Written By: Stacey Sprain, Op-Ed Writer
As continued from last week’s article, this week we’ll review the numerous Mortgagee Letters HUD has issued recently on topics relating to appraisers and appraisals.
Mortgagee Letter 2009-36 dated 9/23/09 simply reiterates the announcements made in Mortgagee Letter 2008-39 that I actually already reviewed and presented in my article on Friday, September 11th. Click here to access that article. As of 10/1/09, any appraisers that are not state certified residential or general appraisers will be removed from HUD’s appraiser roster.
Mortgagee Letter 2009-30 dated 9/18/09 discusses Appraisal Validity periods. Effective for cases assigned on and after January 1, 2010, ALL FHA appraisal types will be valid for only 120 days. This includes existing, proposed and under construction property types. This is a large change as to date, appraisals for existing properties are valid for 180 days and those for new construction properties are valid for up to 12 months.
Note that HUD doesn’t allow for re-certifications of value so once an appraisal expires after 120 days, it would need to be completely redone.
Mortgagee Letter 2009-29 dated 9/18/09 discusses Appraisal Portability and states that its content will be enforced for cases assigned on and after January 1, 2010 as well. The bulletin reaffirms HUD’s rule against lender’s using “appraisal shopping” techniques to obtain and appraisal with the highest possible property value and least amount of required repairs and states that when one lender transfers an existing case and appraisal to a second lender, the second lender is not allowed to request another appraisal except under any of the following circumstances:
• The DE Underwriters for the second lender determines the existence of material deficiencies in the appraisal provided by the first lender
• The appraiser who performed the first appraisal is on the second lender’s exclusionary list of appraisers.
• The first lender neglects to provide the second lender with a copy of the appraisal in a timely manner and the borrower’s contingency, rate lock or closing date may be negatively impacted.
In such situations are listed above, the end lender must include copies of BOTH appraisals in the case binder. The lender must explain and document WHY another FHA appraisal was ordered for the case.
HUD also goes on to clarify that when the first lender transfers the FHA case assignment to the second lender, they are REQUIRED to transfer the appraisal as well. However, HUD does not require nor does USPAP allow for the appraiser to change the lender’s name within the original appraisal report to reflect the name of the second lender. To do so constitutes a completely new appraisal and the appraiser then has the right to charge for a complete new appraisal.
It’s important that the Appraisal Logging in FHA Connection reflect the correct data information for the appraiser who completed the appraisal being used in the final underwriting decision. Lenders who fail to comply with the requirements set forth in said Mortgagee Letter are subject to administrative sanctions.
Mortgagee Letter 2009-28 dated 9/18/09 covers the topic of Appraiser Independence as well as announces new requirements pertaining to entities that are eligible to order appraisals for FHA insured mortgages. These new requirements are effective for cases assigned on and after January 1, 2010.
In summary, this bulletin revokes the ability of loan officers, loan officer assistants, loan production personnel and processors to communicate directly with FHA roster appraisers and reiterates HUD’s stance that the appraiser is not to be unduly influenced in any way whatsoever to provide an appraisal containing a desired value. The lender may not add the appraiser’s name to any exclusionary listing without first notifying the appraiser directly. The lender is obligated to follow HUD’s regulations to maintain appraiser independence as outlined in past Mortgagee Letter 1994-54 and in Mortgagee Letter 1996-26.
Need FHA Training? CLICK HERE: http://www.FHA-Classes.org
These are BIG changes for HUD on FHA appraisers and appraisal rules but transitioning to follow them should not be of major concern because we are already following similar regulations set forth for conventional appraisers and appraisals with the Home Valuation Code of Conduct. Most lenders will likely replicate their processes and procedures to include and encompass their FHA case ordering and appraiser assigning as of January 1st of the New Year.
One big note of importance for processors- When logging the FHA appraisal, you need to make sure the appraiser who completed the appraisal is the same appraiser who is assigned to perform the appraisal duties on the FHA Case Assignment itself. If the appraisal comes in from someone other than the person originally assigned, you must first complete and “Appraiser Re-Assignment” in FHA Connection to transfer the original appraisal assignment to the appraiser who actually completed the appraisal. THEN you will proceed with logging the case. ML 2009-28 states that after January 1, if those do not match, the lender may be subject to administrative sanctions. I see those errors on a daily basis so it’s important you learn to pay attention to those important details!
About The Author
Stacey Sprain - As an op-ed writer, Ms. Stacey Sprain is currently a NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). With over 15+ years of mortgage banking experience, Stacey is also a Quality Control Manager for a major mortgage lending institution.