Appraisal Underwriting Part I - The Basics · –Virtual inspections: •Appraisers may use virtual inspection methods to augment the data and imagery that is used for either a desktop

Appraisal Underwriting:Part I - The Basics

June 2020

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Customer EducationBrought to you by: Genworth Customer Development and Process Consulting

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Session Overview Participants will learn about analyzing the Uniform Residential‏Appraisal Report

– URAR – Fannie Mae Form 1004– Freddie Mac Form 70

Resources available‏

The roles of the appraisal, the appraiser and the underwriter/reviewer‏‏

Appraisal exhibits‏

Each section and data field on the appraisal form‏

Appraisal red flags and best practices‏

1Appraisal Underwriting

Additional Genworth Appraisal Training:Genworth offers training on other specific appraisal topics‏

– Manufactured Housing– Rural Properties


Visit Our For Additional Informationwww.mi.genworth.com/Training

Genworth Appraisal Review Checklist

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Appraisal Underwriting

https://new-content.mortgageinsurance.genworth.com/documents/uw-tips-and-credit-policy/Appraisal%20Review%20Checklist.pdf

https://new-content.mortgageinsurance.genworth.com/documents/uw-tips-and-credit-policy/Appraisal%20Review%20Checklist%20-%202-4%20units.pdf\


https://new-content.mortgageinsurance.genworth.com/documents/uw-tips-and-credit-policy/Appraisal%20Review%20Checklist.pdf

https://new-content.mortgageinsurance.genworth.com/documents/uw-tips-and-credit-policy/Appraisal%20Review%20Checklist%20-%202-4%20units.pdf

COVID-19 Updates!! Fannie Mae and Freddie Mac released appraisal policy changes March‏23, 2020


https://singlefamily.fanniemae.com/media/22321/display https://guide.freddiemac.com/app/guide/content/a_id/1003723

https://singlefamily.fanniemae.com/media/22321/display

https://guide.freddiemac.com/app/guide/content/a_id/1003723

Fannie Mae appraisal policies are effective immediately and have been‏extended for applications taken on or before July 31, 2020

– Temporary appraisal requirement flexibilities: Allowing exterior-only inspection appraisal or desktop appraisals for certain transactions, see LL-2020-04 for full details

– Desktop appraisals: allowing for purchase transactions when an interior and exterior appraisal is not available

– Exterior only inspection appraisals: allowing for on purchases and limited cash-out refinance of Fannie Mae-owned loans

– Identification of a Fannie Mae loan: reminding lenders and Sellers about the Loan Lookup tool to identify a Fannie Mae-owned loan

– Desktop Underwriter messaging updated to identify when Fannie Mae owns an existing loan on a limited cash-out refinance

– Revisions to the scope of work, statements of assumptions and limited conditions, and appraiser’s certifications: requiring modified language to be used with exterior-only and desktop appraisals

– No changes to CTP loans


Fannie Mae LL-2020-04

Fannie Mae appraisal policies are effective immediately and have been‏extended for applications taken on or before July 31, 2020:

– New Construction: where appraisals are “subject to completion per plans and specifications” and when properties are 100% complete but an interior and exterior inspection appraisal cannot be completed, permitting a desktop appraisal form* (applies to purchases only) see LL-2020-04 for list of acceptable forms based on property type

• For new construction where construction has not yet begun or is partially complete and the appraisal is made “subject to completion per plans and specifications” lenders must provide the appraiser with required documentation per LL-2020-04

• For new construction where the property is 100% and the appraisal report is completed “as is” the lender must provide the appraiser with required documentation per LL-2020-04

• Builder Certification form is required attesting that the information provided is true and correct. This certification must be maintained in the loan file.

• Completion of Construction Certification form is required for new construction when the appraisal was completed “subject to completion per plans and specifications” if the lender is unable to obtain a completed Appraisal Update and/or Completion Report (Form 1004D)

*Fannie Mae permits a desktop appraisal on the forms identified in LL-2020-04 but lenders must also adhere to the LTV ratio requirements in Temporary appraisal requirements flexibilities, including the requirement for second homes with LTVs greater than 85% require a traditional appraisal (Excluded CTP)



Fannie Mae appraisal policies are effective immediately and have been‏extended for applications taken on or before July 31, 2020:

– Appraisal waivers: encouraging lenders to accept waiver offers when eligible– No changes to delivery at this time – Completion report (Form 1004D): allowing a letter signed by the borrower

confirming that the work was completed for appraisal reports completed “subject to” (excludes new construction)

– Form Instructions: Map Reference field will be used when a “desktop” or “exterior” only appraisal report is completed on a form for an interior and exterior inspection



Fannie Mae LL-2020-04 Fannie Mae appraisal policies are effective immediately and have been‏extended for applications taken on or before July 31, 2020:

– Virtual inspections:• Appraisers may use virtual inspection methods to augment the data and imagery that is used for either a desktop or exterior-only appraisal.

