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
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.