FHA Joins HVCC Ranks
Ouch! As recently as Aug 31, FHA was quoted as "not considering adopting the Home Valuation Code of Conduct appraisal system now in place at Fannie Mae and Freddie Mac" ("Inside Mortgage Finance" Aug 31, 2009). So Friday's announcement came as a shocker. The FHA Commissioner announced in a series of 3 mortgagee letters (2009-28-30) that beginning January 1st, 2009, FHA will prohibit appraisals ordered by mortgage brokers or borrowers, in addition to the current restriction of real estate agents' involvement in the appraisal order process.
Details in the Mortgagee Letter 2009-28 state that "FHA does not require the use of AMCs (Appriasal Management Companies) or other third party organizations for appraisal ordering..." but lenders are all using the dreaded AMCs to order appraisals, and there is no other outlet for placing appraisal orders around the nation since these AMC systems, however flawed, are already in place.
That said, not all AMCs are performing poorly. A local appraiser is more apt to show up at the home for inspection now that the AMCs have compiled ample stable of approved appraisers. Appraisal turntimes depend on the individual appraiser, but the AMCs seem willing to light a fire under the appraiser if they are dragging their feet. My biggest complaint is that the appraisers' payment for service has been drastically reduced.
I don't think HVCC hurts mortgage brokers as much as it hurts appraisers, but HUD is trying to ease the pain by requiring that appraisers "are compensated at a rate that is customary and reasonable for appraisal services performed in the market area of the property...". It also states the "The fee for the actual completion of an FHA appraisal may not include a fee for management of the appraisal process..." Well that is an improvement over current HVCC where appraisers are getting paid as little as half fees from pre-HVCC. Let's see if it actually transpires to protect HUD approved appraisers for fair payment for their services.
There are provisions for the portability of the appraisal if the borrower needs to change lenders during the process, with HUD requiring the lenders to be more supportive of appraisal portability. The time a HUD appraisal is valid has been reduced from 6 months to 4 months.
For complete mortgage letters, visit http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/
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