Fannie Mae Eyes “Quality Monitoring” of Appraisers

Fannie Mae reportedly has created a blacklist of appraisers that it views as having questionable practices, hoping the list will serve as a warning to banks and mortgage lenders to be cautious about doing business with appraisers who appear on the list.

Loans involving appraisers who appear on the “appraisal quality monitoring” list will face extra scrutiny by Fannie before the government-sponsored enterprise agrees to buy them from lenders.

So far, just four names appear on the list. But Fannie says it will be scouring its appraisal database to identify appraisers who repeatedly submit unacceptable appraisals — with red flags including inflating the appraised value of a home, misstating the characteristics of a house, and failing to use the best comparable sales of physically similar properties.

“This is just the beginning,” says Andrew Wilson, a spokesman for Fannie Mae. “We will continue to do these reviews and make additions to that list as we identify appraisers that we have concerns about.”

Fannie has not made its list public yet — it is only accessible to lenders. Appraisers who appear on Fannie’s list are contacted. Those on the list also have already been reported to state appraisal boards for violations of the Uniform Standards of Professional Appraisal Practice. Fannie has created a rebuttal process for appraisers and lenders.

“Lenders are likely to beef up their oversight of appraisers so they don’t fall into the trap of submitting loans that could end up being rejected,” says Elizabeth Green, a principal consultant at the consulting firm Rel-e-vent Solutions. “This is another aspect of the same quality vigilance that lenders have to have in place. There’s just too much risk if you don’t manage for this.”

Source: “Fannie Creates Appraiser Blacklist in Effort to Flag Problem Loans,” American Banker (Jan. 28, 2014)