New Appraisal Guidelines for Fannie Mae and Freddie Mac

 

Beginning on September 1, 2011, Fannie Mae and Freddie Mac are requiring appraisers to include a “Quality Rating Code” on all appraisal reports. According to the Federal Housing Finance Agency, the new Uniform Appraisal Dataset (UAD), was created to improve the quality and consistency of appraisal data on loans delivered to the GSEs, Freddie Mac and Fannie Mae.” This is done by defining “all fields required for an appraisal submission for specific appraisal forms and standardizing definitions and responses for a key subset of fields.”

We’ll see if standardizing the required fields and Quality Rating Codes (QRC) has the desired effect of creating consistent appraisals regardless of geographic location. In the meantime, here are the QRC and what they mean:

C1: The improvements have been very recently constructed and have not previously been occupied. The entire structure and all components are new and the dwelling features no physical depreciation.

C2: The improvements feature no deferred maintenance, little or no physical depreciation, and require no repairs. Virtually all building components are new or have been recently repaired, refinished, or rehabilitated. All outdated components and finishes have been updated and/or replaced with components that meet current standards. Dwellings in this category either are almost new or have been recently completely renovated and are similar in condition to new construction.

C3: The improvements are well maintained and feature limited physical depreciation due to normal wear and tear. Some components, but not every major building component, may be updated or recently rehabilitated. The structure has been well maintained.

C4: The improvements feature some minor deferred maintenance and physical deterioration due to normal wear and tear. The dwelling has been adequately maintained and requires only minimal repairs to building components/mechanical systems and cosmetic repairs. All major building components have been adequately maintained and are functionally adequate.

C5: The improvements feature obvious deferred maintenance and are in need of some significant repairs. Some building components need repairs, rehabilitation, or updating. The functional utility and overall livability is somewhat diminished due to condition, but the dwelling remains useable and functional as a residence.

C6: The improvements have substantial damage or deferred maintenance with deficiencies or defects that are severe enough to affect the safety, soundness, or structural integrity of the improvements. The improvements are in need of substantial repairs and rehabilitation, including many or most major components.

C2
The improvements feature no deferred maintenance, little or no physical depreciation, and require no repairs.
Virtually all building components are new or have been recently repaired, refinished, or rehabilitated. All outdated
components and finishes have been updated and/or replaced with components that meet current standards. Dwellings
in this category either are almost new or have been recently completely renovated and are similar in condition to
new construction.
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2 Responses to New Appraisal Guidelines for Fannie Mae and Freddie Mac

  1. It will be interesting to see whether standardizing the required fields and Quality Rating Codes (QRC) results in more consistent real estate appraisals (regardless of geographic location).
    However, it’s possible that this could make the appraisal process more cumbersome and expensive for lenders and also for buyers.
    As Realtors and real estate professionals, we don’t want the process to be more expensive for buyers, especially with housing markets already too fragile and crowded with nervous buyer prospects.

    • Margie says:

      I totally agree with you. In my opinion, many of the rules and regulations that have been created as a result of the mortgage melt-down have had more negative unintended consequences that outweigh the improvements that were intended. My recent blog post about streamlining foreclosures instead of bogging them down in legalities touches on your point as well. Thanks for commenting!

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