UAD or not?

[Rich Heyn]

I have an interesting story on the subject. When I worked for my dad, all of our clients were in-house. Nothing we appraised was sold to the secondary market. We did however use a FNMA form (2055, 1004) when providing appraisals to our lender clients.

Eventually it was time for me and another guy that worked for my dad to interview for our licenses. Our interviews were probably a month apart. We were both chewed up one side and down the other by two senior board members and the investigator for using FNMA forms for non-secondary market lending purposes.

Their reasoning was, because the forms were FNMA forms and stated as much, the client and other readers could reasonably assume that the appraisal was FNMA compliant because it was developed on a FNMA form.

So with the boards threat to drop the hammer if we didn't change our evil ways, we switched to GP or AI forms for our in-house lenders. Every now and then I'll get a client that wants an in-house appraisal performed on a 1004, so I retell this little story.

The short version is: If it's an in-house lender; I only use GP or AI forms.

I'm curious if your Board could come up with a citation from USPAP or State regulations that would support their position.

 

[SpartanAG]

I'm curious if your Board could come up with a citation from USPAP or State regulations that would support their position.

You know I asked that question while I was sitting there. The answer they gave me was: Since it was on a FNMA form, it could reasonably be assumed to be FNMA compliant by the client and reader. Since the appraisal was on a FNMA form, but wasn't FNMA compliant, it could be considered misleading. Since we aren't supposed to develop misleading appraisals, they had better not catch me using FNMA forms for non-secondary market lending...or else!

Yes they did say "or else". Since they were the deciding body on whether or not I got to take my test and get my license, I wasn't going to argue.

 

[Mr Rex]

Why not just comply with FNMA guidelines?

 

[SpartanAG]

Why not just comply with FNMA guidelines?

Because they were in-house appraisals and the clients didn't need nor require us to meet FNMA guidelines. Most of our clients didn't and still don't sell loans to the secondary market. Most of that work was in extremely rural areas, so there was little secondary market work anyway.

 

[Mr Rex]

The only difference is explanation, no?

 

[SpartanAG]

The only difference is explanation, no?

No. Not even close. All we needed to produce was a USPAP compliant appraisal for our in-house clients. FNMA guidelines (at the time) added several requirements that were not required by USPAP or my clients, and would have in some instances been impossible meet do to the rural nature of my market area. Why try to jump through all the arbitrary FNMA hoops when you don't have to?

Either way it wouldn't have mattered to the board. Even if the appraisal met all the requirements for FNMA, the intended purpose of the report was not for a FNMA client, but an in-house client. Since it wasn't intended for the secondary market, whether or not it met the requirements, the board said we should not use that form because it was misleading.

Keep in mind I am just relaying a previous experience. I am not claiming that using FNMA form for in-house assignments is either right or wrong. That is a business decision each appraiser must make.

 

[Mr Rex]

What are these onerous "requirements"? I doubt you work a more rural area than I do and while Fannie has many "guidelines", there are few "requirements", except to explain when varying from the guidelines.

 

[SpartanAG]

What are these onerous "requirements"? I doubt you work a more rural area than I do and while Fannie has many "guidelines", there are few "requirements", except to explain when varying from the guidelines.

Again, why even attempt to meet requirements that I wasn't required to meet either by USPAP or by my clients? We didn't see a point in expending the extra effort when it wasn't required and wouldn't add anything meaningful to the development of the appraisal.

I don't know your market area any better than you know mine, so neither one of us has a frame of reference as to the rural-ness of each others market areas, not that it matters anyway.

So back on the OP's topic. No I don't use UAD forms for in-house clients.

 

[Mr Rex]

My point is that the Fannie Mae "requirements" are minimal at best when compared to any other mortgage lending assignment's "requirements", so its not such an onerous task to comply with the guidelines and remove all doubt. YMMV.

FNMA and UAD for non lender work is amateurish at best.

 

[SpartanAG]

My point is that the Fannie Mae "requirements" are minimal at best when compared to any other mortgage lending assignment's "requirements", so its not such an onerous task to comply with the guidelines and remove all doubt. YMMV.

FNMA and UAD for non lender work is amateurish at best.

I got your point about the FNMA "requirements". Again, why do the extra work, however minimal, if it isn't required or wanted by the client? All our clients wanted was a USPAP compliant appraisal. No other guidelines or hoops; just USPAP (and applicable banking and state regs). Our clients didn't service secondary market loans, and didn't need or want appraisals that met those requirements. So if my clients didn't want a FNMA compliant appraisal, why would I go through the extra effort to provide one?

Surely you remember how it was back in the day when you didn't have to drive each and every sale and take a new picture to make sure it was "in season". Back when you dealt directly with the client, instead of "Danny" from India. Back when if the LO had a question you got a phone call instead of an email with ridiculous stips. Meeting FNMA guidelines in a rural area when not required or wanted, costs time and money. If the client doesn't want a FNMA compliant appraisal, they sure as heck aren't going to pay for one.

"FNMA and UAD for non lender work is amateurish at best."

I'm not sure why that comment was made, but we agree. We normally do a narrative, GP or AI forms for non-lender work.