In recent days there have been rumors and reports that the implementation of the Uniform Appraisal Dataset (UAD) announced by the government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, would be delayed. NAR has confirmed that the UAD will go into effect for appraisals on GSE mortgages as scheduled on September 1, 2011, and there will not be a delayed implementation. Appraisal reports submitted to the GSEs on or after this date are required to be UAD compliant. You can get more information on UAD requirements by visiting the Fannie Mae or Freddie Mac UAD web pages.
Yesterday, we discussed FHA’s adoption of the UAD effective January 1, 2012. This is not to be confused with the GSEs effective date of September 1, 2011.
This week, the Federal Housing Administration (FHA) released Mortgagee Letter 2011-30: The Uniform Appraisal Dataset (UAD) and Appraisal Reporting Forms. The ML states that FHA will adopt UAD and two of the UAD compliant reporting form for all FHA case numbers assigned on or after January 1, 2012. This also applies to HUD REO and pre-foreclosure sales after the first of the new year. Lenders may submit loans for endorsement with UAD-compliant appraisals prior to this date but are not required to do so.
FHA will require the UAD modified appraisal form for the Uniform Residential Appraisal Report (Fannie Mae 1004/Freddie Mac 70) and the Individual Condominium Unit Appraisal Report (Fannie Mae 1073/Freddie Mac 465). FHA does not accept exterior only appraisal reports.
FHA Roster appraisers are required to become familiar with UAD requirements and the modified appraisal forms. The ML identifies four UAD field specific compliance requirements. All other FHA appraisal reporting requirements remain in effect and the UAD requirements are not “a substitute for, and do not exempt FHA Roster appraisers from the requirement to provide adequate explanations in the addendum of the reporting form methodology, anomalies, property deficiencies and other conditions that may have an impact upon the value of a property and its marketability.“
On August 11, 2011, National Association of REALTORS® (NAR) President Ron Phipps sent a letter to federal regulators calling for a ban on the use of indemnification clauses used by appraisal management companies (AMCs). The letter was sent to Federal Financial Institutions Examination Council (FFIEC), the US Department of Housing and Urban Development, the Federal Housing Finance Agency, and the US Department of Veterans Affairs.
Indemnification clauses are becoming more common in service contracts used to engage AMC panel appraisers. In many cases, appraisers are asked to sign contracts that include language to indemnify and hold harmless the AMC against any suit, threat, or claim on any work product or service provided as part of the contract agreement. In some instances, the appraiser is even required to indemnify the lender and the AMC for amounts equal to their costs in repurchasing a mortgage loan, regardless of any proof of culpability on the part of the appraiser. The AMC is free from any legal obligation and the appraiser bears all responsibility.
NAR strongly supports the independence of appraisers and the appraisal process. The use of indemnification clauses places pressure on the appraiser, compromises their independence, and has a negative effect on the quality of appraisal reports. This adds risk for both consumers and lenders while diminishing much needed public trust in the appraisal profession.
The Appraisal Foundation (TAF) released a free video this week previewing the 2012-13 changes to the Uniform Standards of Professional Appraisal Practice (USPAP). The 23 minute video includes:
- revisions to the definitions of “Client”, “Extraordinary Assumptions”, Hypothetical Condition”, and a new definition of “Exposure Time”;
- Creation of a new RECORD KEEPING RULE and related edits to the Conduct Section of the ETHICS RULE;
- Revisions to Advisory Opinion 21; and
- Revisions to STANDARDS 7 & 8
View the video here.
Check out other Foundation videos at their E-library.
The US Department of Housing and Urban Development (HUD) unveiled a proposed rule in the Federal Register to ensure the agency’s rules conform with the Housing and Economic Recovery Act (HERA) of 2008. The proposed rule requires that appraisers approved by the Federal Housing Administration (FHA) be certified, rather than licensed, by a state appraisal licensing board in order to provide appraisals for mortgages insured by FHA. Comments are due September 12, 2011.
While this proposed rule will officially make HUD in compliance with HERA, the agency has been using only state-certified appraisers for some time. Mortgagee Letter 2008-39: Revised Eligibility Requirements for FHA Roster Appraisers was released on December 17, 2008. The ML stated that all appraisers performing FHA appraisals must be state certified by October 1, 2009.
FHA will not, however, recognize appraisers certified by a “nationally recognized professional appraisal organization” in lieu of certification by a state appraisal licensing board. While HERA provides this flexibility, the proposed rule states that FHA will accept only appraisers certified by the state to “prevent disruption and to ensure efficient processing of mortgage insurance.”