FHA Offers Education Session for Appraisers

The Federal Housing Administration (FHA) announced that on April 21, 2010, in Atlanta, GA they will hold an education session for appraisers. This is a full day, live course that offers instructions on most recent changes and updates to FHA procedures and guidelines for FHA Appraisers.  The session will take place at the Richard Russell Bldg-Strom Auditorium, 75 Spring Street SW, Atlanta, GA 30303.

The topics discussed will include; Appraiser Portability, Appraiser Independence, Appraiser Sanction Process, Declining markets and 1004MC form, Case Transfer Responsibilities, HUD REO Appraisals, MPR/MPS-Property Inspections, and other related topics.

Registration is required but there is NO FEE.  More information is available here.

FHA Delays Implementation of Appraisal Rules

On December 23, 2009, the Federal Housing Administration (FHA) announced the enactment of two appraisal Mortgagee Letters (ML) will be delayed until February 15, 2010. ML 2009-28, Appraiser Independence, prohibits mortgage brokers and commission-based lending staff from ordering the appraisal. In ML 2009-51, FHA announced it is adopting the Appraisal Update and/or Completion Report, Fannie Mae Form 1004D/Freddie Mac Form 442/March 2005.

ML 2009-28 and ML 2009-51 were initially to be implemented on January 1, 2010. According to FHA, the extension “will provide FHA and lenders additional time to adjust systems to accommodate the changes.”

FHA Removes Second Appraisal Requirement

On Saturday, November 14, 2009, FHA Commissioner Dave Stevens spoke before a group of Realtors at the NAR annual convention in San Diego, CA. During the speech, the Commissioner noted that FHA, based on input from NAR, would soon remove the requirement for a second appraisal on loans that exceed $417,000 and are secured by properties located in declining markets. Earlier this week, FHA released ML 2009-48 to make it official. This ML rescinds ML 2008-09. ML 2009-48 also eliminates the need for a second appraisal on cash-out refinances. (as described in ML 2009-08).

FHA retains a second appraisal requirement per ML 2006-14. This policy requires a second appraisal when a property is resold between 91 days and 180 days following acquisition by the seller. This is part of their property flipping prohibition policy.

FHA Announcements on Performance Standards and Flood Zones

The Federal Housing Administration (FHA) recently released several new Mortgagee Letters, including 2 on focused on appraisals.



ML 2009-37: Flood Zone Requirements and Responsibilities of FHA Mortgagees and Appraisers. Appraisers are required to review the applicable FEMA Flood Insurance Rate Map (FIRM) and make appropriate notations. If the property is in flood zone the appraiser is required to include a flood map with the appraisal report. The appraiser must enter the FEMA zone designation on the reporting form as well as identify the map panel number and map date. If the property is not shown on any map the appraiser should enter “not mapped”.



ML 2009-41: Appraisal Performance Standards and Sanctions. This is largely a reminder of administrative sanctions that FHA may take ranging from a Notice of Deficiency (lowest level sanction) to civil or criminal sanctions (most severe). Appraisers are reminded that they must conform to FHA appraisal requirements and USPAP. Lenders are reminded that they are responsible, along with the appraiser, for the quality and accuracy of the appraisal.

FHA Appraisal Rules: Benefits of HVCC Without the Unintended Consequences?

National Mortgage News reports that the new Federal Housing Administration (FHA) appraisal rules may make HVCC – and appraisal management companies (AMC) – easier to cope with in the industry. While noting that the intent of HVCC was to improve appraiser independence and reduce undue influence, the article notes that in trying to accomplish these goals HVCC has increased the cost of the appraisal and raised questions about appraisal quality.

The new FHA rules will help because appraisers can report their fee on the appraisal report, which will “hold AMCs feet to the fire. FHA’s new policy allows the appraiser’s fee and the management company’s fee to float separately at market rates.” Donald Blanchard, chief compliance officer for Lender Processing Services, is ok with this new rule but expressed concerns that this will ultimately result in higher prices for an appraisal.

