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Fannie Mae’s Temporary Requirements for Condo and Co-op Projects

(effective January 01, 2022)

We believe most appraisers are already aware of the new requirements as set out in Fannie Mae’s Lender Letter (LL-2021-14) dated October 13, 2021, but we wanted to share some information discussed with customers who have called and emailed with questions and concerns.

While Fannie Mae states that lenders and appraisers have interconnected duties, they also set forth specific tasks that must be undertaken by appraisers and specific tasks that must be undertaken by lenders.

"Appraisers must document any special assessments or significant deferred maintenance that may impact the unit’s safety and soundness or marketability, or the financial stability or physical safety of the overall project and its amenities."

Appraisers should take the time to carefully review Fannie Mae’s appraiser guidance so they understand exactly what they are required to do when completing a condo or co-op assignment.

Special Assessments

Appraisers are required to research information regarding special assessments and enter that information in the special assessment field located in the subject section of the appraisal report.

Additional step by step instructions regarding the reporting of assessment information is provided.

It is always recommended that the appraiser identify the source of any information being reported.

"Lenders, borrowers, and project management companies have this information and should provide it to appraisers. Real estate agents may also be a good source for this type of information."

State who you obtained the special assessment information from and consider appending the documentation provided to your appraisal report, for example:

“Per Mr. John Smith (HOA Secretary) at ABC Homeowner's Association … …, board meeting minutes dated (xx/xx/xx) provided by Mr. Smith in support of his statements are enclosed as an addendum to this report”.

In the event that the information being reported turns out to be incorrect, it is important that the source of the information is clearly identified somewhere in the report.

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Deferred Maintenance

The appraiser must also document any deferred maintenance that may impact the safety and soundness of the unit or the overall project and its amenities. Any obvious conditions must be identified in the report and documented with photos.

The appraiser should be careful when it comes to being asked to provide a cost to cure. Depending upon the condition being reported, the appraiser might not know the origin of the problem and what it might truly cost to complete a thorough repair. Sometimes what looks like a simple water stain might require a more detailed investigation than the appraiser can provide, to determine the actual source of the leak and what steps need to be taken to effectuate a needed repair.

As with all assignments, it is suggested that the appraisal include carefully drafted disclaimer language to limit the scope of the appraiser's liability, such as:

"The appraiser can only view reasonably accessible areas of the property in order to observe the overall condition. The appraiser is not qualified to warrant the mechanical, electrical or structural condition or integrity of any part or whole of the subject property. The appraiser is not a mechanical, electrical, or structural engineer or contractor. The appraiser is not an expert, and cannot be relied upon to determine whether any building code violations might exist at the subject property. Additional inspections by qualified professionals are strongly recommended."

The Fannie Mae guidelines specify which tasks should be undertaken by the appraiser and which are the responsibility of the lender. The appraiser should refuse any request to perform those tasks which Fannie Mae has designated to be lender tasks.

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