B4-1.2-04, Appraisal Age and Use Requirements (03/01/2023)

When an appraisal is obtained, the property must be appraised within the 12 months prior to the date of the note and mortgage.

When the effective date of the original appraisal report is more than four months but less than 12 months from the date of the note and mortgage, the appraiser must perform an appraisal update that includes inspecting the exterior of the property and reviewing current market data to determine whether the property has declined in value since the date of the original appraisal report.  This policy applies regardless of whether the property was appraised as proposed or existing construction. The appraisal update must occur within four months prior to the date of the note and mortgage.

The original appraiser should complete the appraisal update; however, lenders may use substitute appraisers. When updates are completed by substitute appraisers, the substitute appraiser must review the original appraisal report and express an opinion about whether the original appraisers opinion of market value was reasonable on the date of the original appraisal report. The lender must note in the file why the original appraiser was not used. 

The inspection and results of the appraisal update must be reported on the Appraisal Update and/or Completion Report (Form 1004D).

• If the appraiser indicates on the Form 1004D that the property value has declined, then the lender must obtain a new appraisal for the property.

• If the appraiser indicates on the Form 1004D that the property value has not declined, then the lender may proceed with the loan in process without requiring any additional fieldwork.

When the effective date of the original appraisal report is more than 12 months from the date of the note and mortgage (with or without an appraisal update) a new appraisal report is required. Except for single-close construction-to-permanent financing loans, these policies apply to all appraisals including those that receive appraisal and value representation and warranty enforcement relief (see  B5-3.1-02, Conversion of Construction-to-Permanent Financing: Single-Closing TransactionsB5-3.1-02, Conversion of Construction-to-Permanent Financing: Single-Closing Transactions).

See B4-1.3-12, Quality AssuranceB4-1.3-12, Quality Assurance, for information concerning changes to the appraised value. See B2-1.5-02, Loan EligibilityB2-1.5-02, Loan Eligibility, for information regarding property valuation requirements for mortgage loans sold to Fannie Mae more than four months from the note date.

Desktop Appraisals

When the effective date of the original desktop appraisal report is more than four months from the date of the note and mortgage, a new appraisal is required.

If the lender obtains more than one appraisal for a loan due to applicable law, regulation, lender policy, or otherwise, the lender must

• adhere to a policy of selecting the most reliable appraisal rather than the appraisal that states the highest value,

• document the reasons for relying on the appraisal, and

• submit the appraisal selected by the lender through the UCDP prior to delivery.

These requirements also apply if the lender considers an appraisal to be deficient (see B4-1.3-12, Quality AssuranceB4-1.3-12, Quality Assurance).

Fannie Mae will allow the use of an origination appraisal for a subsequent transaction if the following requirements are met:

• The subsequent transaction may only be a limited cash-out refinance.

• The age of the appraisal report must be less than 12 months from the note date of the subsequent transaction. If the appraisal report is greater than four months from the date of the note and mortgage, then an appraisal update is required. See preceding section, Age of Appraisal and Appraisal Update Requirements, for requirements for completing an appraisal update.

• The lender must ensure that the property has not undergone any significant remodeling, renovation, or deterioration to the extent that the improvement or deterioration of the property would materially affect the market value of the subject property.

• The borrower and the lender/client must be the same on the original and subsequent transaction.

Note: The appraisal must comply with all other requirements in the Underwriting Property section of the Selling Guide.