NAR supports the new FHA appraisal rules because of the fee disclosure, the transfer rules now in place, and because FHA explicitly states that AMCs do not have to be used by lenders. The Realtors are calling on FHA and the GSEs to issue joint guidance in the form of codified frequently asked questions.

Reminder: Eligibility Requirements for FHA Roster Appraisers

The Federal Housing Administration (FHA) reminds appraisers and lenders that as of October 1, 2009, appraisers on the FHA Appraisal Roster must be state certified. FHA made the announcement in ML 2009-36. Appraisers on the roster without state certification will be removed from the roster. Appraisers who are removed from the roster but subsequently meet the minimum state certification eligibility requirements may apply for reinstatement to the roster.

Other resources that are useful for those with questions about their status on the FHA Roster include ML 2008-39: Revised Eligibility Requirements for FHA Roster Appraisers, The Appraisal Foundation’s State Qualification Criteria, and the FHA Appraisal Roster Page.

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.

Latest on the Suspension of Taylor, Bean & Whitaker

Last week the US Department of Housing and Urban Development (HUD) suspended Taylor, Bean & Whitaker preventing the company from originating and underwriting FHA-insured mortgages. Additionally, Ginnie Mae defaulted and took over TBW’s mortgage backed securities program. Finally, TBW’s wholly owned appraisal management company was shut down.

FHA said “FHA and Ginnie Mae are imposing these actions because TBW failed to submit a required annual financial report and misrepresented that there were no unresolved issues with its independent auditor even though the auditor ceased its financial examination after discovering certain irregular transactions that raised concerns of fraud.”

FHA has released a series of FAQs for consumers and industry partners. Ginnie Mae created this document for consumers concerned about their loans with TBW.

According to a report by the Appraisal Institute TBW “was the 12th largest U.S. mortgage lender in the first six months of 2009, and the third largest lender of FHA loans in June. FHA agents raided its office along with the Florida offices of Colonial BancGroup Inc., for which Taylor Bean had depended on for short-term “warehouse” loans. Federal agents executed the raids after negotiations of a proposed deal that would have given Taylor Bean control over Colonial — which would then qualify the struggling bank for $536 million in federal bailout funds — collapsed.“

FHA Adopts Fannie Mae 1004MC Market Conditions Addendum

Effective April 1, 2009, the Federal Housing Administration will require appraisers to use the Market Conditions Addendum (Fannie Mae 1004MC, Freddie Mac Form 71). According to Mortgagee Letter 2009-09 released on March 23, 2009, this will ensure greater transparency and accuracy of appraisals performed for FHA-insured financing. Properties located in declining markets must include at least two comparable sales that closed within 90 days of the effective date of the appraisal. A lack of available market data must be accompanied by a detailed explanation.

FHA states that a declining market is any “neighborhood, market area, or region that demonstrates a decline in prices or deterioration in other market conditions as evidenced by an oversupply of existing inventory or extended marketing times.” The 1004MC form will identify a declining trend in the market. FHA reminds Direct Endorsed lenders that both the lender and the appraiser are equally responsible for the integrity, accuracy, and thoroughness of an appraisal submitted to FHA.

HUD Addressing Appraisal Shortage Soon

HUD is preparing to address the appraiser shortage problem for areas with fewer state-certified appraisers. FHA programs now require state-certified appraisers, including the Hope for Homeowners Program (H4H). As we mentioned previously, FHA business is dramatically increasing and should be a boon to appraisers on the FHA roster. According to Inside Regulatory Strategies, some states will implement H4H immediately. States with a serious shortage of certified appraisers will be given time to gradually implement the programs. A Mortgagee Letter is expected soon and could be effective November 1, 2008. Those not certified and on the roster would be wise to do change this quickly, particularly if your state has a shortage of certified appraisers (this means YOU Michigan appraisers).

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