Why These Rules Matter for Your Home Purchase
When you apply for a mortgage, the appraisal protects both you and your lender by establishing the property's fair market value. Fannie Mae's unacceptable practices rules ensure appraisers stick to objective, data-driven analysis instead of personal bias or unsupported opinions.
These guidelines exist because discriminatory appraisal practices have historically undervalued homes in certain neighborhoods, particularly those with minority populations. By prohibiting biased language and requiring factual support for all conclusions, Fannie Mae aims to create more consistent and fair property valuations.
Your lender reviews every appraisal for compliance with these standards before approving your loan. If an appraisal contains prohibited practices, it gets rejected and you'll need a new one.
Discriminatory Practices That Disqualify Appraisals
Appraisers cannot consider or reference protected characteristics of current or potential residents. This includes race, color, religion, sex, sexual orientation, gender identity, age, marital status, disability, familial status, national origin, or receipt of public assistance.
The rule also prohibits coded language that might indicate bias. Terms like "pride of ownership," "crime-ridden area," "desirable neighborhood," "gentrified," "working class," "inner city," or "up and coming" are all forbidden. References to specific demographic groups, like "predominantly Hispanic neighborhood" or "diverse school system," also violate the guidelines.
Say you're buying a home in a neighborhood that's experienced recent demographic changes. The appraiser cannot describe it as "gentrified" or reference the racial or ethnic composition of residents. Instead, they must focus on objective factors like recent sales prices, property conditions, and market trends.
Language and Analysis Requirements
Appraisers cannot use vague, subjective terms without backing them up with specific data. Words like "high," "low," "good," "bad," "strong," "weak," or "average" must be supported by factual analysis and context.
If an appraiser describes market conditions as "strong," they must explain what makes them strong. Are homes selling quickly? Are prices increasing? How do current conditions compare to historical patterns? The appraiser needs to provide the underlying data and reasoning.
This requirement ensures you get an appraisal based on facts rather than the appraiser's personal impressions. It also makes the report more useful for understanding your property's value.
Crime References Are Prohibited
Appraisers cannot include any references to crime rates or crime statistics in their reports, whether objective or subjective. This means no mentions of police reports, crime databases, neighborhood safety concerns, or security issues.
This rule might seem counterintuitive since safety affects property values. However, crime data can be misused to perpetuate discriminatory practices or reflect bias rather than actual market impact. Fannie Mae determined that market data itself reflects any legitimate safety concerns without requiring explicit crime references.
If safety issues genuinely affect property values in an area, this impact should show up in the sales data and market analysis without needing direct crime statistics.
Comparable Property Requirements
The appraiser must personally inspect all comparable properties used in the analysis. This means at least a visual inspection of each comparable property's exterior. They cannot rely solely on photos, previous reports, or third-party descriptions.
Comparable properties must be appropriate for the analysis. The appraiser cannot ignore better, closer, or more similar properties without adequate explanation. If a more suitable comparable exists, they need to use it or clearly explain why they didn't.
Data about comparable properties cannot come from interested parties to your transaction without independent verification. If your real estate agent provides information about a recent sale, the appraiser must verify that information through public records or other disinterested sources.
Market Data and Adjustments
All value conclusions must be supported by actual market data. The appraiser cannot make large adjustments between your property and comparable properties unless those adjustments reflect how the market actually reacts to such differences.
For example, if your home has a pool and comparable properties don't, the appraiser can only adjust for the pool's value based on market evidence. They might look at paired sales analysis showing how much more homes with pools sell for in your area.
The appraiser also cannot fail to make adjustments when they're clearly needed. If comparable properties are significantly different from yours in important ways, those differences must be accounted for in the analysis.
What Documents Support Proper Appraisals
Your appraiser will gather information from multiple sources to ensure compliance with these guidelines. They'll pull data from the Multiple Listing Service (MLS), public records, and their own property inspections.
The appraiser documents their methodology and data sources in the appraisal report itself. They must certify that they followed professional standards and didn't engage in any prohibited practices.
Your lender's underwriter reviews the appraisal for compliance before approving your loan. They look for objective language, proper comparable selection, supported adjustments, and absence of discriminatory content.
Common Problems That Delay Closings
Appraisals get rejected when they contain subjective language without factual support. An appraiser might describe your neighborhood as having "good schools" without providing test scores, ratings, or other objective measures of school quality.