• Traditional appraisals require the appraiser to perform a complete onsite interior and exterior inspection of the property; Virtual inspections cannot be used to substitute for the onsite interior and exterior inspection.

• Virtual inspections using video and photographs provided by the borrower or contractor can be used to evidence renovation progress to disburse renovation funds. See LL-2020-04 for all requirements

• Additional flexibilities for HomeStyle® Renovation loans and Condominium Project reviews – See LL-2020-04 for full details


Bulletin 2020-5 & 2020-23



Guidance Related to COVID-19:– 2020-05 original appraisal flexibilities– 2020-23 extends policies to July 31, 202

https://guide.freddiemac.com/ci/okcsFattach/get/1003909_7


https://guide.freddiemac.com/ci/okcsFattach/get/1003909_7

Bulletin 2020-5 The temporary flexibilities are effective immediately for all Mortgages in process and‏remain in place for Mortgages with Applications Received on or before July 31, 2020.:Appraisal Flexibilities Include‏

– Temporary appraisal requirement flexibilities: Allowing exterior-only inspection appraisal or desktop appraisals for certain transactions, see Bulletin 2020-5 for full details

– Desktop appraisals: allowing for purchase transactions when an interior and exterior appraisal is not available

– Exterior only inspection appraisals: allowing for on purchases and limited or no cash-out refinances of Freddie Mac-owned loans

– Identification of a Freddie Mac loan: reminding lenders and Sellers about the Loan Lookup tool to identify a Freddie Mac-owned loan

– Cash-out loans and CTP and new construction require full appraisals– Revisions to the scope of work, statements of assumptions and limited conditions,

and appraiser’s certifications: requiring modified language to be used with exterior-only and desktop appraisals


Bulletin 2020-5 The temporary flexibilities are effective immediately for all Mortgages in process‏and remain in place for Mortgages Applications Received on or before May 17,2020 to Mortgages with Application Received Dates through July 31,2020:Appraisal Flexibilities Include‏

– Appraisal waivers: encouraging lenders to accept waiver offers when eligible– No changes to delivery at this time – Completion reports (Form 1004D/442) allowing alternatives when a Form

1004D/442 cannot be obtained– CHOICERenovationSM and GreenCHOICE MortgagesSM: no changes– For Freddie Mac loans submitted and resubmitted to Loan Product Advisor

on or after March 29, 2020, expanding ACE appraisal waivers to include certain cash-out and “no cash-out” refinances below:


Bulletin 2020-5


The temporary flexibilities are effective immediately for all Mortgages in process and remain in place for Mortgages with Applications Received on or before July 31, 2020.

Appraisal Flexibilities:

Bulletin 2020-8 The temporary flexibilities are effective immediately for all Mortgages in process‏and remain in place for Mortgages with Applications Received on or before July 31, 2020:Appraisal Flexibilities Include‏

– For new construction properties, where the appraisal was completed “subject to completion per plans and specifications,” including properties that were fully completed after the effective date of the appraisal, and an interior and exterior inspection appraisal cannot be completed, Freddie Mac will permit a desktop appraisal on the forms identified in the following table:


See bulletin for full list of documentation requirements

Bulletin 2020-8 The temporary flexibilities are effective immediately for all Mortgages in process‏and remain in place for Mortgages with Applications Received on or before July 31, 2020:Appraisal Flexibilities Include‏

– For new construction properties, where the appraisal was completed “subject to completion per plans and specifications,” including properties that were fully completed after the effective date of the appraisal, and an interior and exterior inspection appraisal cannot be completed, Freddie Mac will permit a desktop appraisal on the forms identified in the following table:


See bulletin for full list of documentation requirements

COVID-19 Update- Bulletin 2020-11

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Additional Guidance Related to Covid-19 See Bulletin 2020-11 for Condominium

flexibilities and CHOICERenovationLoansSM flexibilities for borrowers on forbearance

https://guide.freddiemac.com/app/guide/bulletin/2020-11


https://guide.freddiemac.com/app/guide/bulletin/2020-11

Bulletin 2020-11 The temporary flexibilities are effective immediately for all Mortgages in process and‏remain in place for Mortgages with Applications Received on or before July 31, 2020.:Appraisal Flexibilities Include‏ Map reference field for desktop and exterior-only appraisals‏ Freddie Mac is clarifying that the map reference field on the appraisal report may only‏contain the word “desktop” or “exterior.” No other words or phrases may be used or included. The map reference field should reflect the appraisal type agreed to with the acceptance of the assignment and the minimum scope of work required for the assignment. The appraiser is responsible for determining what is the adequate scope of work for any assignment and may choose to expand the scope of work beyond the minimum requirements.

