HUD released today an FHA Mortgagee Letter regarding appraiser independence.

In many ways, the new FHA requirements are very similar to the HVCC appraiser independence requirements that became effective May 1, 2009.  As such, they are likely to have a similar effect on FHA mortgage business that HVCC had on conventional mortgage business. Following are highlights from the Mortgagee Letter:

• Effective January 1, 2010, new appraiser independence requirements will be effective for all FHA loans with case numbers on or after January 1, 2010.
• FHA-approved lenders will be prohibited from accepting appraisals prepared by appraisers who are selected, retained or compensated in any manner by a mortgage broker or any member of a lender’s staff who is compensated on a commission basis tied to the successful completion of a loan.
• FHA lenders must ensure that:

- Appraisers are allowed to record their fee for the assignment in the appraisal

- Appraisers are compensated at customary and reasonable rates

- Management fees charged by an AMC or other third parties must be for actual services related to ordering, processing and reviewing the appraisals

- AMC and other third party fees must be customary and reasonable

• FHA Lenders are prohibited from:

- Requesting an estimated or predetermined value or providing “comp checks”

- Providing to the appraiser an anticipated or estimated value for the property (however, sale contract must be provided)

- Removal of an appraiser from an approved list, without written notice with reason for such removal

- Ordering a second appraisal unless the first is flawed

• Appraisers must certify:

“I have knowledge and experience in appraising this type of property in this market area” (Appraiser’s Certification # 11),  and

“I am aware of, and have access to, the necessary and appropriate public and private data sources, such as multiple listing services, tax assessment records, public land records and other such data sources for the area in which the property is located.” (Appraiser’s Certification #12)

Let IRR-Residential help you create an FHA compliant solution for your organization and help you get ahead of the curve. To learn more about how IRR-Residential can help your organization, contact our Business Development department at busdev@irr-residential.com or (913) 261-1800 for further information.