Compliance Corner with Rich Heyn – ACI – The Appraiser's Choice

Understanding the 1004MC

Bea Acs — Fri, 24 Jul 2009 19:00:00 GMT

Last February we decided to offer our clients a free webinar on Fannie Mae’s (then) new 1004MC addendum. Participants “attend” the Webinar by logging onto a website where they can view and hear the presentation. Participants can also text in questions to the presenter and respond to the presenter’s questions with affirmative or negative symbols.

After delivering the 1004MC webinar to over 5,000 clients, I’ve learned that a number of misconceptions still exist about the new form. I’ll itemize the 10 most common questions, concerns and issues that I’ve gleaned from the participants.

One-unit housing trends in the neighborhood section of the report are submarket specific. Suppose the neighborhood consists primarily of two property types. Detached single-unit dwellings (all relatively homogenous in character) and condominium units. Your analysis indicates the detached units have been relatively stable but the condo units are declining. So how do you respond to “one-unit housing trends” in the neighborhood section of the form? Simple. If you are appraising one of the detached units you check “stable” and if you are appraising one of the condo units you check “declining.”
Neighborhood boundaries are not elastic. The polls I’ve taken during the webinar indicate that about 30% of appraisers think that Fannie Mae guidelines state that the comparables used on page 2 of the report in the Sales Comparison Analysis grid must come from within the subject neighborhood. Some appraisers even advocate setting the neighborhood boundaries after the comparables are chosen so that all of the comparables are “within” the defined neighborhood. The reality is that Fannie Mae guidelines refer to this practice as unacceptable.
Fannie Mae uses terms “neighborhood” and “market area” synonymously. To most appraisers these terms have different meanings. This is supported by the fact that each term has its own definition in the Appraisal Institute’s Dictionary of Real Estate. However, Fannie may does not distinguish between the two terms.
Active listings are not current listings. The 1004MC asks for active listings as well as current listings. Active listings are listings that were active at some point in time but have sold, expired or have been withdrawn by the property owner. In other words, historical listings. Current listings include only those that were offered for sale as of the effective date of the appraisal.
What if I don’t have enough comparable sales in the subject neighborhood to develop a meaningful market analysis? Do I expand the neighborhood boundaries to include more data on the 1004MC? The short answer is an emphatic NO. Fannie Mae is on record as stating that the 1004MC is neighborhood specific, the appraiser is free to develop additional analysis using sales from competing neighborhoods and that the appraiser is expected to provide support for the housing trends as noted in the neighborhood section of the report.
The 1004MC has little to do with value, everything to do with underwriting. If the appraiser checks the “declining” box after Property Values in the Neighborhood section of the report, Fannie Mae “requires the lender to offer financing at loan-to-value and combined-loan-to-value ratios that are five percentage points below the maximum rations allowed for the selected mortgage product.” In other words, the borrower will not be allowed to borrow as much as they may have wanted to. The 1004MC is intended to provide support for the appraiser’s reported One-Unit Housing Trends, thereby assisting underwriters and lenders with risk-management.
If appraising a condo, complete both top and bottom. Some appraisers think that if a condo is being appraised, only the bottom part of the 1004MC is required. This is not the case as both top and bottom sections of the form are to be completed. The rationale is that a neighborhood may include multiple condo projects with competing units. In that case, the data set for the grid on the top half of the page would include sales and listing data from multiple projects. The bottom part of the form is subject-project specific.
Median Sale Price as % of List Price may not be what you think it is. At first blush, you might think that this percentage is derived by simply dividing one line on the form by another. This is not the case, as the percentage is derived only from properties that have sold. The appraiser is to take the sales that were reported for a given period on the 1004MC and divide the sale price of each sale by its (most recent) listing price. The median of these percentages is then reported on the form.
Comparable sales at top of page two should match up with the 1004MC. It’s the same data set. The 1004MC simply asks for the sales to be broken down into the three periods.
Comparable offerings at top of page two will not match up with 1004MC. Listings will not match as the 1004MC asks for listings that may have sold, expired or have been withdrawn.

