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By Richard Lauro
Training specialist
Radian Guaranty Inc.
A Look at the Market-Conditions Addendum
It’s smart to know the intent of Fannie Mae form No. 1004MC — aka, Freddie Mac form No. 71
as of this past april 1, fannie mae,
Freddie Mac, the U.S. Department
of Veterans Affairs, and the U.S.
Department of Housing and Urban
Development have required a market-conditions addendum with all appraisals. It is Fannie Mae form No.
1004MC and Freddie Mac form No. 71;
both use the same form and simply
have a different name for it.
The one-page document’s stated
purpose is “to provide the lender/
client with a clear and accurate understanding of the market trends and
conditions prevalent in the subject
neighborhood.”
Brokers and other professionals
seeking more information about the
addendum can consider attending
training sessions aimed at explaining
the requirements of the form and how
it can best be used. But brokers also
should understand what the form is
and the market factors behind each
section on it.
Inside the Market-Conditions Addendum
Inventory Analysis:
Describes supply-and-demand
elements based
on comparable
neighborhood
sales
Median Sale & List
Price: Lists median
sales prices, list
prices and days
on market and
categorizes price
and sales trends
Seller concessions:
Offers detailed
explanation of
seller concessions
for comparable
neighborhood
properties during
the prior 12 months
“When lenders
can make more-
informed
decisions, the entire
industry benefits.”
Foreclosure sales &
summary: Breaks
down the effects
of foreclosure/
REO sales on the
local market.
Also allows for
discussion about
pending sales and
other information
What it is
A summary that identifies risk directly
related to the collateral represents an
important addition to the underwriting
process and loans for which mortgage
brokers seek funding. The form — an
addendum to the neighborhood section
of the Uniform Residential Appraisal Report — is used on the following types of
one- to four-unit valuations:
Residential •
Exterior-only •
Condominium •
Cooperative •
Exterior-only;condo/co-op •
Manufactured;home •
Investment;property •
Update/completion•
Prior to the addendum’s inception,
appraisers gathered information
about market trends and conditions
in a subject neighborhood but had no
structured format by which to report
such information. The addendum
was designed to change that and to
make market-condition information
easier to understand for all mortgage
professionals.
Although the Home Valuation Code
of Conduct (HVCC) — implemented
Condos & co-ops:
Gathers information
based on units in
the same project
as the condo or
co-op in question.
Summarizes
trends and
possible impacts
Appraiser
information:
Offers details
about the
appraiser and
the supervisory
appraiser
Image: Fannie Mae
this past May 1 following an agreement
between Fannie Mae, Freddie Mac and
New York Attorney General Andrew M.
Cuomo — restricts brokers from ordering appraisals for loans sold to Fannie
and Freddie, brokers should still be familiar with the market-conditions addendum to understand the rationale
behind an appraisal and to be able to
discuss it appropriately with customers and fellow industry professionals.
The 1004MC/71 represents an integral part of the valuation process
for loan processors and underwriters researching the market conditions of the collateral backing their
loans. The form also has many appraisers concerned about opposing
opinions, various interpretations and
potential inconsistencies of multiple-listing-service data used to complete
the addendum.
Richard Lauro, a training specialist for
Radian Guaranty Inc., has been in the
mortgage-banking industry for 15 years.
He has served in a variety of positions,
including as a processor, closer, underwriter and loan officer. For the past 10
years, Lauro has focused on training.
Having worked in many different industry roles, he is extremely versatile in his
approach. Reach him at Richard.Lauro@
radian.biz.
