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FHA Commissioner Responds to New FHA Appraisal Guidelines

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Mortgage and Lending

Cari Anderson's East Bay Mortgage UpdateThis month National Mortgage Professional Magazine published an interview with David H. Stevens, Assistant Secretary for Housing at HUD and FHA Commissioner. Among many topics, he addressed FHA's new appraisal ordering process which closely mirrors the HVCC for conventional loans. FHA's goal was to implement a "blind ordering" protocol to eradicate any possibility of interested parties influencing the appraised value. He commented on the concern of many in the industry who feel that the new rule carries with it a complexity in appraisal portability and the subsequent possibility of the consumer being forced to pay for a new appraisal if the funding source needs to be changed. In response to the interviewer's question as to whether or not HUD would consider a "blind ordering" interface that would be accessible to "any originator, no matter what channel or origination." Below is Mr. Stevens' reply:

"I do think the blind ordering of appraisals is the one thing that was the strongest piece of the Home Valuation Code of Conduct (HVCC) that everyone universally understands and agrees with ... taking away the influence factor in the appraisal ordering is critical. We also believe that portability is important, so controlling the appraisal channel and having it directed is a concern to me because should that loan be turned down and the borrower wants to go somewhere else, do they need that appraisal at the next firm or do they need to pay a new appraisal fee? It continues to be an expensive way to complete the transaction." He concluded that the main issues are "... how to make the appraisal stay and take away that influence factor, keep it arms-length, but also not make this another setback to the consumer who needs that appraisal and may need an appraisal for a different institution."

We are hopeful that Mr. Stevens and HUD will continue to consider this matter and to amend their policies with only the best interest of the consumer in mind.

Posted by

                         Cari Anderson Tri Valley Mortgage Expert

Cari CA Real Estate Broker License 01220718...NMLS License ID 234849

Valerie Osterhoudt
Johnson Real Estate, Inc. - Cromwell, CT
ABR, Cromwell, CT Real Estate ~ 860.883.8889

Cari.. This new way of appraising property is causing a lot of problems....especially when appraisers are NOT from the area and do not know what they are doing.

I have a buyer that is looking to purchase a condo.  The appraisal came in $5k less than the offer.  My client was up in arms.  Rightfully so.  I told her I would speak with the listing agent.  I too felt the property was worth $5k more.  The comps that were used did not take in regard that this condo has a garage, and the others did not, it did not take in regard the location (end unit, no neighbors).  The garage alone is worth $5k easily. The appraiser would NOT budge.. my client pulled out.

Sad story, she can't find another property and time is running out.  The one she *really* loves (which is the one she really wants) is still up for sale.  No one is coming out ahead in this instance.

valerie osterhoudt

Mar 09, 2010 10:15 AM
Robert Vegas Bob Swetz
Las Vegas, NV

Very interesting post!

VB ;o)

Mar 09, 2010 12:28 PM
Elizabeth Weintraub Sacramento Broker
Elizabeth Anne Weintraub, Broker - Sacramento, CA
Put 40 years of experience to work for you

I'm find consumers are being asked to pay for a new appraisal anyway because once the FHA underwriter looks at it, nine times out of 10, a review appraisal is ordered.

Mar 09, 2010 12:58 PM
Cari Anderson
Danville, CA

Valerie: this is why we are hoping to get HVCC overturned. Lots of people are working hard to get rid of it. Unfortunately, FHA's stance is totally separate although it looks an awful lot like HVCC.

Elizabeth: Amen. I think the policy makers at FHA look at things from a theoretical standpoint but in practice, what seemed like a good idea is only hurting the consumer further.

Mar 10, 2010 02:18 AM
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Cari:  This issue is confusing, frustrating, and causing some real problems in transactions these days.  Underwriters are going over appraisals with a fine tooth comb.  I'm on pins and needles until the appraisal passes "inspection".  Moving clients to a new lender can bring cause almost panic.  Hopefully, this HUD representative follows up on his promise to continue to search for new and better answers to resolve the problems we are experiencing.

Gene

Mar 10, 2010 07:22 AM
Gerry Suarez Jr.
New American Funding NMLS 6606 - Orlando, FL
FL Mortgage Guru

Much like the new GFE the best intentions can cause great pain. That's a very nice synopsis of the issue at hand Cari. I personally have to wonder though, why did the follow the generally accepted failed HVCC model instead of the widely accepted and successful VA model? I, for one, think a slightly bigger government bureaucracy might be a better thing here. Obviously the private AMC's haven't gotten it right.

Again, great post!

Gerry Suarez, Jr.

Your FHA Loan Pro!

Mar 17, 2010 03:46 AM
Cari Anderson
Danville, CA

Gene: I totally agree.

Gerry: Agree again - the VA system has worked for years. As Gene mentioned above, the portability issue is a huge problem right now too. It would be nice to have one appraisal ordering system that would also allow for easy portability.

Mar 17, 2010 04:28 AM
Gerry Suarez Jr.
New American Funding NMLS 6606 - Orlando, FL
FL Mortgage Guru

Cari, I understand the concern over portability but since the appraisal becomes attached to the case number it will be as portable as that case number. Yes, each lender has it's own AMC and rules to deal with but once the appraisal is done, it takes a a clear cut set of circumstances to sever that appraisal- see ML 09-29.

I must say I haven't had reason to challenge that since Feb 15th but I'm figuring HUD won't allow it any other way. Are you guys saying lenders aren't taking transfered appraisals?

Gerry Suarez, Jr.

Your FHA Loan Pro!

Mar 17, 2010 07:43 AM
Cari Anderson
Danville, CA

It can be done but it holds up the process since if one lender  orders the appraisal, then the new lender would have to request it from the first one. I personally haven't run into this (yet) but I've heard of some issues.

Mar 17, 2010 09:08 AM