Selling Guide

Published December 16, 2020

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A2-2-06, Representations and Warranties on Property Value (12/04/2018)

Introduction

This topic contains information on the following:

 

Representations and Warranties related to Collateral Underwriter (CU)

In addition to the limited waiver of underwriting representations and warranties available for certain DU loans, loans may also benefit from enforcement relief of certain representations and warranties related to the appraisal and value of the subject property (without regard to underwriting method). To be eligible for relief:

  • the loan must be secured by a one-unit detached, attached, or condo property (manufactured homes are not eligible); and

  • the appraisal must receive a CU risk score of 2.5 or below.

When this criteria is met, the lender is not responsible for the following requirements described in this Guide:

  • underwriting the appraisal report to determine whether the subject property presents adequate collateral for the mortgage;

  • ensuring the appraisal accurately reflects the market value of the property;

  • ensuring the appraiser used sound reasoning and provided evidence to support the methodology chosen to develop the opinion of value; and

  • analyzing the comparable sales used in the appraisal report, including the description, selection, adjustments, and reconciliation of the comparables.

The lender remains responsible for the description of the property, and the accuracy and completeness of all data on the appraisal that pertains to the property and project (if applicable). This includes the property’s condition and quality ratings. The lender is also responsible for ensuring the property meets the property eligibility requirements in this Guide. Lastly, the lender remains responsible for any life-of-loan representations and warranties that may apply to the property or the appraisal.

 

Representations and Warranties related to Appraisal Waivers

In addition to the limited waiver of underwriting representations and warranties available for certain DU loans, when a loan casefile is eligible for an appraisal waiver and the waiver is exercised by the lender, Fannie Mae accepts the value estimate submitted by the lender as the value for the subject property. The property value the lender enters in DU may be based on:

  • the lender’s estimate of value, determined at the discretion of the lender, or

  • the borrower’s estimate of value.

If the lender exercises the waiver offer, the lender is not responsible for the representations and warranties related to the value, and marketability of the subject property. The lender is also not responsible for the representations and warranties related to the condition of the subject property, with the exception of the following cases:

With the rural high-needs appraisal waiver, the lender must warrant that the property is safe, sound, and structurally secure (see B2-3-01, General Property Eligibility). For all appraisal waivers, the lender remains responsible for the accuracy and completeness of all data that pertains to the property and project (if applicable) that is submitted to DU (other than the property value), and must warrant that the property is adequately insured.

Fannie Mae does not warrant that the estimated value provided by the lender is the actual value of the subject property. The lender may not make any statements to any third party (including the borrower) that Fannie Mae performed any kind of review, appraisal, or valuation of the property.

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