Introduction

This Part -- Property and Appraisal Guidelines -- details our general requirements for analyzing the property appraisal aspects of conventional mortgages secured by one- to four-family properties.  It also discusses special considerations for certain types of housing-units in condominium, PUD, and cooperative projects; manufactured (and other factory-built) homes; Community Living group homes; mixed-use properties; properties affected by environmental hazards; urban properties; affordable housing program properties; properties located in special assessment or community facilities districts; properties subject to leasehold interests (including those held by community land trusts); and energy-efficient properties -- that merit special consideration in the property and appraisal review.  Because the evaluation of a property is such a vital part of the risk analysis, we expect a lender to place as much emphasis on underwriting the property and reviewing the appraisal as it does on underwriting the borrower's credit worthiness.

We require the appraiser to provide complete and accurate reports; to report neighborhood and property conditions in factual and specific terms; to be impartial and specific in describing favorable or unfavorable factors; and to avoid the use of subjective, racial, or stereotypical terms, phrases, or comments in the appraisal report.  The opinion of market value must represent the appraiser's professional conclusion, based on market data, logical analysis, and judgment.  When the information or methodology of an appraisal requires additional clarification or justification, the lender's underwriter must obtain from the appraiser any information that is necessary to make an informed decision concerning the property.

We require that the appraiser and the lender follow appropriate practices in the property valuation and underwriting processes.  Our appraisal standards specifically prohibit the development of a valuation conclusion that is based on race, color, religion, sex, handicap, familial status, or national origin.  The effectiveness of our property underwriting guidelines is dependent on the ability of a lender and its appraisers to avoid the use of potentially discriminatory practices in the property appraisal and underwriting processes.

We hold the lender responsible for the accuracy of both the appraisal and its assessment of the marketability of the property; therefore, it is important for a lender's underwriters to understand their role in the appraisal process and their relationship to the appraiser.

The appraiser's role is to provide the lender with an accurate, and adequately supported, opinion  value and an accurate description of the property. 

  The underwriter's role is to review the appraisal report to assure that it is of professional quality and is prepared in a way that is consistent with our appraisal standards, to analyze the property based on the appraisal, and to judge the property's acceptability as security for the mortgage requested in view of its value and marketability. 

These requirements are intended to provide guidance to an underwriter and an appraiser about the type of information that is needed to make a prudent underwriting decision.  They are also designed to provide our minimum acceptable appraisal standards.  We recognize that our guidelines may not address every appraisal problem; therefore, we allow the appraiser discretion to properly develop the value opinion.  The appraiser must, however, provide sound reasoning in his or her appraisal report for any decisions he or she makes that are not specifically covered by our guidelines.

This Part XI consists of four Chapters:

Chapter 1 -- Appraiser Qualifications -- discusses the lender's responsibility for selecting appraisers and for reviewing their appraisals both initially and on an ongoing basis, the use of supervisory or review appraisers, and our right not only to refuse to accept appraisals prepared by specific appraisers, but also to refer unacceptable appraisal reports to the appropriate state appraiser licensing or regulatory boards for investigation and action.  

Chapter 2 -- Appraisal (or Property Inspection) Documentation -- describes the various appraisal (or property inspection) report forms that are to be used to document an appraisal (or property inspection) and any required exhibits to them; discusses requirements related to the age of an appraisal (or property inspection) report; explains the types of appraisals needed for new, proposed, and existing construction; and references the various certifications that an appraiser must make.

Chapter 3 -- Special Appraisal Considerations -- discusses considerations that should be given to properties with unusual features, points out the need for properties to meet specific eligibility criteria in order for the mortgage to be delivered to us, and explains the detrimental effect that certain environmental conditions can have on a property's value.

Chapter 4 -- Reviewing the Appraisal Report -- discusses the requirements for analyzing a property and its appraisal.