Last month, one of the prominent government sponsored enterprises, Fannie Mae, announced that it is keeping a blacklist of appraisers and is warning banks and mortgage lenders about the consequences of doing business with the listed appraisers.
Fannie Mae now scrutinizes appraisals early in the mortgage process before it even buys a loan from a lender. They can now identify certain inaccuracies and inconsistencies in an appraiser’s work product, and will reject loans outright for egregious inconsistencies made by appraisers. Their analysis will include, but not be limited to, instances when the same appraiser has provided inaccurate, inconsistent, or contradictory information on the same property and same transaction across multiple appraisals. Appraisal reports are reviewed for patterns of discrepancies and inconsistencies related to property characteristics such as gross living area, sales price, room count, lot size, along with condition, quality, view, and location ratings.
The list is accessible only by lenders and indicates whether the appraiser’s appraisals are subject to 100% review or whose appraisals are no longer accepted by Fannie Mae. Details about how to obtain access will be provided on Fannie Mae’s business portal and through communications to approved sellers and servicers. It is obvious that appraisals are coming under increased scrutiny, with some industry professionals blaming the use of the appraisal management company, while others blame the government sponsored enterprises’ prohibition on the use of trainee appraisers. Regardless of the reason, banks and mortgage lenders must be cautious when selecting an appraiser given Fannie Mae’s new processes to monitor appraisers.
It should be noted that the other prominent government sponsored enterprise, Freddie Mac, has maintained its own blacklist since the early 1990’s.
For more information, please contact our banking group or call 208.344.6000.