This blog originated with an appraiser down in Georgia - it's so important for ALL of us that I want to be sure that all my fellow Cabarrus/Mecklenburg/Stanly counterparts know about it, too!
Yes it is true, just yesterday, September 18th FHA sent out a Mortgagee Letter to all lenders that they are adopting HVCC in most of its current form.
By now most of you know about HVCC, if not please check my previous blogs on the subject. Fannie Mae adopted HVCC (Home Valuation Code of Conduct) on May 1st. as they wanted to insure appraiser independence. In short this means that mortgage brokers can no longer order appraisals from appraisers. It is now being handled by AMC's (Appraisal Management Companies) or the Banks directly. No production staff that is paid commission based upon a loan closing can order appraisals.
Due to this change, what was happening was FHA loans were on the rise BIG time as the brokers still had control over the appraisal process. That will end January 1st. FHA does not want to take on any more risk than they already have and FHA does not want and they are not asking the Federal Goverment to bail them out. They have enough in reserves to deal with any loses they have. So FHA must make sure that appraiser independence is guaranteed to minimize on this lending risk. I am not surprised at all, I really was expecting this from FHA.
What does this mean?
1. Good news for appraisers, the AMC's who normally pay CUT rate fees and who care less about quality appraisal reports and experienced appraisers and more about making money, must pay appraisers based upon normal market rates for completing FHA assignments. However the borrower will wind up paying more for FHA loans as the appraisal fees will be even higher....at least this is my take on the situation as the AMC's will jack up their prices to the banks to pay the appraisers what they should and to make profit for themselves as well.
2. Mortgage Brokers will no longer be ordering appraisal reports. So this repsonsibility will go to the Banks or the AMC's.
3. Appraisal reports will only be good for 4 months rather than 6 months.
4. Good NEWS: FHA will allow appraisal reports to be transferred to another lender rather than having another appraisal report completed.
5. The only way another appraisal report can be completed if someone does not agree with value is the report will have to be flawed in some way and it will have to be proved that flaws exist in the report
6. No one can talk to appraisers about value issues. REALTORS, you can still give Appraisers comparable sales data, that is NOT prohibited, you just cannot talk to them about value. The banks and AMC's can discuss particulars of the assignment, but no one can pressure an appraiser for value PERIOD!
7. As of October 1st only CERTIFIED Appraisers can complete FHA appraisal assignments.
8. FHA will require that the appraiser is knowledgeable in the area that they appraise. So if you find an appraiser coming from way out of the area to do an appraisal, this would be one reason to suspect the accuracy of the report. This has ALWAYS been required of appraisers as part of USPAP ( Competency RULE) but many appraisers would take the job no matter where it was and this is not good, if they have no clue about the area.
9. Banks will be liable for the loans they underwrite, not brokers, so there may be more FHA brokers coming from the picture.
To read more about it click here for the full story:
Pass this along, this WILL affect your business as of JANUARY 2010.
Your Active Rain Appraiser