On February 15, 2010, three new Mortgagee Letters that specifically address appraisals will be in effect - HUD FHA Mortgagee Letter 2009-28, 2009-29, and 2009-30.
HUD FHA Mortgagee Letter 2009-28
This was the first opportunity for HUD not only to restate and reaffirm appraisal independence, but to specifically reiterate the importance of appraiser independence and advised on new regulations. To ensure appraiser independence, FHA-approved lenders are now prohibited from accepting appraisals prepared by FHA approved roster appraisers who are selected and paid by a mortgage broker or any member of a lender's staff who is compensated on a commission basis.
Lenders will now also be responsible for assuring that the appraiser who completes the appraisal is correctly identified as being in the FHA Connection. If the appraiser is not on the roster, then the lender will be subject to administrative sanctions. SAMCO provides this proof with each FHA appraisal.
FHA did recognize the growing use of appraisal management companies by lenders to ensure appraisal independence. FHA lenders must provide documentation of the appraisal fee separately from the appraisal management fee, ensure that the customary and reasonable appraisal fee is paid to the appraiser, and that AMC fees must not exceed customary and reasonable for the service provided. With SAMCO, each appraisal has an invoice clearly showing the fee paid to the appraiser and SAMCO's management fee. With any AMC that a community bank is working with, this should be a must, for the banks protection.
Reaffirming existing requirements, "no members of a lender's loan production staff or any person who is compensated on a commission basis upon the successful completion of a loan, or who reports, ultimately, to any officer of the lender not independent of the loan production staff and process, shall have substantive communications with an appraiser relating to or having an impact on valuation, including ordering or managing an appraisal assignment".
Back in 1994, when FHA transitioned from rotational assignment of appraisers, Mortgagee Letter 1994-54 advised the requirement for appraisal independence and in subsequent letters advised the mortgagee and the appraiser from even the appearance of a conflict of interest. The Truth in Lending Act (TILA), Regulation Z, and USPAP are all referred to any attempts to affect or impair the appraiser's judgment.
HUD Mortgagee Letter 2009-29
This letter clearly stated that FHA prohibits requesting additional appraisals in an effort to achieve the highest value possible or to reduce/eliminate issues in the report. Appraisal portability was also a concern. FHA does not require that the client name on the appraisal be changed when transferred to another lender. If a lender needs a client name change on the appraisal report, a request needs to be submitted to SAMCO Appraisal Management Company. That will be the only change to the report. If additional changes are requested, a new appraisal report must be ordered.
HUD Mortgagee Letter 2009-30
The validity period for an FHA appraisal was changed from a six-month validity period for existing properties and 12 months for proposed or construction properties to a flat 120 days on existing, proposed, and construction properties. This was in response to the deterioration of values in many neighborhoods in the country.
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