Fannie Appraisal Value Reconsideration

On May 1, Fannie updated appraisal value reconsideration standards.

  • Fannie issued Announcement SEL-2024-03 on borrower-initiated appraisal appeals.
  • Defined first-generation homebuyer loan, clarified affidavit of affixture requirements.
  • Expanded manufactured housing in community land trust property shared equity policy
  • Freddie bulletin on value reconsideration (#210584), defined 1st-generation, #210590
  • First Generation Homebuyer
  • To establish an industry standard for first-generation classification, Freddie, Fannie, under guidance of FHFA, aligned definition of First-Generation Homebuyer Mortgage.
  • First-Generation Homebuyer Mortgage is one in which each Borrower is purchasing the mortgage premises and will reside in the mortgaged premises as primary residence.
  • Has no ownership interest in another property during last 3 years preceding note date.
  • Further, no parent of borrower has had ownership interest in property in last 3 years preceding note date, borrower has aged out of foster care or borrower is emancipated.
  • Identification of mortgage as 1st-generation homebuyer mortgage is currently optional
  • However, if Seller chooses to deliver a mortgage as a 1st-generation homebuyer Mortgage, must complete Guide Form 1109, First-Generation Homebuyer Certification.
  • Provided Form 1109 completion instructions and delivery requirements for sellers.
  • Created B2-2-07, First-Generation Homebuyer Loans; impacted Gude E-3-06, glossary.
  • Reconsideration of Value
  • Developed borrower-initiated reconsideration of value (ROV) framework for lenders.
  • Lenders must have policies and procedures in place for addressing borrower requests to appeal an appraisal when they believe the opinion of value is unsupported.
  • Is deficient due to unacceptable appraisal practices or reflects discriminatory practices.
  • Regardless of ROV outcome, lender must ensure values are reliable and supported.
  • Must ensure borrower’s concerns with the valuation are addressed in a timely manner.
  • Updated policy included specific instructions for the borrower disclosure that must be provided at the time of loan application and again upon delivery of the appraisal report
  • Also lender requirements for reviewing and responding to borrower(s) and appraiser.
  • Impacted Selling Guide sections B1-1-01, B4-1.1-02, B4-1.1-04 and B4-1.3-12.
  • Affidavit of Affixture
  • Affidavit of Affixture is only required when a loan on manufactured housing is delivered with a personal property title and the borrower’s intent is to convert to real property.
  • If manufactured home was previously converted to real property per applicable law, will not require Affidavit of Affixture unless applicable State law requires new affidavit.
  • Impacted Selling Guide section B5-2-05, manufactured housing legal considerations.
  • Community Land Trusts
  • Amended shared equity policy to allow 1-unit MH Advantage manufactured homes subject to community land trusts that are not located in PUD or condo project.
  • As of application date, manufactured home must be affixed to permanent foundation.
  • Unless it has already been converted, the lessor must have initiated the conversion of the manufactured home to real property; all other land trust requirements apply.
  • Impacted Selling Guide section B5-5.3-03, shared equity transactions, eligibility.
  • Co-Op Share Loans
  • Removed the exclusion that co-op share loans cannot be registered with Mortgage Electronic Registration Systems, Inc. (MERS); aligns registration with all other loans.
  • Eliminated need for a subsequent assignment of the security instrument should the seller/servicer sell the loan to another seller/servicer that is a member of MERS.
  • Impacted Selling Guide section B8-7-01, Mortgage Electronic Registration System.
  • Audited Financial Statement
  • Revised requirements for submitting the annual Audited Financial Statement (AFS).
  • Authorization for Verification of Credit and Business References (Form 1001), and the Lender Record Information (Form 582); all submission must be made electronically.
  • As part of update launched a new dedicated site for submitting AFS, updated email.
  • Form 582, 1001 must be submitted within 5 business days of any changes to principal officers or partners and/or owners with a interest of 5% or more in the company.
  • Impacted Selling Guide sections A4-1-01, A4-1-02, A4-1-03, E-1-02, and E-3-01.
  • Trust Income
  • Trust verification documentation must clearly identify the date the trust was created.
  • Documentation may include a letter from an accountant or attorney who has reviewed documentation, when trustee’s statement not available or when borrower is trustee.
  • Trusts created within 12 months of loan application date and funded by the borrower’s employment-related assets may be used as income but must meet income calculation
  • As well as all other requirements in Employment-Related Assets as Qualifying Income.
  • When variable trust income has been received for less than 24 months, but not less than 12 months, the lender may consider it as stable income if conditions are met.
  • Variable trust income must have other positive factors that reasonably offset the shorter income history in alignment with our standard variable income guidelines.
  • Additioanlly, for variable trust income, lenders may rely upon copies of the trust’s federal income tax returns, as an alternative to the borrower’s personal tax returns.
  • Provisions impacted Selling Guide section B3-3.1-09, other sources of income.
  • Uniform Instruments
  • In response to industry feedback, published additional State-specific MultiState 30-day average SOFR ARM instruments that require State-specific authorized changes.
  • There is no content changes to newly published instruments other than incorporating all State-specific required authorized changes and adding a State-specific tagline.
  • Miscellaneous Updates
  • Clarified Housing Choice Voucher Homeownership Program payments are nontaxable.
  • Lender should develop an adjusted gross income for the borrower using the monthly payment from the public agency; documentation of nontaxable nature not required.
  • Designation of Wire Transfer Instructions (Form 482) updated to reflect that Fannie will call authorized representative who signed form to confirm validity prior to processing.
  • Effectiveness
  • First-generation homebuyer, affidavit of affixture provisions may be used immediately.
  • Lenders encouraged to implement ROV provisions immediately, must by Aug. 29, 2024
  • Community land trust eligibility for manufactured housing provisions effective May 1.
  • Audited financial statement submission provisions must be implemented by Aug. 1.
  • Trust income provisions effective immediately; uniform instrument provisions available for immediate use but must be used for loans with note dates on/after Nov. 1, 2023.
  • In May 2024, FHFA reported on appraisal reconsideration of value policies, #210755.
  • In May 2024, HUD issued amended ROV guidance and lender requirements, #210754.

Regulators Fannie
Entity Types Bank; CU; MG Orig; Servicer; Thrift
Reference Gd SEL-2024-03, 5/1/2024; Form 1109, 1001, 582, 482;
Functions Actuarial and Valuation; Compliance; Financial; Legal; Operations; Underwriting
Countries United States of America
Products Banking; Loan; Mortgage
Regions Am
Rule Type Final
Rule Date 5/1/2024
Effective Date 8/1/2024
Rule Id 210750
Linked to Rule :210584
Reg. Last Update 5/1/2024
Report Section US Banking

Last substantive update on 05/06/2024