16Freddie Mac COVID 19 UpdatesAppraisal Underwriting

Bulletin 2020-11 The temporary flexibilities are effective immediately for all Mortgages in process and‏remain in place for Mortgages with Applications Received on or before July 31, 2020.:Appraisal Flexibilities Include‏Virtual Inspections for Appraisals‏ Appraisers may use virtual inspection methods to augment the data and imagery that‏is used for either a desktop appraisal or an exterior-only inspection appraisal. All interior and exterior inspection appraisals require the appraiser to perform a complete onsite interior and exterior inspection of the property. A virtual inspection is not a substitute for an on-site interior and exterior inspection.

17Freddie Mac COVID 19 UpdatesAppraisal Underwriting


Appraisal BasicsURAR Overview, Market Value, Appraiser and Reviewer Responsibilities

Appraisal Basics:The appraisal report provides‏

– Detailed description of the property– Condition and marketability information– Market value

• Appraiser’s opinion• Supporting detail on how the appraiser arrived at the opinion

– Additional property issues/information


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Appraisal BasicsMarket Value‏

– The buyer and seller are typically motivated– Both parties are well informed/advised, each acting in what he/she considers

his/her own best interest– A reasonable amount of time is allowed for exposure in the open market– Payment is made in terms of US dollars– The price represents normal consideration for the property sold, unaffected by

special or creative financing or sales concessions


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Appraisal BasicsSeller/Lender Responsibilities‏

– Providing Appraiser With• Sales Contract (See Fannie Mae updates on next slide)• Other Available Information

– Selecting the Appraiser and General Appraisal Requirements– Underwriting the Appraisal– Disclosing Required Information – Ensuring the appraiser has requisite knowledge


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Appraisal Basics Appraiser Responsibilities‏

– An accurate, adequately supported opinion of market value– An objective analysis of quantifiable data to support housing trends– All relevant information that supports the conclusions about market conditions,

including:• Sales/financing concessions• Down payment assistance• Days on market, list-to-sales price ratios, and availability of financing


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Appraisal BasicsReviewer/Underwriter Responsibilities‏

– Completeness– Appropriate Form– Opinion of market value supported– Consistency– Market issues noted– All attachments/addenda provided– Ensure UAD requirements are met– The appraisal meets the applicable lending standards


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Appraisal BasicsIf there is inconsistent data:

– Appraiser explanation is necessary– Investors may be apprehensive to purchase the loan


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Appraisal Basics:Loans being sold to a GSE must include at least the following‏

– Clear pictures of the subject property that support the information on the appraisal:

• Front View• Rear View• Street Scene• Kitchen• Bathrooms• Main Living Area• Outbuildings

– Building Sketch– Additional photographs, as needed– Photographs of Each Comparable Sale: Clear, Front View– Location Map


Information On This Slide Applies To The URAR; Other Appraisal Forms May Have Different requirements.

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Section-by-Section ReviewURAR Page 1: Subject, Contract, Neighborhood, Site and Improvements Sections

Subject Section

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Appraisal UnderwritingAppraisal Underwriting

Fannie Mae Requires Properties That Are Listed For Sale As Of Application Date For a Cash Out Refinance Be Taken Off The

Market On Or Before The Disbursement Date Of The New Mortgage

Subject Section

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Contract Section

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Page 16-18


Contract Section-Fannie Mae

30Appraisal UnderwritingAppraisal Underwriting

Contract Section-Freddie Mac

31Appraisal UnderwritingAppraisal Underwriting

Neighborhood Section

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Page 19-22


Neighborhood Section Condominiums

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Not In book


Site Section

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Page 23-26


Improvements Section

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Page 27-32


Accessory Units


Accessory Units


Accessory Units – Freddie Mac


Bulletin 2019-09

Improvements Section

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Page 27-32


Additional Improvement Considerations:A Few Other Property Concerns‏

– Additions without Permits: If the appraiser identifies an addition(s) that does not have the required permit, the appraiser must comment on the quality and appearance of the work and its impact, if any, on the market value of the subject property.

– If appraisal indicates evidence of wood-boring insects, dampness, or abnormal settlement, the appraiser must comment on the effect on the value and marketability of the subject property. Lenders must either provide satisfactory evidence that the condition was corrected or submit a professionally prepared report indicating based on an inspection of the property, that the condition does not pose any threat of structural damage to the improvements


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Project Description

General Description

Subject Phase

Is Project Complete or Incomplete

Project Information Condominiums

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Primary Occupancy-General Guidelines Check Specific Investor Project Requirements As They Vary And Can Change

Management Group- Who is in control? Generally, GSEs do not allow for more than 15% of homeowners association dues or

assessments are to be delinquent more than 60 days.

