FHA Recovers Fumble

By
Real Estate Appraiser with Miller Appraisals

FHA realized that they dropped the ball back on February 7, 2008, when they lowered the requirements to become an FHA approved appraiser. Basically if you were an appraiser and you had a pulse you could join the FHA roster. 

FHA has been like a knight in shining armor to the lending world as it slays the ARM dragon and helps the homeowner damsels in distress. This fairy tale world was created in part by the serious lack of lending standards in place during the refinance boom. Basically if you were a homeowner and were breathing you could qualify for some type of loan.

There were many unscrupulous and/or inexperienced appraisers a.k.a. "Skippy" who helped to hyper inflate the market and cause the turmoil we all have come to know and love today. The market is currently in a re-adjustment stage and many of the Skippies are without work. FHA volume is up and they opened their arms wide to embrace Skippy and keep food on his table when they dropped the test requirement. Now Skippy was enabled to do to FHA what they did in the conventional market. 

Thankfully, the light has come on for FHA and they realized that maybe letting anyone and everyone appraise for FHA was not the best of ideas. A bill recently passed by the House (H.R. 3221) under Section 1404 "Revised Standards for FHA Appraisers" requires that appraisers (A) "be certified" and (B) "have demonstrated verifiable education in the appraisal requirements established by the Federal Housing Administration under this subsection.'' 

This bill eliminates the open invitation from FHA and now sets standards to those applying. It requires a higher license level in which will help to eliminate many of the inexperienced appraisers who have less education and appraisal experience than required for the higher certified levels. I am not saying that all licensed level appraisers are in this boat. I know and respect many appraisers who are licensed instead of being certified. Many of them made this choice because back in the day it made the most sense based on the home values in the areas they appraised. I also know some certified appraisers who aren't worth a darn and I wouldn't trust them to appraise my dog's house let alone a real house. 

The second thing this bill does is require appraisers to take some kind of course on FHA in order to be approved for their roster. FHA appraisals are not difficult if you know what you are doing. FHA requires additional things than a conventional appraisal does not. It makes sense that in order to be approved for FHA you have the proper training and knowledge of FHA's requirements. 

It is my hope that the floodgates did not let in too many Skippies. It appears as if anyone who became approved after 2/7/08 up until this bill goes into effect will remain on the roster regardless of their license level or FHA educational background. FHA can help to save the day if they can keep greedy and unethical people from poisoning the water.

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Rainer
218,548
Lisa Friedman
Alliance Realtors - Bedminster, NJ
Central New Jersey Real Estate

Kanneth, glad to hear about the stricter requirements.  Too bad they aren't enforceable for the new people who are getting grandfathered.

Aug 12, 2008 04:43 AM #1
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

I've often wondered why HUD, FDIC or Fannie or Freddie don't come up with a simple piece of software that will search defaulted loans and examine how many of those were due to high appraisals. 

It would not be difficult and would be a basis for reasonalbe investigation. 

Is it that perhaps HUD, FDIC, Fannie or Freddie don't want to start to connect the dots?????

Aug 12, 2008 05:07 AM #2
Rainer
5,382
Kenneth Miller
Miller Appraisals - Fremont, OH
NW Ohio FHA Appraiser

I don't think they want to know the full extent of the damage. If there is no concrete number then they can best guess it at a much lower number. Most of the players involved knew about the faulty appraisals or bad loans but did nothing about it. They didn't care as long as they were making money and selling the loans to investors. Nobody wanted to be the first come out and say we lost money when everyone else was still claiming they were making it. They also don't want people to know that they knew that many of the loans they bought were bad based on the loan product or the qualifications or lack thereof of the borrowers. Everyone else was buying them regardless of the fact so why stand out from the crowd. 

Aug 12, 2008 05:32 AM #3
Rainmaker
40,284
Tom Horn
Thomas Horn, Real Estate Appraiser - Alabaster, AL
Appraising The American Dream

This is what I would like to say to FHA/HUD...DUH!!!  You conveyed exactly my thoughts on letting everyone in.  They should at least have to prove their proficiency in appraising FHA and know HUD requirements.

Aug 12, 2008 09:09 AM #4
Rainmaker
173,450
Richard Glesser
North Country Appraisal Services - Gaylord, MI

The tighter the standards, the better for the consumer and the public since it will, in the end, save FHA, if it's not already too late.  I never understood the watered down requirements since there is indeed far more involved in FHA appraising.  I actually agree most with the VA model which has maintained a fee panel and overseen the appraisal process with internal education and reviews.  Operating on a rotation basis, the VA has distanced itself from any lender-pressure accusations levied on the general appraisal industry.  I have, do, and always will support any higher education requirement for appraisers.  I have over 1000 hours of class time and only 2 or 3 were totally worthless as I enter every class as an opportunity to learn something new.

I hope FHA follows through and tightens their requirements while also shutting the door quickly on those unqualified appraisers hoping to grandfather in as many did with the 2008 increased appraiser qualifications.  By overwhelming the state boards with applications for upgrading, few thorough checks were completed on "experience" and hours.

Aug 12, 2008 12:38 PM #5
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Rainer
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Kenneth Miller

NW Ohio FHA Appraiser
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