Important Updates

Adoption of Fannie Mae Form 1004D/Freddie Mac Form 442 form/March 2005

Mortgagee Letter 2009-51: Effective February 15, 2010

SUBJECT: Adoption of the Appraisal Update and/or Completion Report (Fannie Mae Form 1004D/Freddie Mac Form 442/March 2005) The Federal Housing Administration (FHA) is adopting the Appraisal Update and/or Completion Report, Fannie Mae Form 1004D/Freddie Mac Form 442/March 2005. This is a dual-purpose form. Part A, Summary Appraisal Update Report, provides for updates of existing appraisals when the appraiser concurs with the original appraisal report and updates the appraisal by incorporating the original appraisal report. Part B, Certification of Completion, provides for compliance repair and completion inspections for existing and new construction dwellings. This mortgagee letter is effective for all case number assignments on or after January 1, 2010.

This form is a two-part form. Supervisory signatures are NOT permitted, only the FHA Roster appraiser may sign the Appraisal Update and/or Completion Report. The borrower may pay for costs associated with the completion of the Appraisal Update and/or Completion Report. Copies of the Appraisal Update and/or Completion Report must be retained in the case binder.

Part A: Facilitates what lenders use to refer to as “Recertification of Value”. This section is a “yes” or “no” question with brief comments concerning whether the subject’s value has declined since the original appraisal. Typically if the appraiser checks “no”, then there will be no need for comments. If checked “yes” then commentary will follow. The most common need for this section is for new construction. For example: The original appraisal is proposed based on plans and specifications and some time later the construction is complete and the lender wants to ensure the value is at least what was stated in the original appraisal report.

NOTE: The FHA appraiser who performed the original appraisal is the only person and/or appraiser that may complete this section of the form as long as the appraiser is in good standing with the FHA Appraiser Roster.

Part B: Facilitates the HUD Repair Inspection Report. This section is completed to certify the completion of construction and/or require repairs. NOTE: The FHA appraiser who performed the original appraisal OR any other appraiser in good standing with FHA Appraiser Roster is permitted to complete this section.  In other words, it does not have to be the original appraiser.

When will you use this form?

1.    If the original appraisal reports FHA required repairs.

A.   The underwriter will require part “B” to be completed to certify all HUD required repairs have been completed.

2.    If the original appraisal report is due to expire and the lender does not want to order a new appraisal report.

A.   Validity period of the Appraisal Update and/or Completion Report is 120 days. In no case may a loan close where the effective date of the original appraisal be more than one year old at the time of loan closing.

B.    Lenders will require this form to be completed for new construction that has been completed.

When the Appraisal Update and/or Completion Report May Not be Used:

Part A/Summary Appraisal Update Report:

1. The property has declined in value.

2. The building improvements that contribute value to the property cannot be observed from the street or a public way.

3. The exterior inspection of the property reveals deficiencies or other significant changes that did not exist as of the effective date of the appraisal report being updated.

Part B/Completion Report:

1. The Completion Report may not be used in lieu of form HUD-92051, Compliance Inspection Report, for new construction and manufactured housing.

Appraiser’s scope of work and due diligence:

Part A/Summary Appraisal Update Report

The appraiser must:

1. Adhere to the Scope of Work and Appraiser’s Certification listed on the form, which includes an exterior inspection of the subject property from, at least, the street.

2. Research, analyze and verify current market data to determine if the property has declined in value since the effective date of the appraisal report being updated.

3. Assure compliance with development and reporting requirements of the Uniform Standards of Professional Appraisal Practice (USPAP), and specifically Advisory Opinion 3.

4. Retain all supporting documentation in the work file.

5. Check the box applicable to Part A.

6. Concur with the original appraisal report and update the appraisal by incorporating the original appraisal report if the market value of the subject property has not declined since the effective date of the original appraisal.

7. Provide a photo of the street scene and photos from as many angles of the home that are visible from a public way.

Part B/Completion Report

The appraiser must:

1. Review the requirements and/or conditions noted in the appraisal report referenced in the header of the Summary Appraisal Update and/or Completion Report.

2. Check the box applicable to Part B.

3. Perform a thorough inspection of the items noted in appraisal referenced in the Summary Appraisal Report and confirm completion/satisfaction of requirements and/or conditions.