Fannie Mae, Freddie Mac Clarify Rural Property Appraisal Requirements

Freddie Mac Fannie Mae FHFA Appraisal Appraisal Management Companies

On April 1, Freddie Mac issued Bulletin 2014-05, and on March 25, Fannie Mae issued Lender Letter LL-2014-02, in response to directives from the FHFA to clarify certain requirements related to appraisals for properties located in rural areas. In the clarifying documents, Fannie Mae and Freddie Mac state that they do not require the use of third-party vendors such as appraisal management companies to order appraisals or to comply with requirements that the mortgage production function and the appraisal ordering and quality assurance functions remain separate. In addition, both Fannie Mae and Freddie Mac provide a small lender exception to the separation requirement. The guidance documents also state that a residential property in a market that contains properties or land uses that are non-residential in nature, is not necessarily ineligible for sale to Fannie Mae or Freddie Mac. Both entities assert that they will purchase a mortgage secured by a property that is unique or may not conform to its neighborhood, provided an appraiser is able to evaluate and report on how the characteristics of the market area and unique property features affect the value and the marketability of the subject property. The guidance documents also advise sellers that in areas with less real estate activity, such as rural market areas, appraisers may, with documented support, use comparable sales that are older than 12 months, or that are a considerable distance from the subject property or not similar to the subject property.