Written By: Stacey Sprain, Op-Ed Writer
With all of the recently implemented FHA appraiser and appraisal changes, it can be somewhat confusing as to what detail and information you as a loan officer or processor may need to be aware of when it comes to new appraisal orders and appraisals received as the result of case transfers. Below is some information you may find useful.
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There are two common situations that can lead to an incoming FHA case transfer:
1. The borrower starts their FHA loan application with Lender A who obtains an FHA Case Assignment but the borrower chooses to finish out the loan process by re-applying with Lender B and requests their case be transferred from Lender A to Lender B; or
2. Lender B attempts to request a case assignment for a new application but receives a message in FHA Connection that an existing case, belonging to Lender A, exists in association with the subject property. (most often this involves different borrowers than applied with Lender A)
In either case, Lender B in is position to request a case transfer from Lender A. There are a number of things that must be taken into consideration by Lender B when requesting the case been transferred from Lender A to Lender B. These are pertinent questions that should be asked whenever you are in position to accept an incoming case from another lender:
1. Does Lender B have application from the same or differing applicants than started the process with Lender A?
2. Has Lender A underwritten and rejected a loan for the same borrower’s who are now in process with Lender B?
HUD requires that Lender A complete the Mortgage Credit Reject screen in FHA Connection prior to transferring the case to Lender B if indeed the loan was underwritten and rejected. When this screen is completed by Lender A, Lender B can “overturn” the rejection of Lender A by specifically explaining and documenting the reasoning in Lender B’s case file for insuring.
3. Has an FHA appraisal been received for the subject property by Lender A?
- If Lender A does not have an appraisal in hand, your borrower’s will be able to obtain an appraisal specifically for them and their property through whatever appraisal ordering process your organization has implemented for purpose of maintaining appraiser independence.
- If Lender A does have an appraisal in hand, Lender B should be aware of any internal procedures and requirements that may apply within Lender B’s organization for the review and acceptance of incoming appraisals related to FHA case transfers.
4. If Lender A has a completed FHA appraisal in hand, is the existing appraisal still valid? Will the appraisal remain valid by the time Lender B’s loan is set to close?
- If the case was assigned prior to January 1, 2010 the appraisal has a six month validity period for existing construction or a 12 month validity period for new construction.
- If the case was assigned after January 1, 2010 but before February 15, 2010 the appraisal expires after 120 days and a new appraisal is required after expiration.
- If the case was assigned on or after February 15 the appraisal has a validity of 120 days but when it expires, FNMA Form 1004D may be used to request an appraisal update If the appraisal meets the requirements of Mortgagee Letter 2009-51. If the appraisal does not meet such requirements, a new appraisal must be requested from the same appraiser who completed the incoming appraisal through whatever appraisal ordering process your organization has implemented for purpose of maintaining appraiser independence.
Need FHA Training? CLICK HERE: http://www.FHA-Classes.org
5. If Lender A has a completed FHA appraisal in hand, is the appraiser on Lender B’s ineligible list? Is there any reason Lender B cannot accept an appraisal completed by the appraiser who completed the appraisal for Lender A?
- Unless the situation meets either of the requirements listed in Mortgagee Letter 2009-29, Lender B must re-use the appraisal being transferred in from Lender A.
6. Does Lender A intend to charge Lender B for transferring the appraisal?
- Transferring lenders are entitled per HUD to charge reasonable fees for reimbursement of the appraisal expense. When the case involves different borrowers for a common property, FHA instructs that Lender B is to collect an appraisal fee from the new borrowers and present the fee to Lender A so that Lender A may reimburse the original borrower’s for the appraisal expense.
For any case transfer request, Lender B should specifically request that all rights to the existing case and appraisal be transferred to Lender B and that Lender B will accept all rights to the case. The questions listed above should also be kept in mind when requesting the case transfer so that informed decisions can be made at point of transfer and so that effective communications can be made to your borrower(s) involved with the case transfer process.
One thing to note of importance - If Lender B determines that any portion of the transferred appraisal received from Lender A requires updating, additional commentary, corrections, etc. the appraiser is obligated by the confidentiality regulations within USPAP and cannot honor the request of Lender B without considering it a new appraisal assignment. These situations can lead to additional fees and in some cases, requirements for another appraisal fee to be charged. HUD does not allow the borrowers to be charged for more than one appraisal.
HUD does not require that the borrower names, client (lender name) or transaction details match on the appraisal in cases of case transfer. They are concerned most that the value of the property is justified to meet the requirements of your transaction type and that the property meets HUD minimum property standards. However, Lender B may have their own requirements for all data to match between the appraisal and the transaction. Be aware that you cannot request that the appraiser change the client (lender) name or any of the other minor details without it being considered a new assignment which leads to added charges. HUD does not get involved with the appraiser charges or charges between the lenders concerning case transfers.
If the transferring lender is uncooperative, prior to contacting HUD, the new lender should attempt to resolve the situation with the original lender at a management level. If the new lender cannot reconcile the situation with the original lender, the new lender can fax the following items to the Director of Processing and Underwriting Division in the appropriate Home Ownership Center (HOC) containing the following:
1. The steps taken by the lender to try and accomplish the transfer;
2. A Listing of the fees (if any) the original lender has requested be paid;
3. The resolution, if any, to the request for payment of fees by the original lender;
4. A letter signed by the borrower stating that the borrower wants to work with the new lender.
HUD staff will transfer the case number or cancel the existing case number so that a new case number may be issued, as appropriate.
Fax the above listed information to the appropriate Homeownership Center as listed below:
- Atlanta Homeownership Center oversees the following states: Alabama, Florida, Georgia, Kentucky, Illinois, Indiana, Mississippi, North Carolina, South Carolina, and Tennessee.
Fax request to: 404-331-3361
- Denver Homeownership Center oversees the following states: Arkansas, Colorado, Iowa, Kansas, Louisiana, Missouri, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, South Dakota, Texas, Wisconsin, Wyoming, and Utah.
Fax to (303) 672-5211 or (303) 672-5210, if busy
- Philadelphia Homeownership Center oversees the following states: Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Vermont, Virginia, and West Virginia.
Fax to (215) 656-3434 for properties in DE, DC, MD, MI, PA, VA, WV
Fax to (215) 656-3438 for properties in CT, ME, MA, NH, NJ, NY, OH, RI, VT
- Santa Ana Homeownership Center oversees the following states: Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon and Washington.
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.