Published Tuesday | July 17, 2007
Fannie Mae tells lenders to use care in appraisals
BLOOMBERG NEWS

Fannie Mae, the nation's largest provider of money for home loans, cautioned lenders Monday to be more thorough in scrutinizing property appraisals in weakening housing markets. The company will provide alerts to lenders using its underwriting system when a home is in an area experiencing a price decline or "where it may be difficult to assess home values," the company said on its Web site.

Such conditions may occur when the supply of houses exceeds demand or properties stay unsold for more than six months. Fannie Mae, which buys mortgages from lenders, giving them fresh money to make new loans, wants appraisers to pay attention to local conditions and then detail them in reports for loan files.

Fannie Mae expects "lenders delivering mortgage loans will assess not only the borrowers' ability to qualify for the mortgage loans but also objectively assess the collateral that will secure the mortgage loan," the memo said.

The directive may make it harder for potential homebuyers in softening markets to get loans and could drive down values further.

Lenders already are tightening standards amid surging delinquencies and defaults, with the amount among subprime mortgages to borrowers with bad credit or high debt packaged into bonds hitting a 10-year high.

The share of all mortgages entering foreclosure rose to the highest in at least 35 years in the first quarter, according to the Mortgage Bankers Association.

Very good article. Thanks for sharing. I suppose in a way it might help curb some of the other fraud activity as well. Suppose it's a wait and see.

""but also objectively assess the collateral that will secure the mortgage loan,""

For people who don't know that would be appraisers and their reports.

I forgot to mention... For those of you who are afraid to mark the "declining" box in the appraisal because the underwriter will kill the deal, think twice. NOT marking the box may kill your ability to do appraisals with that lender.

Many of the big lenders are now using systems like Corelogic for automated underwriting. These systems are plugged into other data systems that monitor sales activity for a zip code or census tract. If those systems indicate that there is a decline, but your appraisal says otherwise, do not be surprised if you are asked to comment.

If your comps are over 6 months old, do not be surprised to see underwriting conditions asking why you have not made negative time adjustments.

Times are changing... be prepared to change or be frustrated.

There are very few places in the entire Atlanta market where "declining" shouldn't be checked. Great point, John.

Amen to that MAG. By the way, how is the Mozy working out....still ok?

Link to Article

John

Mike, I don't even think about Mozy anymore. It is so efficient, it backs up everything while I'm asleep. No complaints at all.