Another common issue involves inappropriate comparable properties. If the appraiser uses sales that are much older, farther away, or significantly different from your property without proper explanation, the appraisal may not meet Fannie Mae standards.
Large, unsupported adjustments also cause problems. If the appraiser makes major adjustments between your property and comparables without market evidence to support those adjustments, the underwriter will likely require a new appraisal.
Sometimes appraisers inadvertently use prohibited language or make references to demographics or crime. Even well-intentioned comments can violate these guidelines and require a new report.
Impact on Your Loan Timeline
When an appraisal gets rejected for unacceptable practices, you'll need to order a new one. This typically adds 7-10 days to your loan timeline, assuming you can quickly find another qualified appraiser.
The new appraiser cannot simply revise the rejected report. They must conduct their own independent analysis and inspection. This means starting the appraisal process over from the beginning.
Your lender may be able to expedite the new appraisal if your closing date is approaching, but you should prepare for potential delays when appraisal issues arise.
References
For the official guidelines, see 5603.4: Unacceptable appraisal practices in the Fannie Mae Selling Guide.
Mortgage guidelines change. Stay current.
Fannie Mae and Freddie Mac update their rules several times a year. Get notified when changes affect your mortgage eligibility, required documents, or loan terms.
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Original Freddie Mac Guideline Text
Bulletin 2025-7
, which announced the policy requirements for Uniform Appraisal Dataset (UAD) 3.6. Sellers may submit to the Uniform Collateral Data Portal
®
appraisal reports that use UAD 3.6 before the mandatory effective November 2, 2026 version of this section.
The following are examples of unacceptable appraisal practices. Evidence of any of the practices listed in this section will be a breach of Seller’s warranty as to the professional quality of the appraisal.
Consideration of the race, color, religion, sex, sexual orientation, gender identity, age, marital status, disability, familial status, exercise of any federally protected civil right, receipt of income derived from any public assistance program, birthplaces of residents at the property or in the Neighborhood, national origin of the prospective owners or occupants of the subject property or of the present owners or occupants of the properties in the vicinity of the subject property. (See also
Section 1301.2
for equal opportunity compliance requirements.)
Use of unsupported or subjective terms or statements to assess or rate, such as, but not limited to, “high,” “low,” “good,” “bad,” “fair,” “poor,” “strong,” “weak,” “rapid,” “slow,” “fast” or “average” without providing a foundation for analysis and contextual information
Incorporating terminology or veiled language that could indicate underlying bias, including but not limited to, “pride of ownership,” “crime-ridden area,” “desirable neighborhood or location” or “undesirable neighborhood or location,” “gentrified,” “working class,” “inner city,” “preferred community,” “up and coming,” predominantly Hispanic or Black neighborhood, substantial amount of Black or Hispanic residents at the property, diverse school system, amenities specifically geared to a race, ethnic or religious group or using terms such as Millennials, Generation X or Baby Boomers
Development of an appraisal using inaccurate or incomplete data about the subject property, the Neighborhood, the Market Area or any comparable property used in the appraisal analysis or report
Inclusion of references, statements or comparisons about crime rates or crime statistics, whether objective or subjective, in the appraisal analysis or report
Consideration of the age or location of a dwelling, or the age of the Neighborhood or census tract where the dwelling is located, in a manner that has a discriminatory effect
Basing the development of an opinion of value on factors that local, State or federal law designates as discriminatory
Reliance in the appraisal analysis on comparable properties that were not personally inspected by the appraiser when required by the appraisal’s scope of work. A personal inspection requires at least a visual inspection of the exterior of the comparable property.
Reliance in any appraisal analysis on inappropriate comparable properties, or the failure to use comparable properties that are more similar, or nearer, to the subject property without adequate explanation
Use of comparable property data provided by any interested party to the transaction without verification by a disinterested party
Use of inordinate adjustments for differences between the subject property and the comparable properties that do not reflect the market’s reaction to such differences, or the failure to make proper adjustments when necessary
Development of an opinion of value and/or marketability conclusions that is not supported by available market data
Breach by the appraiser or supervisory appraiser of a certification or Statement of Assumptions and Limiting Conditions or comparable statements on any Freddie Mac approved appraisal report form or addendum
Section 5606.3
for additional unacceptable appraisal practices related to electronic appraisal reports.
