Navigating New Fannie Mae Market Analysis Rules (SEL-2024-07)

Hi everyone, I'm Daniel Yoder, an appraiser navigating the same industry shifts as many of you. We've talked a lot about the big picture changes coming with UAD 3.6 and the redesigned URAR, but sometimes the smaller, more immediate policy updates require just as much attention. Today, I want to zero in on a specific change impacting our daily workflow: the updated requirements for Appraisal Market Area analysis, detailed in Fannie Mae's Selling Guide Announcement SEL-2024-07 and effective for loans requiring an appraisal with applications dated on or after February 4, 2025.

While not directly part of the UAD 3.6 dataset specification itself, these changes are happening concurrently and reflect the GSEs' broader push towards greater consistency and transparency in appraisal reporting – goals that underpin the entire UAD and Forms Redesign initiative. Understanding these market analysis updates is crucial as we adapt our processes.

Standardizing the Language: "Neighborhood" vs. "Market Area"

One of the foundational changes highlighted in SEL-2024-07 is the move towards standardized definitions for "Neighborhood" and "Market Area." Fannie Mae, in collaboration with Freddie Mac, is implementing these definitions, which will be added to the Selling Guide Glossary. The aim here is clear: to promote consistency in how we define and discuss these crucial geographical contexts across all appraisal reports. This standardization should help reduce ambiguity and ensure everyone – lenders, reviewers, and appraisers – is speaking the same language when discussing the geographic scope influencing property value.

Key Updates to Market Trend Analysis and Reporting

Beyond definitions, the announcement lays out several specific requirements and clarifications regarding how we analyze and report market conditions and comparable sales adjustments. Here are the key takeaways for appraisers:

• Market Trend Timeframe: We now have a specific minimum timeframe – 12 months – from which the overall market trend must be derived. This provides a clearer baseline for establishing broader market movements.
• Overall Trend vs. Specific Adjustments: The guidance explicitly states that the derived overall market trend might differ from the time adjustments applied to individual comparable sales. This acknowledges that while a general trend exists, specific comps might require different adjustments based on their unique sale timing and market fluctuations. Appraisers need to be prepared to justify both.
• Methodology Illustration: We are now required to include an illustration of the methodology used to determine specific comparable sale time adjustments driven by market conditions. This means showing our work more clearly when applying time-based adjustments to individual comps.
• Supporting the Analysis: Crucially, the appraiser must report the market analysis that supports both the indicated overall market trend and the market-derived time adjustments applied to the comparables. It's no longer enough to state a trend; we need to demonstrate the analysis behind it and its specific application.
• Comparable Selection: While not a radical departure, the announcement reinforces guidance around the selection of comparable sales, tying it into the refined market area analysis.

What This Means for Your Workflow

These updates necessitate a more rigorous and clearly documented approach to market area definition and trend analysis.

1. Precision: Defining Neighborhood and Market Area boundaries according to the forthcoming standardized definitions will be essential.
2. Analysis Depth: Deriving the overall trend from a 12-month window requires consistent data tracking. Differentiating this from specific comp adjustments demands careful analysis of micro-market movements.
3. Documentation: Illustrating the methodology for time adjustments and explicitly supporting both the overall trend and specific adjustments in the report narrative will become standard practice.

These requirements align directly with the spirit of the UAD 3.6 initiative – moving towards more structured, data-driven, and transparent reporting. While these specific changes are policy updates within the Selling Guide, they contribute to the overall environment of enhanced data scrutiny and standardization. For more context on the announcement itself, you might revisit the overview here: [Fannie Mae Updates Appraisal Guidelines: Market Analysis & Comparables (SEL-2024-07)](www.valuemate.ai/blog/fannie-mae-updates-appraisal-guidelines-market-analysis--comparables-sel-2024-07).

Getting Prepared

With the February 4, 2025, effective date approaching, now is the time to:

• Review SEL-2024-07: Familiarize yourself thoroughly with the specific language and requirements.
• Check the Glossary: Once updated, review the standardized definitions for Neighborhood and Market Area.
• Refine Your Process: Update your templates and internal procedures for market trend analysis and time adjustment methodology documentation.
• Leverage Tools: Consider how your existing tools support these requirements. Solutions that help organize market data and streamline calculations, like Valuemate's automated features for certain report sections, could potentially assist in managing the increased detail required for this type of analysis.

Adapting to these market analysis requirements is another step in our ongoing evolution as appraisers. By understanding these changes and adjusting our practices now, we can ensure our reports meet the GSEs' expectations for consistency and transparency come February 2025. Stay informed, and let's keep navigating these changes together.