Beginning February 15, 2010 five new Mortgagee Letters will be in effect addressing several issues and three of the letters specifically address appraisals and several changes occurring for appraisal guidelines for FHA loans.

MORTGAGEE LETTER 2009-28

Appraiser Independence

In this letter FHA reiterates the importance of appraiser independence and lays out guidelines with regards to who is eligible to request an FHA appraisal from the roster. These requirements are in effect for all case numbers assigned on or after February 15, 2010.

It will no longer be acceptable for mortgage brokers or commission based lender staff to order FHA appraisals or for mortgage brokers or commission based lender staff to select or request a specific appraiser to complete an FHA appraisal assignment.

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Our systems and procedures are set up for this transition as we, as the third party, will be selecting the   appraiser to complete the assignment based on proximity to subject and qualifications to complete the assignment in a thorough manner.

It will now also be the responsibility of the lender to ensure that the appraiser who completed the report is the same appraiser who was identified in FHA connection when the case number was assigned.

We are making this our responsibility as well. When we assign an order to an FHA appraiser, we confirm the name and license number with the appraiser on the phone. We then look up the state licensing board to ensure the appraiser is up to date on all licensing and we check the HUD roster to ensure that certification is current. The order will be assigned in our system to that specific appraiser. The appraiser accepts the order and confirms that they will be, in fact, completing the assignment and acknowledges that the report will not be accepted with any other signature on the report.

Lastly, the letter addressed Appraisal and AMC/Third Party Organization Fees. FHA recognizes that many lenders utilize companies like Nationwide Appraisal Network to help ensure appraiser independence on every order. FHA is asking that lenders ensure that appraisers are not prohibited from listing their fee on the report, that appraisers are paid customary fees for the area, the fee for the actual completion of the report does not include AMC fees, any fees charged by the AMC is for work done by the AMC, and that AMC fees are customary for the area.

We have a disclaimer that addresses each item. This disclaimer is included in every report so the borrower and FHA can see that we are in compliance with this regulation. We are making this our responsibility to ensure that we are all in compliance with all rules and regulations on every report.

MORTGAGEE LETTER 2009-29

Appraisal Portability

FHA prohibits “appraiser shopping” where lenders order additional appraisal reports in an effort to seek out highest value or least number of issues reported in the appraisal. They have listed the circumstances where it is acceptable to order a second appraisal as follows:

• The first appraisal contains material deficiencies as determined by the Direct Endorsements underwriter for the second lender.
• The appraiser performing the first appraisal is on the second lender’s exclusionary list of appraisers.
• 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 (loss of interest rate lock, purchase contract deadline, foreclosure proceedings, and late fees) to the borrower.

Appraisal Transfer and Change of Client Name in Appraisal Report

If a borrower switches lenders, the first lender must, at the borrower’s request, transfer the case to the second lender. FHA does not require that the client name on the appraisal be changed when it is transferred to another lender.

In accordance with 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.

If a client name change is needed, the second lender may forward the request to Nationwide Appraisal Network. We will send the new request from the new lender to the appraiser to address accordingly. The scope of the work is limited to the client name change. A new client name should include the name of the client (lender) and HUD.

MORTGAGEE LETTER 2009-30

Appraisal Validity Periods

This letter addresses the change to the validity period for appraisals used for FHA-insured mortgages. Effective February15, 2010 the validity period for all appraisals on existing and proposed and under construction properties will be 120 days. This is a change from the current 6 month validity period for existing properties that are complete and 12 months for proposed and under construction properties.

For more information please visit http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/.

Please contact the Director of Operations for any questions you may have regarding our processes and how they pertain to the FHA Mortgagee letters.