Hendricks Apprasial Services Blogosphere

SIGNATURE: personalized evidence indicating authentication of the work performed by the appraiser and the acceptance of the responsibility for content, analyses, and the conclusions in the report.

JURISDICTIONAL EXCEPTION: an assignment condition established by applicable law or regulation, which precludes an appraiser from complying with a part of USPAP.

ASSIGNMENT: 1) An agreement between an appraiser and a client to provide a valuation service; 2) the valuation service that is provided as a consequence of such an agreement.

Hendricks Appraisal Services is available for all of your residential appraisal needs within San Antonio, New Braunfels, Seguin, La Vernia, Bulverde and surrounding areas. Please do not hesitate to call or login to place an order. We maintain a turn-time of 3 days or less and our fees are very competitive relative to the quality of work and customer service received. Call us now at 210-946-6868.

How will you be affected?

On April 3, 2009, after the culmination of a fifteen month joint ASB/AQB campaign that asked appraisers, users of appraisal services, regulators, educators, and others how well USPAP was serving their needs, the Appraisal Standards Board (ASB) approved and adopted modifications to the 2008-09 edition of the Uniform Standards of Professional Appraisal Practice (USPAP).  This was accomplished with a series of public documents and public meetings. Written comments from almost 2,000 individuals, as well as oral comments offered at public meetings, were also received. The ASB considered every comment, developed a work plan to address the issues brought forward, and asked for and received public comment on a proposed work plan. This work plan included changes for the 2010-11 edition of USPAP, as well as additional changes (such as those involving the issue of reporting) for the 2012-13 edition of USPAP. The Appraisal Standards Board and The Appraisal Foundation.

Over the course of the next week we will discuss each change and/or revision that has was effective January 1, 2010. As always, Hendricks Appraisal Services is committed to quality and integrity with every appraisal assignment. Serving the San Antonio and surrounding areas since 1993.

Releases, Readdressing, and New Assignments

Anyone who has been in the appraisal business for any length of time has had a call requesting a report be "transferred" to a new client by changing the name.  This request, referred to as "readdressing" in Uniform Standards of Professional Appraisal Practice (USPAP), is not permitted.  Simply changing the name does not change the original appraiser-client relationship and is considered misleading.  

Most clients desire to have their own name on an appraisal because they want to establish a relationship that provides them all the rights, obligations and liabilities such a relationship places on the appraiser.  However, according to the USPAP Advisory Opinion (AO) 26 it is clear that once a report has been prepared for a specific client and for a specific use, the appraiser cannot "readdress" or "transfer" the report to another party.  

Per Advisory Opinion 26, the best way to handle one of these requests is to consider it a New Assignment.  Doing so establishes a new appraiser-client relationship. This also satisfies the reason why the client requested the appraisal to be "transferred" to their name.

Some considerations that need to be addressed in this new assignment are outlined in Advisory Opinion 27.  First, per the new USPAP requirement in the Conduct Section of the Ethics Rule, the appraiser needs to disclose to the new client, if necessary, any services regarding the subject property performed by the appraiser within the past three years.  The appraiser also needs to be careful not to disclose any confidential information or results that are part of the original assignment.  Confidential information is defined as: those details identified by the first client as private and any particular information provided to the appraiser and not available from any other source.  

A new assignment does not mean that the appraiser needs to start from scratch.  A new inspection may not be required as long as the effective date, scope of work and the intended use are similar.  In this case, the appraiser may accept the new assignment with a retrospective effective date that is the same as the inspection date already made.  Although the results may be the same, this is not considered revealing the first client's assignment results.  

In the past, USPAP suggested in AO 10 that the appraiser obtain a release from the original client before accepting the new assignment.  However, this has never been a USPAP requirement and this Advisory Opinion has since been retired.  

Additionally, in September 2009, HUD released Mortgagee Letter 2009-29; this letter addresses appraisal transfers and client name changes.  If a borrower switches lenders before a loan is closed, the first lender must, at the borrower's request, transfer the case to the second lender.  However, FHA does not require that the client name on the appraisal be changed when it is transferred to the new lender.  Simply changing the client’s name is, as discussed above, a violation of USPAP.  HUD will accept the appraisal from the second lender with the first lender’s name at the top.  

Although "readdressing" is never allowed by USPAP, it doesn't mean that the new client's needs can't be met. With a little effort, understanding and the proper scope of work, the new client can receive a new appraisal with their name at the top.

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.

Second Appraisal Reporting Requirements

Mortgagee Letter 2009-48 (Effective Immediately)

This mortgagee letter modifies FHA’s requirements for second appraisals,

eliminating the need for a second appraisal on high balance loans in declining

markets. The requirements set forth in this mortgagee letter are effective

immediately for all case numbers. Below is a link to the full text of this mortgagee

letter.

Mortgagee Letter 2008-09, Second Appraisal Requirements, is rescinded in its entirety, eliminating the previous policy requiring a second appraisal to be performed for loans that exceed $417,000 secured by properties located in declining markets.

