New FHA Rules for Appraisals

By
Services for Real Estate Pros with Paul Warkow-D.G. Weber Law Associates

Effective January 1, 2010 FHA is changing the requirements for ordering appraisals.  It is some what similar to the Fannie HVCC but not quite.  Here are the highlights:

 

  • Cannot accept appraisals prepared by an appraiser who is selected, retained or compensated in any manner by a mortgage broker or any member of lender’s staff who is compensated on a commission basis tied to the successful completion of the loan
  • Lenders must ensure that if an Appraisal Management Company (AMC) is used, the AMC fees must comply with the following:   
    • FHA appraisers are not prohibited from recording the fee the appraiser was paid on the report
    • FHA appraisers are compensated at a rate that is customary and reasonable for the area
    • The fee for the completion of the appraisal may not include a management fee or any other activity other than the performance of the appraisal.
    • Any management fee charged must be for actual services rendered  to ordering, processing  or reviewing appraisals
    • AMC fees must not exceed what is customary and reasonable for the market area
  • There are also new rules with assigning appraisals when the borrower switches lenders
    • When there is a new lender, the first lender must at the borrower’s request transfer the case number to the new lender
    • FHA does not require that the lender name be changed on the appraisal when it is transferred
    • The lender is not permitted to request that the appraiser change the name of the lender on the appraisal unless it is a new assignment
    • It is specifically not permitted for a lender to order a new appraisal just to get a higher value or get around repairs.  (Do not be fooled by a new loan officer who claims that a new appraisal can be done).

 

The new rules are not quite as bad as HVCC.  There are limitations put on AMC that might discourage them from getting into the FHA appraisal business.  These rules seek to make it easier to transfer appraisals.

Comments (4)

Christine Hynes
American Capital Corporation - Laguna Beach, CA
Orange County Senior Loan Consultant

Paul - thanks for the update, it is tough to keep up on it all.

Dec 17, 2009 06:04 AM
Joel Prince
The Principle Group, Inc - Hixson, TN
Hixson/Soddy Real Estate Broker

Paul -

Thanks for this post.  I had heard FHA was going to institute some new rules.  It's good to get the specifics.

Dec 17, 2009 06:20 AM
Paul Warkow
Paul Warkow-D.G. Weber Law Associates - Hauppauge, NY

Christine and Joel-That is what makes our business so challenging because of the constant changes.  There are more proposed changes for FHA loans with regard to tightening underwriting criteria, but they are just proposals and ideas.  There is nothing definite yet.  However, these appraisal changes will take effect January 1.

Dec 17, 2009 06:28 AM
Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

Just recently in a short sale situation the appraiser in my opinion was wrong, because the appreaiser used the wrong comparisons.

We argued with the  short sale lender, and they finally ordered another appraisal, and the other one came very different and supported the contract number.

Eliminating second appraisals may be hurting.

Dec 17, 2009 03:24 PM