price estimate and doing a recertification with an updated opinion of value. It seems to me you would be combining two functions into one report, a recertification and a new appraisal report. I am still confused about what should be included in a recertification report and this really confuses things by including a new appraisal report into the same report. Maybe my coffee has not kicked in yet. I am not a morning person.
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
Actually, according to USPAP the only change that went into effect for 2003 is the new assignment instead of an extension. When the effective date of the opinion of value changes it became an update has been in effect since 1995. The "recertification of value" became in 1995 only a verification that the value on some date in the past was $zzz. Current activity was an update. Where everybody got confused was Fannie Mae Guidelines. Their previous guidelines came out in 1994, before the 1995 USPAP change, and in the 1994 guidelines Fannie Mae used the term of recertification of value--so lenders and appraisers got into the habit of saying "recert" instead of changing to the 1995 USPAP. Before that we had "opinion of value letters"--which became big no-nos with USPAP. So based on past history, Fannie Mae guidelines will change in about 6-7 years, the update as an extension will disappear from Fannie Mae verbiage. But in 5-6 years USPAP will change again and the two documents will be out of sync again! Between 6/30/2002 and 12/31/2002 they did say the same thing!
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
If your appraisal is for the purpose of a financial transaction, and just might eventually end up with Fannie Mae or Freddie Mac, regardless of who the original lender might be----erase, delete, remove, etc the term "recertification of value" completely and totally from your vocabulary. For appraisals for mortgage loan purposes requesting current data, that term has not existed since 1995 per USPAP. Just like the words inspect or inspection no longer exists in mine. I am an appraiser that observes. A home inspector inspects.

Anyway, a recertification of value would only occur if the client wanted to know if the house was completed on January 27, 2003 per plans and specs and did you really and truly say that June 1, 2002 the value was $10? Per USPAP 1995-2003 that is a recertification of value because the effective date of the opinion of value does not change. A report of that type would be useless to a lender that plans to eventually sell to Fannie Mae.

A lender wants to know if they house was completed on January 27, 2003 per plans and specs and is the value as of January 27, 2003 still $10? That is an change in the effective date of the opinion of value so it becomes an update according to Fannie Mae's Section 201 (6/ 30/2002) and the 1995-2003 USPAP.

If there is no change in the effective date of the opinion of value, Fannie Mae will not buy the loan because the effective date is more than four months old. When the effective date becomes older than four months, Fannie Mae requires the appraiser to observe (they use the term inspect) at least the exterior of the property and a review of CURRENT data to determine whether the property has declined in value since the date of the original date. See Section 201 - Age of Appraisal (or Property Inspection) of Fannie Mae guidelines that went into effect 6/30/2002.

If the original report was on a 2055 or other Desktop Underwriter type of form, Fannie Mae requires a new Form 2075 as an update.
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
If the original report was on a 2055 or other Desktop Underwriter type of form, Fannie Mae requires a new Form 2075 as an update.

Jo Ann, do you send the 2075 with your letter of update? Or is the 2075 considered to be the update? :morning: Foggy minds need some 'splaining.
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
For Fannie Mae in that specificate situation, the 2075 would be the update.
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
What is needed is for Fannie Mae, FHA, and VA to write a directive to the LENDERS that says what we have been beating to death for two years now.

As appraisers, we should say this when ask for a Recertification of Value...

"What you need is an UP DATE OF APPRAISAL not a Recertification. I can do that for you but it will require substantial additional work. (then you decide what you need to do to compy with USPAP and charge accordingly)

If you really want to educate the lender, prepare a document that outlines the Update procedure and have it ready to fax to the lender when you get one of these requests. Let them choose the option needed and agree to the fee.
 
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