Rescind Second Appraisal Portion of Mortgagee Letter 2009-08. Elimination of the second appraisal requirement extends to cash-out refinance transactions as well, as described in Mortgagee Letter 2009-08, Limits on Cash-Out Refinances. FHA will no longer require a second appraisal to be performed when the mortgage amount for cash-out refinance exceeds $417,000 and is secured by a property located in a declining market.

FHA will retain the second appraisal policy described in Mortgagee Letter 2006-14, Property Flipping Prohibition Amendment. This policy requires a second appraisal when a property is resold between 91 and 180 days following acquisition by the seller, if the resale price is 100 percent (or more) higher than the price paid by the seller when the property was acquired. The lender must obtain a second appraisal from another appraiser and the cost of the second appraisal may not be charged to the homebuyer.

For example: If a property is resold for $80,000 within six months of the seller’s acquisition of that property for $40,000, the mortgage lender must obtain a second independent appraisal supporting the $80,000 sales price. The mortgage lender may also provide documentation showing the costs and extent of rehabilitation that went into the property as support for the increased value but must still obtain the second appraisal. The second independent appraisal must be completed by a FHA roster appraiser selected by the lender that is underwriting the mortgage. The lender is not to request a second case number through FHA Connection.

Appraisal Validity Periods, Mortgagee Letter 2009-30

(Effective January 1, 2010)

This mortgagee letter changes the validity periods for appraisals. The

requirements set forth in this mortgagee letter will be effective for all case numbers

assigned on or after January 1, 2010.

This is a pretty simple change.

OLD REGULATION: By now I am sure you all know and understand that case numbers have a “shelf life” of (6) months for existing properties and (12) months for properties that are proposed and/or under construction. Once a case number is assigned to a property a new case number may not be ordered or assigned for (6) months for existing properties and (12) months for properties that are proposed and/or under construction.

NEW REVISED REGULATION: All case numbers assigned on or after January 1, 2010, will be valid for 120 days (4 months), regardless of property type. The (6) months for existing properties and (12) months for properties that are proposed and/or under construction rule no longer applies. It is now a simple (4) months from date assigned regardless of existing or proposed or new construction.

This should clear things up and make things a little simpler to understand and remember. Should you have any questions or concerns, please do not hesitate to call Hendricks Appraisal Services at 210-946-6868.

Appraisal Portability, HUD Mortgagee Letter 2009-29

(Effective January 1, 2010) 

This mortgagee letter addresses the portability of appraisals for the purpose of

facilitating the loan process when a borrower switches from one FHA approved

lender (first lender) to another (second lender) and an appraisal was ordered by

and completed for the first lender. The requirements set forth in this mortgagee

letter will be effective for all case numbers assigned on or after January 1, 2010.

Below is a link to the full text of this mortgagee letter. 

In words we can all understand and relate to:

In cases where a borrower has switched lenders, the first lender must, at the borrower’s request, transfer the case to the second lender. 

Once the FHA case number is assigned to a property, borrower and lender can it be transferred to another lender? Yes, it can be transferred. 

Does the lender/client name have to be changed to the new lender? No, FHA does not require the lender/client name to be changed when transferred to another lender. The original report is sufficient with no revisions. 

May the new lender utilize the original appraisal without any other revisions? Absolutely, there is no need to order a “client name change” or especially a new appraisal. 

May the new lender request a new appraisal with using the same FHA case number? Yes, as long as it is not for the purpose of “appraiser shopping” where lenders are actually value shopping.

A second appraisal may be ordered by the “new” or “second” lender under the following limited circumstances:

1. The first appraisal contains material deficiencies as determined by the Direct Endorsement underwriter for the second lender.

2. The appraiser performing the first appraisal is on the second lender’s exclusionary list of appraisers.

3. Failure of the first lender to provide a copy of the appraisal to the second lender in a timely manner would cause a delay in closing, posing potential harm to the borrower.

Please note the following: In accordance with the Uniform Standards of Professional Appraisal Practice (USPAP), the lender is not permitted to request that the appraiser change the name of the client within the appraisal report unless it is a new appraisal assignment.  To effect a client name change, the second lender and the original appraiser may engage in a new appraisal assignment wherein the scope of work is limited to the client name change.  A new client name should include the name of the client (lender) and HUD.

In other words, a client name change request is considered a new assignment. However, the new lender may limit the scope of work to only include the client name change. In this case, the effective date of the original appraisal will remain the same along will all other aspects of the report.

