Appraisal rules are about to change and will affect your appraisal procedures. In an effort to enhance the quality and consistency of appraisal data and to foster the electronic collection of that data, Fannie Mae and Freddie Mac, at the direction of their regulator, the Federal Housing Finance Agency, co-developed the Uniform Mortgage Data Program (UMDP), consisting of a Uniform Appraisal Dataset (UAD) and the Uniform Collateral Data Port (UCDP). Recent changes to Regulation Z, mandated under the Dodd-Frank Act, were also implemented by the Federal Reserve Board, to ensure the independence of appraisers in preparing appraisals.
Uniform Mortgage Data Program
The UMDP implements two objectives electronic submission of appraisal data and collection of additional loan data in an updated format through a uniform approach that facilitates lender adoption by having uniform datasets and file formats. The UMDP includes: (1) the UAD that standardizes key appraisal data elements to enhance data quality and promote consistency; (2) the UCDP for the electronic collection of appraisal data to minimize impact on lenders; and (3) A Uniform Loan Delivery Dataset (ULDD) that leverages the industry-recognized MISMO Version 3.0 standard.
Fannie Mae and Freddie Mac created a UAD Specification document to provide business and technical requirements for implementation of the UAD. The UAD includes all data elements required to complete appraisal report forms. The UAD also standardizes the input values for certain elements (for example, specific date and dollar amount formats) and standardizes the definitions for select key appraisal data elements, such as property condition and quality of construction, on the UAD appraisal report forms. The UAD Specification may be amended from time to time.
Fannie Mae began working with Freddie Mac to develop a common approach to the standardization and collection of appraisal data. As a result of that collaborative effort, the UCDP was developed to serve as the joint portal through which lenders can submit electronic appraisal reports to Fannie Mae and Freddie Mac. The UCDP was made available on June 27, 2011, for customers and their designated agents so that they can integrate the new information flow into their existing processes prior to the mandatory submission date (December 1, 2011). Appraisal data files can be submitted to Fannie Mae and Freddie Mac via the UCDP prior to that date. All appraisals successfully uploaded to the UCDP will receive a Submission Summary Report summarizing the appraisal submission details and the status of the submission as well as providing a Document File Identifier, which is the unique appraisal identifier generated by the UCDP.
Fannie Mae and Freddie Mac are also transitioning their single-family loan delivery file formats to the industry standard MISMO Version 3.0 Reference Model and changing the data elements they require at the time of loan delivery. Through their work together on the Uniform Loan Delivery Dataset, Fannie and Freddie are establishing a common usage for the majority of the loan delivery data elements and are minimizing differences wherever possible. This new uniformity should ease lender burden by establishing a single enhanced procedure for data submission.
There are three implementation dates by which lenders must comply with the different facets of the program. All appraisals with an effective date of September 1, 2011 or later must comply with the UAD data standardization requirements. For all loan applications dated December 1, 2011 or later, Lenders must deliver full UAD-compliant electronic appraisal report data (if an appraisal is required) and expanded loan delivery data. For any loan delivery on or after March 19, 2012, Lenders must deliver full UAD-compliant electronic appraisal report data (if an appraisal is required), and loan delivery data must be provided in industry-standard ULDD format (unless manually entered in Loan Delivery)
Appraiser Independence Rule
The Federal Reserve Board announced an interim final rule on Oct. 18, 2010 to ensure that real estate appraisals used to support creditor's underwriting decisions are based on an appraiser's independent professional judgment, free of any influence or pressure from those with interests in the transactions. The rule, required under section 1472 of the Dodd-Frank Act (which added new section 129E to TILA), expands the FRB 's previous appraisal rule that went into effect on April 1, 2010, by including within its coverage creditors, appraisal management companies, appraisers, mortgage brokers, realtors, title insurers and other entities that provide settlement services.
The interim final rule includes several provisions that protect the integrity of the appraisal process when a consumer's principal residence is securing the loan. Specifically, the interim final rule:
- Prohibits coercion, bribery and other similar actions designed to cause appraisers to base the appraised value of properties on factors other than their independent judgment;
- Prohibits appraisers and appraisal management companies hired by lenders from having financial or other interests in the properties or the credit transactions;
- Prohibits creditors from extending credit based on appraisals if they know beforehand of violations involving appraiser coercion or conflicts of interest, unless the creditors determine that the values of the properties are not materially misstated;
- Requires that creditors or settlement service providers that have information about appraiser misconduct file reports with the appropriate state licensing authorities; and
- Requires the payment of reasonable and customary compensation to "fee" appraisers, who are not employees of the creditors or of the appraisal management companies hired by the creditors.
Compliance with the interim rule became mandatory on April 1, 2011.