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FHA issued mortgagee letters today announcing major changes to FHA loan procedures.  The following are highlights from the announcements:

MORTGAGEE LETTER 2009-28: Appraiser Independence

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 are:

Prohibition of mortgage brokers and commission based lender staff from the appraisal process

Historically FHA prohibited mortgagees from accepting appraisal reports completed by an appraiser selected, retained or compensated, in any manner by real estate agents. To ensure appraiser independence, FHA-approved lenders are now prohibited from accepting appraisals prepared by FHA Roster 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.

Appraiser Selection in FHA Connection

Lenders are responsible for assuring that the appraiser who actually conducted the appraisal used for the FHA-insured mortgage is correctly identified in FHA Connection. FHA has found that, on numerous occasions, the name of an appraiser in the appraiser log-in screen is not the appraiser who actually completed the appraisal. Lenders who fail to assure that the FHA Connection reflects the correct name of the appraiser will be subject to administrative sanctions.

Appraisal and Appraisal Management Company (AMC)/Third Party Organization Fees

FHA does not require the use of AMCs or other third party organizations for appraisal ordering, but recognizes that some lenders use AMCs and/or other third party organizations to help ensure appraiser independence. To address several questions that have already been raised regarding compensation, this mortgagee letter corrects and expands existing fee requirements set forth in Mortgagee Letter 1997-46.

FHA-approved lenders must ensure that:

• FHA Appraisers are not prohibited by the lender, AMC or other third party, from recording the fee the appraiser was paid for the performance of the appraisal in the appraisal report.
• FHA Roster appraisers are compensated at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised.
• 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.
• Any management fees charged by an AMC or other third party must be for actual services related to ordering, processing or reviewing of appraisals performed for FHA financing.
• 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.

Prior to this point, FHA loans are not subject to the appraisal independence requirements that were established by HVCC.  This announcement is FHA’s equivalent to HVCC.

Feel free to contact me with questions.

Steve Lines
FHA Mortgage Specialist
email: slines@bestFHAlender.com
www.bestFHAlender.com
http://twitter.com/stevelines
Academy Mortgage
Mesa, Arizona