Single Entity Single-investor concentration-No single entity must own more than 2 units in projects

with 5-20 units. If 21 or more units 20% of total units for Fannie Mae, 21 or more units 25% for Freddie Mac.


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Is the Project a Conversion? Soundness and condition-For a conversion that was legally created in the most recent three years, either:

1.The architect's/engineer's report or a functional equivalent originally obtained for the conversion must comment favorably on the structural integrity of the project, and the condition and remaining useful life of the major project components such as the heating and cooling systems, plumbing, electrical systems, elevators, boilers, roof, etc.

2.The appraiser must explicitly comment on the structural soundness, habitability and condition of the project, and the remaining useful life of the major project components such as but not limited to the roof, elevators, and mechanical systems such as the HVAC, plumbing, electrical systems, boilers, etc.

All work involved in a Condominium conversion must have been completed in a professional manner?

Is the Project Complete?

Is there any Commercial Space? Any commercial space in the project must be compatible with the overall residential nature of the project. No more than

35% of the total space must be used for nonresidential purposes.



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Condition & Quality of Construction

Common Elements & Recreational Facilities Common Elements such as parking and recreational facilities must be consistent with the nature

of the project and be competitive in the market.

1.The unit owners must be the sole owners of and have the right to the use of Common Elements including but not limited to all buildings, roads, parking and Amenities. The developer must not retain any ownership interest in any of them.2.The Common Elements including Amenities such as parking and recreational facilities must not be subject to a lease between the unit owners/homeowners association and any other party

Leases or Ground Rent and Parking



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Analysis of the Budget The budget must be consistent with the nature of the project. Review specific

investor requirements.

Additional Fees

Special or Unusual Characteristics

Project Analysis Condominiums


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$ Per Square feet of GLA

General Description

Car Storage

Unit Description Condominiums


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Project Questionnaire


Condo Reminders– The project itself must be approved for Fannie Mae

and Freddie Mac otherwise it is an “Unwarrantable Project” that you portfolio or sell to a private investor

– Guidelines Change often so always check the guidelines for compliance

– Condo project status can change– Understand what type of Project Review is

available/required for your project– Send condo questionnaires out as early as possible– Be sure to include the condo dues in your housing

ratio– Genworth will review unwarrantable condos case

by case for MI, contact your Genworth Account Rep.

– Loan files containing a Condo Project Advisor feedback certificate may be submitted to Genworth for consideration on a case-by-case basis





Fannie Mae Condo Eligibility


https://singlefamily.fanniemae.com/originating-underwriting/condo-co-op-and-pud-eligibility

https://singlefamily.fanniemae.com/originating-underwriting/condo-co-op-and-pud-eligibility

Freddie Mac Project Reviews


http://www.freddiemac.com/singlefamily/factsheets/sell/condo_projects.html

http://www.freddiemac.com/singlefamily/factsheets/sell/condo_projects.html

Genworth Underwriting Guidelines


Genworth Rate Express®


LOS Connections


Training Tools and Information


Training Tools and Information

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Additional MI Site Information


ActionCenter®: 800 444.5664

Your Local Genworth Regional Underwriter

Your Genworth Sales Representative

Your Genworth Resources


Legal Disclaimer Genworth Mortgage Insurance is happy to provide you with these training materials. While we strive for‏accuracy, we also know that any discussion of laws and their application to particular facts is subject to individual interpretation, change, and other uncertainties. Our training is not intended as legal advice, and is not a substitute for advice of counsel. You should always check with your own legal advisors for interpretations of legal and compliance principles applicable to your business.

,GENWORTH EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED‏INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THESE MATERIALS AND THE RELATED TRAINING. IN NO EVENT SHALL GENWORTH BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER WITH RESPECT TO THE TRAINING AND THE MATERIALS.

Genworth Mortgage Insurance Offers A Comprehensive Suite Of Training Opportunities To Boost Your Know-How, Benefit Your Bottom Line, And Serve Your

Borrowers Better. Visit mi.genworth.com To Learn More.

Collateral Underwriter®, Home Ready® and Desktop Underwriter® or DU® and HomeStyle Renovation® are registered trademarks of Fannie MaeLoan Product Advisor®, Home Possible®, Loan Collateral Advisor® and Home Value Explorer® (HVE®) are registered trademarks of Freddie MacActionCenter®, Homebuyer Privileges® and Rate Express® are registered trademarks of Genworth Mortgage Insurance

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Documents

Appraisal Underwriting Part I - The Basics · –Virtual inspections: •Appraisers may use virtual inspection methods to augment the data and imagery that is used for either a desktop