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FHA Mortgages/HUD is adopting some of the HVCC rules - Changes for 2010

 

fha loans & fha mortgages

HUD released a new mortgagee letter on September 18th, 2009, mortgagee letter 2009-28, that is titled Appraiser Independence. HUD wanted to clarify a few things in regards to FHA loans and adopt some of the guidelines from the HVCC guidelines for conventional loans. HVCC - Home Valuation Code of Conduct

 

FYI – I read a blog from Friday that was title, FHA is adopting HVCC as of January 1st.

 

This is misleading and I wanted to clarify this. HUD is adopting some of the rules & guidelines set within the HVCC. In the new FHA mortgagee letter, it specifically stated this :

"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."  

This came directly from page 2 of mortgagee letter 2009-28.

 

 

 

What are some of the key changes or things to keep in mind from the mortgagee letters mentioned? -

  • Mortgage Brokers & commissioned lender staff - Hence the mortgagee letter, Appraiser Independence, "FHA approved lenders are now prohibited from accepting appraisals prepared by FHA roster appraisals 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." - directly from mortgagee letter 2009-28 - My opinion, many lenders will just order FHA appraisals through AMC companies. (appraisal management companies) - This will ensure any confusion and or finger pointing.
  • Appraiser Engagement - An appraiser should or must have knowledge of the area or type of properties that they are appraising. The lender should not assume such knowledge and it's also the lenders responsibility to ensure accuracy and quality, along with that FHA appraiser. This is on page 4.
  • Prevention of Improper Influences on Appraisers - This has been addressed in mortgagee letter 1996-26. HUD wanted to reaffirm that no member of the lender's staff or anyone commissioned that oversees the completion of that loan, be allowed to have such communications that would have any impact of the valuation, to include having the ability to order or manage the appraisal assignment.  The DE underwriter is allowed to request clarifications and discuss with the appraiser components of that appraisal that influence its quality. Bottom of page 2.  
  • Appraisal Portability - FHA appraisals were always allowed to be transferred to another lender, when the FHA case number was assigned.. This new mortgagee letter, mortgagee letter 2009-29, is clarifying that it is allowed, but adding some new rules if the first lender is delaying the transfer of the original appraisal. It just says that a second appraisal can be ordered under certain circumstances, which is listed on page 1 of mortgagee letter 2009-29.
  • Appraisal Validity Periods - Mentioned in mortgagee letter 2009-30, it states that the appraisal is only valid for 4 months from the date of the appraisal, no matter if it is an existing property, proposed property, and even under construction.

 

 

 

 

My opinion : I know how many realtors are in an uproar about the HVCC issues and how they are affecting the conventional loans. Even though it's not mandatory that FHA loans are done the same way, HUD is just implementing safe guards. I think many of the HVCC issues stem from brokers that have to rely on the banking institution that they are passing the loan to and those larger banks that are just so busy, that they just pass it to a management company that might not be organized. As a mid-sized banker, I have not seen any problems from neither side, even if I have ordered my appraisals through the AMC company. Yes, we started to implement this already on the FHA loans, in fear of some issues. But it has not slowed down the process of my loans one bit. Just food for thought.

On another note, most things mentioned in mortgagee letter 2009-28, are just repeated from prior mortgagee letters from over 12-14 years ago. If any new changes, it was the appraisal validity period and the appraisal portablity, which were mentioned in 2 new mortgagee letters, mortgagee letters 2009-29 & 2009-30.

 

All guidelines/rules go into effect for all FHA case numbers assigned on or after January 01, 2010.

 

 

 

DISCLOSURE :  I am not a certified appraiser.  The information that I obtained came directly from HUD's new mortgagee letter. Being the first out there with any new changes, is not always the best, especially when it's misleading or not correct.

 

 

 

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Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc

Comment balloon 17 commentsJeff Belonger • September 21 2009 09:48AM
FHA Mortgages/HUD is adopting some of the HVCC rules - Changes for…
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HUD released a new mortgagee letter on September 18th, 2009, mortgagee letter 2009-28 that is titled Appraiser Independence. HUD wanted to clarify a few things in regards to FHA loans and adopt some of the guidelines from the HVCC… more