Fannie Mae Changes 2018

The one thing that always remains constant is change. As appraisers in this ever changing industry we have seen changes in the market, technology, bank requirements, emergence of management companies and appraisal form changes. The most recent Fannie Mae change is the removal  of  the 1004MC form in an appraisal. This form has been a requirement since 2009  as a tool to establish the increase, decrease or stabilization of markets in the aftermath of the housing crisis occurring between 2007 – 2010 due to sub prime lending practices.


So what is the 1004MC form? The Market Conditions Addendum (Form 1004MC) is designed to enhance the transparency of the market trends and conditions conclusions made by the appraiser. The Market Conditions Addendum was required with all one- to four-unit property appraisals performed on or after April 1, 2009. This requirement applied to loans delivered to Fannie Mae. The form is broken down into categories of time to include comparable settled sales in the past 90 days, the prior  4 – 6 months and the previous 7 – 12 months from the date of inspection. There is also space for the analysis of active (competing) comparable homes in the market. While in theory this seems to be a useful tool, in some cases it is not as relevant as the original intention of the form. To perform true trend analysis you need to compare apples to apples. In a subdivision where the homes are very similar in size, acreage, updates, quality of construction and age with minimal variation the trend analysis is relevant since the homes are nominally different. This scenario allows the form to reflect if the market is increasing, decreasing or is stable effectively. But in the cases, for instance in Baltimore County where the property is a large contemporary custom home on a small lot, or a dated home on a large plot of land in Cecil County, or an updated home on a slab among older homes with basements in Harford County the analysis seems compromised due to lack of pertinent data to determine true trend analysis. Depending on the areas you are appraising (city, suburban, rural), comparable data and the amount of turn over in the past year will  lie the possibility of whether or not the 1004MC is truly a tool in establishing trend analysis.


According to the GSE (government-sponsored enterprise is a financial services corporation created by the United States Congress) the requirement of the form was eliminated due to Collateral Underwriting. Collateral Underwriter (CU) is a proprietary model-driven tool developed by Fannie Mae that provides an automated appraisal risk assessment to support proactive management of appraisal quality. It also allows Fannie Mae to extract information on comparables used in millions (yes…millions!) of appraisals allowing the compilation of a mass amount of data for their own analysis. Of course appraisers will remain responsible for analyzing market conditions and accurately reporting all information within the appraisal report.


Although it is no longer required by Fannie Mae, the 1004MC is not going anywhere yet. There has not been any announcement from Freddie Mac, FHA, VA and USDA regarding a change in this requirement, so for those loans the 1004MC is still needed. Also, lenders may still require this in their reports, and most will probably opt to include the Market Conditions addendum, or at the very least require some commentary that includes similar information.

So in the interim, the form will still be completed at the request of the lender with careful consideration when the data is plentiful or scarce. Robinson Appraisal Group has always required the 1004MC, and believe in the support that it lends in a report. We will always listen to the needs of our clients and will follow their requirements to ensure the delivery of a quality report.