Here’s a five-step process that may be helpful when dealing with the 1004MC.

Define the neighborhood boundaries, resisting the temptation to artificially expand them.
Identify comparable sales and listings within the neighborhood.
Categorize comparable neighborhood sales and listings by date and complete gridded sections of the form
Determine if sufficient data exists within the neighborhood to enable development of a meaningful market analysis.
If data is insufficient, develop a broader-based analysis using data from competing areas and report the analysis in the summary section of the 1004MC or as an addendum.

If you have questions, feel free to Join the Discussion on Understanding the 1004MC Form. And, if you have not yet taken a Webinar, give it a try as we'll be offering additional topics in the near future.

ACI2009™—Features That Count

Bea Acs — Mon, 17 Nov 2008 18:00:00 GMT

When it comes to bringing to market useful tools and features that really make a difference in an appraiser's world, ACI has a long history of industry firsts. From being the first software company to offer appraisers an automatic addendum writer—to providing the ability to facilitate laser printing—to the release of the GPAR™ Forms series—to our Desk-to-Door™ concierge service, industry firsts are part of our strength and just a sample of what makes us The Appraiser's Choice™.

ACI2009™ brings a myriad of new features and enhancements. Below is a list of my top ten favorites:

10. Full Addendum Editing You asked, and ACI answered. In ACI2009™ addendum writing is easier than ever with full-page addendum editing. Simply click on the addendum icon and start typing in full screen mode like a regular word processor.
	9. Comp Side-by-Side Views Want to see all your comparables on the same screen? Now you can with ACI’s new Side-by-Side Comp View. Save time by making adjustments to comparables across the board without turning pages back and forth to double-check figures.
8. Split Views If having comps side-by-side wasn’t enough, you can now place any form next to any other form in a new window. Need to reference the sales grid while you work in the addendum? Use the vertical split view and you can look at both.
7. Import from PDF Need to create an ACI file from a PDF? Import it! With only a couple clicks of the mouse you can import the data into ACI.
6. Additional Listings Forms Additional listings grids are available to all the major forms. The grids are especially useful for providing evidence of the declining market conditions that are common in some areas today.
5. FloodInsights Update ACI2009™ includes the eagerly anticipated upgrade to Flood Maps: the Subject property locator can now be moved, if necessary.
	4. GPAR™ Restricted Use Forms We’ve expanded the GPAR™ series of forms to include forms for narrow scope assignments, which provides flexibility for non-lending assignments. Try them out and let me know what you think. 3. PARLogic® GPAR™ Rules ACI updated its proprietary PARLogic rule sets to include the GPAR™ series of forms. Now you can run a fast automated review before finalizing the appraisal report.
2. ACI Sketch™ ACI Sketch™ rounds out ACI’s software suite of intuitive and easy-to-use appraisal tools. You’ll master ACI Sketch™, including drawing curves and angles, in minutes. The completed sketch and breakdown import directly into the sketch page, and the GLA imports into the main form.
	1. Pictometry® Ever think about providing an aerial view of the property as an additional service to your client? With Pictometry it’s easy. Pictometry seamlessly integrates with ACI Report and provides 3D-like aerial photos of the Subject property, including overhead and NSEW views. Make your report file stand out, literally, above the competition.

Sounds good so far, doesn’t it? ACI2009™ offers new features and tools to help you pass along value-added services to your clients, and at the same time, help keep your office more efficient in the process. In these changing times, making smart choices keeps you ahead of the game.

Just Give 'em an Appraisal–NOT

Rosanna Bracciale — Tue, 12 Aug 2008 17:30:00 GMT

Several years ago, I was teaching the 7-hour USPAP class and we got on the topic of Scope of Work. A discussion evolved along the lines of what kinds of valuation services a residential appraiser might be able to provide for a client other than a traditional appraisal with an interior inspection. We made a list of different services that began with the appraiser supplying nothing more than raw assessor and MLS data, included “desktop” and “drive by” appraisals and concluded with a Scope of Work that included an interior inspection, full confirmation of sales data, listings, trend analysis, etc. As I recall, the list included about eight or ten items.

