Fannie Mae’s new URAR Appraiser’s Certification doesn’t force you to give up your ownership rights

A lot of bandwidth and I.Q. points have been spent debating the new Appraiser's Certification items in the new URAR Fannie Mae is requiring (in most cases) beginning this month. Specifically, two provisions have aroused interest from appraisers concerned about their rights and liabilities and data companies hoping to get ahold of appraisers' data. They are:

21. The lender/client may disclose or distribute this appraisal report to: the borrower; another lender at the request of the borrower; the mortgagee or its successors and assigns; mortgage insurers; government sponsored enterprises; other secondary market participants; data collection or reporting services; professional appraisal organizations; any department, agency, or instrumentality of the United States; and any state, the District of Columbia, or other jurisdictions; without having to obtain the appraiser's or supervisory appraiser's (if applicable) consent. Such consent must be obtained before this appraisal report may be disclosed or distributed to any other party (including, but not limited to, the public through advertising, public relations, news, sales, or other media).

23. The borrower, another lender at the request of the borrower, the mortgagee or its successors and assigns, mortgage insurers, government sponsored enterprises, and other secondary market participants may rely on this appraisal report as part of any mortgage finance transaction that involves any one or more of these parties.

We believe the issues these two provisions present have been unnecessarily complicated by entities that may want appraisers to believe their reports aren't their own work, and data companies and AVM developers that want to get their hands on appraisers' data without paying for it, like they have been for years. Organizations expressing concern about the language and hosting panel discussions in conference settings recently have at one time or another been involved on the AVM end of things, trying to facilitate getting appraisers' work into collateral databases and AVM engines.

The fact that a borrower might now "rely" on a report is arguably a change in the law and practice from previously. There have been cases where courts have said borrowers could sue over a faulty appraisal, and some that have said since there was no contractual relationship, they couldn't. The key is the limiting language "as part of any mortgage finance transaction that involves any one or more of [the] parties." You will not be sued by a borrower over the appraisal you did on their refinance last year because they couldn't use it to sell their house, or challenge their assessment. The intended use and intended user serve as notice that you are conveying only certain rights to certain parties and are not anticipating any future use or user not contemplated by the transaction.

Data companies are more interested in certification No. 21, which provides that the report may be "disclose[d] or distribute[d] to" various people. It's said that this means appraisers give up the right not to have their work inputted into a collateral database by "data collection or reporting services." This is not true. As the owner of the intellectual property represented by your report, only you can say who can use the report for what purpose. The intended use "is for the lender/client to evaluate the property that is the subject of this appraisal for a mortgage finance transaction." To the extent others may "rely" on the report, that is only in conjunction with a mortgage finance transaction as well.

By conveying a URAR and supporting material to your client, you do not give up your rights! Nothing in the appraiser's certification or elsewhere gives your client, data companies, Fannie Mae or anyone else the right to use your work for purposes you haven't agreed to. And all you've agreed to is to allow "the lender/client to evaluate the property." The report may be "disclosed or distributed to" others, but those others may not use the report outside the limited context of a "mortgage finance transaction" without your permission. Without an express, written agreement – which the appraiser's certification is not – your client gets what they always get from you: a limited use license. If you want to bargain away your rights, you have to affirmatively do so. (And we think you should charge more for it.)

Don't be misled into thinking that by completing and signing the new URAR you're signing your rights away. Your report is your intellectual property and you control who gets to use it, for what purpose. The URAR's conditions aren't as expansive as some AVM developers and their well-wishers would have you believe.