InsightsFannie Mae AIR updates: how AMCs help lenders comply

As Fannie Mae’s recent updates to its Appraiser Independence Requirements place additional scrutiny on lenders to ensure unbiased appraisal processes, AMCs are proving their value.

The Fannie Mae Selling Guide recently became more detailed around the issue of the valuation process for one- to four-unit residential properties. With the intent of strengthening protections to safeguard the independence, objectivity and impartiality of appraisers and other independent parties, Fannie Mae set forth amended standards as to who may and may not engage in the appraisal process.

In short: To ensure the unbiased accuracy of mortgage appraisal reports, any party that is compensated from the successful closing of the loan is not permitted to order appraisals or to be involved in the collateral valuation process in any way.

ServiceLink’s SVP and Chief Appraiser Alan Pair shares insights into compliance and risk mitigation strategies for lenders as they strive to uphold the new Appraiser Independence Requirements and Property Data Collector Independence Requirements:

Q. Fannie Mae recently announced several changes to the Appraiser Independence Requirements (AIR). What are these changes and what do they mean for lenders?

A: According to the Fannie Mae Selling Guide published on Aug. 2, 2023, the changes include:

  • Clarification that mortgage brokers, loan officers/loan originators and production staff — now referred to as “restricted parties” — are not allowed to order appraisals or be involved in the collateral valuation process at all.
  • Clarification that appraisers, appraisal management companies and appraisal firms — now referred to as “independent parties” — all fall under the same protections.
  • Improve readability and clarity through reorganization of the content and other improvements.
  • Introduction of Property Data Collector Independence Requirements (PDCIR) similar to those related to appraisers in AIR, for Fannie Mae and Freddie Mac loans (effective for loans with application dates on or after Nov. 1, 2023).

Regarding appraiser independence, nothing significant has changed since October 2010, when the GSEs (Fannie Mae and Freddie Mac) introduced AIR. As originally published in 2010, AIR stipulates, in part, that no party influenced by the outcome of a particular loan is permitted to have any control over the ordering or influencing of a related appraisal. These parties are now identified and referred to as “restricted parties,” per the Aug. 2, 2023 Fannie Mae Selling Guide update.

On the appraisal side, appraisers, AMCs, appraisal firms and property data collectors are now all part of a protected group known as “independent parties.” These parties may not be solicited to conduct an appraisal by any party influenced by the outcome of the loan.

For lenders, this means that every loan sold to the GSEs must be AIR-compliant. Per the Fannie Mae Selling Guide, lenders are required to obtain “a signed and complete appraisal report that accurately reflects the market value, condition, and marketability of the property.”

Finally, “property data collectors” and the same “independent parties” noted in AIR now have the same protections as appraisers with this update.

Q: What do lenders need to do to ensure they are in compliance with these changes?

A: The easiest way for a lender to comply with consistency and confidence is to engage with an AMC that stringently applies AIR to all providers. ServiceLink has done so since 2010, which mitigates the risk of being out of compliance with AIR, and now PDCIR, regulations.

Lenders that are not engaged with an AMC must take care to review and, where necessary, revise their processes and protocols to ensure compliant appraiser/data collector selection and management. For instance, lenders with in-house panels must be able to demonstrate to regulators that the individuals managing their panel are isolated from the sales, operations and production functions of their businesses, so that there can be no question as to their impartiality.

Q: How does working with an AMC, like ServiceLink, help safeguard lenders from risks associated with these changes?

A: Working with a reputable national AMC lifts many of the responsibilities associated with risk management from lenders. The AMC is charged with diligently monitoring evolving statutes, regulations and industry standards, and standing ready to respond quickly to changes with the goal of protecting lenders, borrowers and providers. The best AMCs are also constantly investing in the development and implementation of new technologies, systems and protocols to address a host of risk mitigation and compliance needs.

In the case of these recent changes to Appraiser Independence Requirements, ServiceLink is positioned to support lenders immediately. We have applied AIR to all providers, not just appraisers, since 2010. Fannie Mae’s updates, including the addition of PDCIR, doesn’t change the way we operate, because we already have inclusive processes and protocols in place. As an example, every order sent to a provider includes a dedicated email and phone number that is monitored 24/7 to report undue influence.

Q: Describe a scenario that was permissible prior to this announcement that is no longer allowed?

A: Prior to the Aug. 2 amendments to the Fannie Mae Selling Guide, data collectors were not protected by the GSEs regarding undue influence. They could have received an order from a realtor, loan processor or loan originator, for example, who would stand to gain financially from the closing of the sale. Fannie Mae’s new Property Data Collector Independence Requirements afford data collectors the same protections that appraisers have had since 2010, ensuring they can conduct their work without undue influence.

Q: Can lenders maintain their current panel while working with an AMC?

A: Yes. Lenders can maintain their current appraiser and data collector panel as long as they comply with AIR and PDCIR. Taking a hybrid approach might take the form of adopting the AMC’s technology but not its panel management, or handing off volume outside of the lender’s key geographic footprint or area of expertise. Or the lender might, in addition to tapping into an AMC’s technology, engage the AMC to manage their appraiser panel. This type of arrangement frees the lender of duties associated with appraiser recruitment, screening, onboarding, oversight, score-carding, auditing, etc.

Q: Anything else lenders should know?

A: Working with a high-quality AMC offers advantages that go beyond AIR compliance. Lenders who work with ServiceLink, for example, benefit from not only our risk mitigation and regulatory compliance expertise, but also our:

  • Technology and infrastructure, which drive efficiencies and customer satisfaction through advances such as real-time digital scheduling.
  • Administrative oversight, which relieves the lender of the responsibilities and overhead related to maintaining and managing the appraiser panel.
  • Scalable solutions, to prepare the lender for volume fluctuations related to dynamic market conditions.
  • Diversity of expertise, as our deep talent pool includes experts in various property types, value ranges and geographies.

If you have questions about AIR, PDCIR or how ServiceLink supports lenders with the mortgage valuation process, contact us today.

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