HUD Appraisal Related Changes and/or New Requirements

Last year, HUD issued several Mortgagee Letters (ML) related to FHA appraisals. These letters either clarified existing FHA requirements or introduced new FHA requirements. Over the course of the next couple of weeks our Blog will attempt to break down and summarize each of the latest appraisal related Mortgagee Letters in an effort to better understand the changes and their meaning in words we call relate to as oppose to the what seems to be encrypted code written by HUD. Below are the most recent Appraisal Related Mortgagee Letters:

• Appraiser Independence (ML2009-28) New Effective Date of February 15, 2010

• Appraisal Portability (ML2009-29) Effective January 1, 2010

• Appraisal Validity Periods (ML2009-30) Effective January 1, 2010

• Second Appraisal Reporting Requirements (ML2009-48) Effective Immediately

• The adoption of Fannie Mae’s/Freddie Mac’s Appraisal Update and/or Completion Report (ML2009-51) New Effective Date of February 15, 2010

New/Updated FHA Appraisal Requirements - 2010

Appraiser Independence

ML 2009-28 (Effective February 15, 2010)

In this mortgagee letter, FHA reiterates the importance of appraiser independence,

and advises of new requirements regarding who is eligible to request an appraisal

from an FHA Roster appraiser. The requirements set forth in this mortgagee letter

were originally set to be effective January 1, 2010, however HUD extended the effective for all case numbers assigned on or after February 15, 2010.

1. Prevention of Improper Influences – Underwriters are allowed to contact the appraiser directly to request clarifications and discuss with the appraiser components of the appraisal that influence its quality. However, under no circumstances should the Underwriter attempt to unduly influence the appraiser’s opinion of value. In the 16 years Hendricks Appraisal Services has been in business, this has never been an issue. Therefore, business as usual with no change of action.

2. Appraiser Independence Safeguards – To ensure appraiser independence, FHA-approved lenders are now prohibited from accepting appraisals prepared by FHA Roster appraisers who are selected, retained or compensated in any manner by a mortgage broker or any member of a lender’s staff who is compensated on a commission basis tied to the successful completion of a loan. This is a new requirement, however, should not be too alarming and taken out of context. The lender may continue to select the appraiser from the FHA Roster as long as a NON-COMMISSIONED employee communicates with the selected appraiser. Anyone can order the appraisal as long as they are not compensated on a commission basis to the successful completion of the loan. However, when ordering appraisals through Hendricks Appraisal Online Ordering System this is a mute point as all orders will always be HVCC and HUD Compliant and will always ensure and maintain Appraisal Independence Safeguards. When ordering online anyone can order, even commissioned loan officers. No need to panic, its really easy!

3. Appraiser Engagement – Knowledge of the market area and overall

geographic competency continue to be standard requirements for all

Hendricks Appraisal Services appraisal assignments. We all practice and live in and around the San Antonio market. Obviously, we are geographically knowledgeable and competent.

4. New Requirement - Prohibition of Mortgage Brokers and commission

based lender staff from the appraisal process – Hendricks Appraisal Services provides a buffer between Loan Production and the appraiser. Hendricks Appraisal Services appraisers should not be contacted by commissioned based mortgage brokers or lenders (i.e. loan officers) in an effort to unduly influence the appraisal process.

5. Appraisal Fee Disclosure – FHA-approved lenders must ensure that:

A. FHA Appraisers are not prohibited by the lender, AMC or other third party, from recording the fee the appraiser was paid for the performance of the appraisal in the appraisal report. (Hendricks Appraisal Services doe not prohibit the appraiser from disclosing fees paid for performance)

B. FHA Roster appraisers are compensated at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised. (Standard fees apply)

C. The fee for the actual completion of an FHA appraisal may not include a fee for management of the appraisal process or any activity other than the performance of the appraisal. (Hendricks Appraisal Services does not charge management fees)

D. Any management fees charged by an AMC or other third party must be for actual services related to ordering, processing or reviewing of appraisals performed for FHA financing. (Once again, Hendricks Appraisal Services does not charge a fee for this service)

E. AMC and other third party fees must not exceed what is customary and reasonable for such services provided in the market area of the property being appraised. (Hendricks Appraisal Services does not charge for this service, furthermore, our fees are very competitive and well within reason for our area). 

As always, I invite you to comment on this Blog by posting any questions or concerns you may have. We want to hear from you.

GOOD NEWS!

Hendricks Appraisal Services is your answer to all of your San Antonio FHA appraisal needs.

Will you have to change the way you have ordered FHA appraisals in the past? Yes, only noncommissioned personnel will be allowed to order FHA Appraisals and cannot speak directly to the appraiser to perform the FHA appraisal.

Is it a Dramatic change? No, not when ordering from Hendricks Appraisal Services. We offer several different options all compliant with the new FHA requirements.

What are the options? You can call the order in like you have in the past, you can fax the order just like you have previously, you can order online like many of our clients have been ordering for some time now.

Required to order with Double-Blind standards? Not a problem, all you have to do is order online with a separate username and password and do not include your name, company name or address.

Need an HVCC compliant order? Not a problem, we offer that as well.

Please contact me if you would like for me to set-up your own personal account or corporate account with confidential username and password. It only takes a few seconds and you will receive an email complete with instructions and your username and password which you will be able to change at anytime as often as possible.