Appraisal Institute & Fannie Mae on Clarification of “Intended User” Issue

With the release by Fannie Mae of its latest version of the Uniform Residential Appraisal Report in March, some appraisers have voiced concern over clarification statements pertaining to the “intended user” of the report.  The Appraisal Institute, on behalf of its 18,000 members and the real estate profession at large, has been working with Fannie Mae to develop further clarification on the issue.  The matter received additional urgency in that November 1 marked the official implementation date for use of the form.

“Fannie Mae has worked closely with the Appraisal Institute to clarify the meaning of “intended users” and parties the ‘rely’ on an appraisal report in conjunction with the certification required in its new appraisal forms, “said Mark Simpson, Fannie Mae’s director of property standards.  “These clarifications help reinforce our view that appraisers are accountable for the quality of their work.”

According to Simpson, “Recognizing that there may be confusion in the appraisal community about the distinction between parties who ‘use’ and parties who ‘rely’ on appraisal reports, Fannie Mae has developed, in cooperation with the Appraisal Institute, the following additional notice or statement that it will accept when the appraiser believes the Lender/Client is the only Intended User:

“The Intended User of this appraisal report is the Lender/Client.  The Intended Use is to evaluate the property that is the subject of this appraisal for a mortgage finance transaction, subject to the stated Scope of Work, purpose of the appraisal, reporting requirements of this appraisal report form, and Definition of Market Value.  No additional Intended Users are identified by the appraiser.”

He also noted that “The use of this additional notice or statement may help to clarify the identification of the Intended User as addressed in the Uniform Standards of Professional Appraisal Practice and on the revised appraisal report forms.  This statement is consistent with Fannie Mae policies and we will purchase loans with this additional language in the reports.  “He emphasized, however, that “Fannie Mae will not accept appraisals with additional notices or statements that may conflict with Certification #23.”

“Appraisers traditionally have not identified the other parties to a mortgage finance transactions that often rely on the accuracy of the appraisal report as Intended Users based on the current definition of an Intended User in the Uniform Standards of Professional Appraisal Practice.  However, if the appraiser believes that any of these parties should be identified as additional Intended Users based on information provided by the Lender/Client or from other sources, he or she should identify then as such in the appraisal report, “Simpson stated.

In its seminars on the subject the Appraisal Institute instructs students that the lending institution, the client, is the “intended user.”  Despite that instruction, confusion has existed because the form itself asks the appraiser to acknowledge that other parties may receive and rely on the report.

One of the instructors for the Appraisal Institute, Alan E. Hummel, SRA, stated, “After teaching this seminar it became clear that some clarification was needed.  I believe this statement helps clarify the issue as it clearly identifies the lender as the intended user.”

The issue has also been subject to comment by the Association of Appraiser Regulatory Officials and the Appraisal Standards Board of the Appraisal Foundation.

For additional information, go to www.efanniemae.com or visit www.appraisalinstitute.org