The 1004MC: A Sad Goodbye

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  • The 1004MC: A Sad Goodbye

    Effective this month, Fannie Mae has made some significant changes to their Selling Guide – the one that interests Class Appraisal most is the removal of the 1004MC requirement in all 1-4 family reports for FNMA lenders. This importance of this addendum should not be overlooked, and many questions surround this sudden annulment.

    The first that may or may not be coming to your mind – what is a 1004MC and why did we need it in the first place?

    The MC in the report’s name stands for “Market Conditions”, and its purpose is clearly defined on the top of the form (sample found here). It states –

    “The purpose of this addendum is to provide the lender/client with a clear and accurate understanding of e market trends and conditions prevalent in the subject neighborhood.”

    Sound important right? The trend of a market area is something everyone involved in the transaction is usually concerned with, and it can play a crucial role in formulating an opinion of value. The form also includes fields concerning the seller concessions trends of the subject’s neighborhood for the past 12 months, and if foreclosures are a factor in the market.

    So by now you might be asking yourself, “why the heck would we get rid of this? I want to know this information!”

    Well, there are some notable caveats to considered. For one, there has not been any announcement from Freddie Mac, FHA, VA and USDA regarding a change in this requirement, so for those loans the 1004MC is still needed. Secondly, Lenders may still require this in their reports, and I expect most will opt to include the Market Conditions addendum, or at the very least require some commentary that includes similar information.

    The last thing to consider is that Appraisers should always try and remain as knowledgeable as possible about the trends in their market area. We expect most will continue to research and analyze a subject’s market conditions and be able to soundly support their conclusions, even if they are no longer required to explicitly put it in the form.

    As a company, Class has always required the 1004MC, and we still believe in the support that it lends in any report. However, we will always listen to the needs of our clients and will follow their direction in regards to aspects of an appraisal that are not required by Secondary Markets.

    For more information, please reach out to Class Appraisal – 866-333-8311

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