After we would list a new item, the class would discuss the service and then move on to a more inclusive item. At each stop along the way, some old guy in the back row would holler out “just give ‘em an appraisal.” It soon became apparent that the old dude just didn’t “get it” when it came to scope of work. Now, if this fellow was capable of getting enough business doing whatever he defined as “an appraisal,” more power to him. However, most appraisers who want to attract new clients and be successful in filling the needs of their existing clientele understand the importance of tailoring the scope of the assignment to the needs of the client.

Just as an appraiser must develop the appraisal in an assignment-specific manner, the appraiser should be reporting the assignment results in accordance with the needs of the client and other intended users. To this end, ACI has developed the family of GPAR forms.

In the previous edition of The Compliance Corner, I discussed the GPAR forms and said I’d be going into additional detail in future installments. So to assist you in using the GPAR forms, let’s look at the first two pages of the GPAR Single Family 2006 and compare it to the URAR 2005 form. I’ll explain the key differences and the reasons for them as we take a section-by-section look at the significant differences between the GPAR single family and the URAR

To facilitate cloning from one format to another and to keep the learning curve short, we retained much of the URAR in terms of data fields and layout. However, to reduce appraiser’s liability and eliminate unnecessary data gathering, we eliminated a number of items. Click here to view the comparison.

In the next installment of Compliance Corner, we’ll look at pages 3 and 4 of the GPAR and pay special attention to how GPAR’s limiting conditions were designed to protect the appraiser from unwanted liability.

The Compliance Corner

admin — Thu, 15 May 2008 12:00:00 GMT

What's a Director of Compliance?

If my mother were alive, she’d probably ask me what a Director of Compliance does for a living. I’m not sure how I’d respond. I suppose I’d say that I help ACI’s clients comply with the things with which they need to comply. Then she’d want to know what those things might be, and I’d answer USPAP, secondary market guidelines and specific client requirements. Then I’d get a funny look from her and the conversation would turn to another topic.

In short, what I do is help ACI view things from the appraiser’s perspective. But “Director of Compliance” sounds better than “Perspective Maintainer” and certainly looks better on a business card.

Joking aside, maintaining the appraiser’s perspective is essential to our company and to our clients. Having an appraiser on staff ensures that our products and services are truly appraiser-focused. So in this and future articles, we’ll look at what ACI has done and is doing to offer our clients the best.

One of my first projects when I returned to ACI (I was here from 1980 to 1991) was the GPAR™ (General Purpose Appraisal Report) family of forms. When Fannie and Freddie revised their appraisal forms in 2005, it was immediately apparent that using the new forms for non-lending work was awkward at best and USPAP non-compliant at worst. The form specifies the intended use as a mortgage finance transaction and the intended user as the lender client. This means that the (unmodified) URAR is not suitable for appraisals where the intended use involves divorce, estate, pre-listing, pre-purchase or any use other than lending. Yes, you can make countermanding statements or insert alternate pages 4-6, but the resulting report may look unprofessional and the end result is still presented on a form that:

was designed for lending purposes
carries a high level of attendant liability
forces the appraiser to gather and report unneeded information

The GPAR forms were designed by ACI in response to our clients’ requests. Many clients wanted a general-purpose appraisal form that “looked and felt” much like the new URAR form and had a high level of data file compatibility to facilitate cloning between the general-purpose form and the URAR.

Presently, the GPAR family of forms includes:

GPAR-Single Family (2006)
GPAR-Condo (2006)
GPAR 2-4 (2007)
GPAR-Land (2006)
GPAR Flex (2007) RU SFR
GPAR Flex (2007) RU SFR Grid
GPAR Flex (2007) RU SFR Sm Grid

As the titles above indicate, we have general-purpose forms for single family, condo 2-4 family and vacant land. The last three, the flex forms, are designed to be used when the appraiser chooses to exercise the Restricted Use reporting option under USPAP. This seldom used reporting option can be a very useful tool that we’ll cover in a future installment of The Compliance Corner.

In the next installment, we’ll discuss the various GPAR forms, what they were designed to do and how you might want to utilize them.