Fannie Mae has revised its Uniform Residential Appraisal Report (Form 1004), Definitions, Statement of Limiting Conditions, and Appraiser's Certification (Form 1004B), and Appraisal Update and/or Completion Report (Form 1004D) on a test basis, with lender and appraiser comment sought by September 15, 2004.

Use of the current URAR, released in 1993, and current versions of the other forms is still authorized. The new forms are out for comment and testing only.

a la mode has been involved in testing the new forms with Fannie Mae. Now that the announcement has been made, we will release working copies of the forms to beta next week, and they will be available to WinTOTAL users after that. WinTOTAL users with support memberships will get the new forms free.

When the new forms are completed and phased in, Fannie Mae will no longer require the cost and income approaches on one-unit properties on the URAR.

"Appraisals reported on Test Form 1004 are considered limited appraisals that are subject to the Departure Rule of the USPAP if the cost and income approaches would otherwise be applicable under the USPAP," Fannie said in Announcement 04-02, released this week and distributed to software vendors today. "An appraisal documented on Test Form 1004, however, will be considered a complete appraisal when the cost and income approaches to value are not applicable because the omission of these approaches for the particular type of appraisal assignment is not a departure from the USPAP."

If the appraiser believes that either the cost or income approach or additional market data is necessary for a particular appraisal, the appraiser should document the supplemental analysis or data as an exhibit.

Fannie's goal, it said, was to make the 1004 "more concise." "Direct questions have been added to the report form, which require the appraiser to comment on key areas of his or her research and analysis."

In a yes/no format, the form asks whether the subject has any physical deficiencies or conditions such as needed repairs or deferred maintenance, or any adverse environmental conditions in the improvements, the site, or the immediate vicinity.

The new 1004 accommodates a three year history for the subject and comps, as newly required by USPAP, and space for the appraiser's analysis of the sale and listing history. The appraiser is asked to provide the effective date of his or her data source(s), the owner of record of the subject from public records, information on any recent listing(s) of the subject, and to indicate whether prior listings or sales of the subject or comps were arm's length transactions.

Fannie said that its recent efforts to refer unacceptable appraisal reports to state regulatory agencies led them "to re-examine the strengths and weaknesses of our appraisal report forms, and our examination provided us with the framework for consolidating and further streamlining our appraisal report forms and processes." To that end, the appraiser's certification in Test Form 1004B "was expanded to specifically address unacceptable appraisal practices and to address potential civil liability and/or criminal penalties for intentional and negligent misrepresentation(s)." Twelve such unacceptable practices are listed and described on the form.

"Any lender or appraiser who wants to participate in the testing of these report forms and/or provide comments may do so," Fannie said. "These report forms are available for use with Desktop Underwriter-processed mortgages as well as manually-processed mortgages. Test Forms 1004 and 1004B can be used to report an appraisal of a one-unit property based on an interior and exterior property inspection. Test Form 1004D can be used for any one- to four-unit property to report an appraisal update and/or certification of completion.

"Test participants should submit comments to us (either by sending them in an e-mail message addressed to test_appraisal_forms@fanniemae.com or by regular mail addressed to Fannie Mae, Test Appraisal Forms, 3900 Wisconsin Avenue, NW, Mail Stop 2H-4S-08, Washington, DC 20016) no later than September 15, 2004."

View the announcement here, Test Form 1004 here, Test Form 1004B here, and Test Form 1004D here.