The FHA released Mortgagee Letter 2009-28 last Friday, September 18, 2009, and it will likely have a dramatic impact on the FHA appraisal business.
This document, which can be viewed in its entirety by clicking on the following link, /offices/adm/hudclips/letters/mortgagee/files/09-28ml.doc is described by the writer, David H. Stevens, Assistant Secretary for Housing-Federal Housing Commissioner, as follows: "This Mortgagee Letter provides clarification and reaffirms Federal Housing Administration (FHA) appraisal requirements related to appraiser independence and announces new requirements pertaining to entities that are eligible to order appraisals for FHA insured mortgages."
The new requirements of importance to appraisers contained in this mortgagee letter are:
1) Mortgage brokers and commission based lender staff are prohibited from involvement in the appraisal process.
2) FHA-approved lenders have new responsibilities to ensure that FHA appraisers are ".compensated at a rate that is customary and reasonable for appraisal services in the market area."
3) "The fee for the actual completion of an FHA appraisal may not include a fee for management of the appraisal process or any activity other than the performance of the appraisal." "AMC and other third party fees must not exceed what is customary and reasonable for such services provided in the market area of the property being appraised."
The Appraisal Institute, in a news release on Saturday, hailed this as an overall victory for appraisers, describing the FHA's actions as ".reversing a policy that inadvertently capped fees for real estate appraisers." The news release also noted that ".FHA's new policy separates the services (and fees) charged by appraisers from those charged by AMCs, allowing each to float at reasonable and customary levels. The previous policy inappropriately restricted the combined fees to just the customary and reasonable fee for the appraisal in the market area where the appraisal is performed." Obituary: Comp Check, 1994-2009
It appears as though this mortgagee letter has driven the final stake into the Comp Check as the FHA has reminded lenders and AMCs that they are prohibited from requesting that appraisers provide ".an estimated, predetermined or desired valuation in an appraisal report prior to the completion of the appraisal report, or requesting that an appraiser provide estimated values or comparable sales at any time prior to the appraiser's completion of an appraisal report." This is expanded upon in the mortgagee letter under the heading "Appraiser Independence Safeguards".
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