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FHA Enhances Credit Policies, Includes Appraisal Enhancements

Federal Housing Administration (FHA) Commissioner David H. Stevens announced plans to implement credit policy changes that will enhance the agency’s risk management functions. FHA will hire a Chief Risk Officer for the first time in the FHA’s history. Commissioner Stevens said “to be clear, the fund’s reserves are sufficient to cover our future losses, so the FHA will not require taxpayer assistance or new Congressional action. That said, given the size and scope of the FHA and its importance to today’s market, these risk management and credit policy changes are important steps in strengthening the FHA fund, by ensuring that lenders have proper and sufficient protections.

FHA is implementing new policies in a mortgagee letter that will be effective January 1, 2010. FHA will reaffirm existing policy on appraiser independence and geographic competence. Mortgage brokers and commission based lender staff will be prohibited from ordering appraisals. FHA’s appraisal validity period will be reduced from six months to four. HUD also acknowledges that FHA is considering implementing components of HVCC for FHA-insured mortgages.

The mortgagee letter will require audited financial statements by supervised mortgagees, modify the streamline finance process, and enhance appraiser independence. The streamline refinance process will include new requirements for seasoning, payment history, income verification, and demonstration of net tangible benefit to the borrower; provide for collection of credit score information when available; and to cap maximum loan-to-value (LTV) ratio at 125 percent.

Comments
  1. Bill Abalos

    How is removing AL level appraisers from the FHA roster going to improve the quality of appraisals? A good appraiser is a good appraiser and has nothing to do with being at the certified level. I am being forced out of this business just because I did not chose to be at the AR level? What about all the training I had to take every 2 years? Does that not count for anything? What about my 11 years of actual work experience? The FHA just released an announcement insinuating that by removing AL level appraisers from their roster that is will purify the industry? Look what happened when Hitler tried that. Killing a group off is not the answer.

  2. Bill Abalos is completely right.
    I am a commercial and residential appraiser and a Real Estate trend consultant with decades of experience and I can say with all certainty the HVCC is is going to result in significant economic demise.
    I am mainly involved in commercial appraising, even more so now that my office with 25 employess has been put FORCED OUT OF BUSINESS as a result of the HVCC. I am near retirement so it doesn’t effect me as much as my 32 year old employee with two kids who is now on unemployment.
    AND NOW FHA?? I don,t understand how our FEDERAL government (ASC and ASB sets criteria) approves licensed appraisers to perform appraisals based on education, experience, and tested competency that the FEDERAL Housing Authority now abolishes.
    There will SOON BE NO APPRAISERS…THEN WHAT?
    It looks to me like the Obama Administration has its head in the sand and the Appraisal Subcommitte has its head YOU-KNOW-WHERE.
    I guess the FEDS consider this collateral damage. They must figure if they force 90% of the appraisers out of business, chances are good they will eliminate the 3-4% that are corrupt. But should’t they employ the same standards to attorneys, contractors, DOCTORS??
    Put your pennies away if you can, this is going to get really ugly. Just look at the NAR report two months ago… Hmmm swept right under the rug.

  3. Bill Abalos is completely right.
    I am a commercial and residential appraiser and a Real Estate trend consultant with decades of experience and I can say with all certainty the HVCC is is going to result in significant economic demise.
    I am mainly involved in commercial appraising, even more so now that my office with 25 employess has been put FORCED OUT OF BUSINESS as a result of the HVCC. I am near retirement so it doesn’t effect me as much as my 32 year old employee with two kids who is now on unemployment.
    AND NOW FHA?? I don,t understand how our FEDERAL government (ASC and ASB sets criteria) approves licensed appraisers to perform appraisals based on education, experience, and tested competency that the FEDERAL Housing Authority now abolishes.
    There will SOON BE NO APPRAISERS…THEN WHAT?
    It looks to me like the Obama Administration has its head in the sand and the Appraisal Subcommitte has its head YOU-KNOW-WHERE.
    I guess the FEDS consider this collateral damage. They must figure if they force 90% of the appraisers out of business, chances are good they will eliminate the 3-4% that are corrupt. But should’t they employ the same standards to attorneys, contractors, DOCTORS??
    Put your pennies away if you can, this is going to get really ugly. Just look at the NAR report two months ago… Hmmm swept right under the rug.

  4. David

    Larry brings up a great point. The FED has no concept of just how many experienced apprasiers are leaving the business. A recent survey done by Working RE magazine indicates that 43% intend to leave the business soon. The survey was taken shortly after HVCC kicked in. I suspect a survey taken today would yield a far higher percentage.
    We nipped our losses fairly quickly by closing the appraisal department and using the appraisal web page to warn the public about the negative impact of HVCC.
    For the full story of HVCC
    visit http://www.investsmart.com

  5. Bill Abalos

    Thank you Larry for your comments. I do feel for your employees and all appraisers who are to young to retire and still have to support young one’s at home. I am one of them and I know exactly how it feels. Appraising as an industry is not going to ever get better. My advice to all appraisers who are being forced to leave the business and give up their clients is this, take a home inspection course and open up shop. It pays just as good as appraising, is easy to get into, no lender bulls**t, and you can promote your business with your former clients. I have been doing home inspections for 7 years and offered discounts when ordering both services from my company. Now I am just doing home inspections but still making decent money. Believe me when I say that I loved the appraisal business, but the love was not given back in return. If anybody needs advice on how to get into home inspections, I can be contacted at appraiserbill@sbcglobal.net

  6. Ron Stewart

    This is government putting their nose where it doesnt belong. Why do you think we are in this mortgage crisis? Wonderful politicians thought that every American should have the right to own a home, whether they can afford it or not! Now they will be changing the appraisal process to feed everything thru AMC’s creating a pool of less qualified appraisers. This inclusion of a middle man will force fees down for appraisers and will force them to place greater number of conditions on their report in order to get fees for reinspections. We just had a VA appraiser that went back three times. Guess who’s paying for that? that’s right our vet. the person that this govern. is trying to protect is the person they will be hurting the most, FHA & VA buyers! typical burecraps!

  7. No one likes more government,there are times where ‘trust’ has to be established. In my opionion this will generate more trust in prices and better qualified buyers.
    I was a project manager of a large condominium before the 15-day recession became law. The law was going to ruin the condo business. It did just the opposite. It generated trust and increased sales.
    Time share was a pitiful industry until time share laws became effective. The laws were going to kill timeshare. Just the opposite happened. Trust was built in the timeshare insdustry. Even Disney World started offering timeshares.
    The housing industry needs to rebuild its trust, from top to bottom. This is a start.

  8. mister d

    Why have a risk manager when you are streamling a majority of your loan with no appraisals. Trillions in loans and you are just now getting a risk manager. Not tomention he a dismal failure at his previous risk management job. Another clssic industry example of failing upward mobility. Lets not make it to obvious that your just trying to make it look like you care about making good loans. It is obviously more important to protect the bankers principal balances. 125% loans were a massive failure in the boom times what do you think you can do different in this market. Prediction: by next year you guys will be lining up with fannie and freddie to feed and the government buffet. That is what you guys are designed to do.

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