B4-1.1-02, Lender Responsibilities (11/06/2024)

The lender is responsible for ensuring that the subject property provides adequate collateral for the mortgage. For most loans, Fannie Mae requires that the lender obtain a signed and complete appraisal report that accurately reflects the market value, condition, and marketability of the property. Some loans may be eligible for a value acceptance option, and an appraisal is not required if the lender exercises the option and complies with the related requirements. (See B4-1.4-10, Value Acceptance (Appraisal Waiver)B4-1.4-10, Value Acceptance (Appraisal Waiver) and B4-1.4-11, Value Acceptance + Property DataB4-1.4-11, Value Acceptance + Property Data, for additional information.)

If an appraisal is obtained, the lender is responsible for

• providing the borrower disclosures and requirements described in B4-1.3-12, Appraisal Quality MattersB4-1.3-12, Appraisal Quality Matters;

• compliance with the Appraiser Independence Requirements;

• selection of the appraiser (see B4-1.1-03, Appraiser Selection CriteriaB4-1.1-03, Appraiser Selection Criteria);

• compliance with the Uniform Appraisal Dataset (UAD) when applicable (see B4-1.1-06, Uniform Appraisal Dataset (UAD) and the Uniform Collateral Data Portal (UCDP)B4-1.1-06, Uniform Appraisal Dataset (UAD) and the Uniform Collateral Data Portal (UCDP));

• ensuring the appraiser has utilized sound reasoning and provided evidence to support the methodology chosen to develop the value opinion, particularly in cases that are not covered by Fannie Mae policy;

• successful submission of the appraisal through the UCDP prior to delivery (see B4-1.1-06, Uniform Appraisal Dataset (UAD) and the Uniform Collateral Data Portal (UCDP)B4-1.1-06, Uniform Appraisal Dataset (UAD) and the Uniform Collateral Data Portal (UCDP)); 

• continually evaluating the appraiser’s work through the quality control process (see  B4-1.3-12, Appraisal Quality MattersB4-1.3-12, Appraisal Quality Matters and D1-3-04, Lender Post-Closing Quality Control Review of Appraisers, Appraisals, Property Data Collectors, and Property Data CollectionD1-3-04, Lender Post-Closing Quality Control Review of Appraisers, Appraisals, Property Data Collectors, and Property Data Collection); and

• ensuring the appraisal does not contain subjective and prohibited language relating to discriminatory practices and appraisal bias.

If the transaction involves property data collection, the lender is responsible for

• compliance with the  Property Data Collector Independence Requirements;
• selection of the property data collector (see  B4-1.4-11, Value Acceptance + Property DataB4-1.4-11, Value Acceptance + Property Data);
• successful submission of the data to Fannie Mae's Property Data API prior to loan delivery; and
• continually evaluating the property data collector's work through the quality control process (see D1-3-04, Lender Post-Closing Quality Control Review of Appraisers, Appraisals, Property Data Collectors, and Property Data CollectionD1-3-04, Lender Post-Closing Quality Control Review of Appraisers, Appraisals, Property Data Collectors, and Property Data Collection).

Publicly available information helps to identify property flipping schemes, which typically involve various combinations of transactions and result in a sale of recently acquired property for significant profit based on a misleading or fraudulent appraisal with an inflated property value. The lender must confirm that the property seller in a purchase transaction (or the borrower in a refinance transaction) is the owner of the subject property.

Lenders must confirm and document in the mortgage file that the property seller in a purchase money transaction or the borrower in a refinance transaction is the owner of the subject property when an appraisal is required. Examples of acceptable documentation include, but are not limited to:

• a copy of a recorded deed, mortgage, or deed of trust,

• a recent property tax bill or tax assessment notice,

• a title report,

• a title commitment or binder, or

• a property sale history report.

This documentation is especially important for transactions involving an assignment (or sale) of a contract for sale and back-to-back, simultaneous, double transaction closings, or double escrows to support the property acquisition, financing, and closing.

When the transaction is part of an employee relocation, the relocation company may be the assignee of the seller, which should be indicated on the sales contract. Additionally, the appraiser must comment on this condition in the appraisal report.

A lender must ensure the appraiser

• described the property and the market area in factual, unbiased, and specific terms;

• considered all factors that have an effect on value; and

• was objective and unbiased in the development of the opinion of market value in the appraisal report.

A number of federal, state, and local laws prohibit discrimination in the appraisal of housing. Fannie Mae expects professional appraisers to fully understand that discriminatory valuation and appraisal reporting practices are not only illegal, but also unethical. Unintentional discrimination can occur in the appraisal report as the result of what an appraiser states, or fails to state. The lender and appraiser must ensure the appraisal is not in violation of any unacceptable appraisal practices (see B4-1.1-04, Unacceptable Appraisal PracticesB4-1.1-04, Unacceptable Appraisal Practices).

The lender must ensure that appraiser comments regarding unfavorable conditions, such as the existence of an adverse environmental or economic factor, also discuss how the condition affects the value or marketability of the property being appraised and explain how the condition was taken into consideration in the valuation process. In such cases, the appraiser’s analysis must reflect and include comparable sales that are similarly affected whenever possible. The appraiser must address the impact these factors may have, if any, on the value and marketability of the subject property. (See B4-1.3-06, Property Condition and Quality of Construction of the ImprovementsB4-1.3-06, Property Condition and Quality of Construction of the Improvements, for further information).