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 © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc
Thank you for sharing the information on the FHA loan program. It is very helpful.
Betty
I found that other blog too.....
Was disappointing to see the misinformation
ALLEN.... . my pleasure and thanks for stopping by.
TOM.... . it was, but that's what happens when people rush information out there also, or read it off another site. By the way, I love the new picture.
I was wondering why you hadn't posted anything about those changes. Now I know why. I read that other post but I always wait to hear verification from you and/or Lenn Harley. I used to watch a couple of other bloggers too, but I haven't seen them around lately =/
Jeff: Thanks for the upate as always. I have had 0 problems with appraisals since the HVCC change. And my company orders every appraisal (govies too) through our system that complies to HVCC. Perhaps I'll change my tune if a bad one crops up. Until then I've noticed reports coming in at value and actually quicker than before. Thanks again!
Thanks for the clarification Jeff. You have to love the HVCC. I can understand wanting to clarify the difference because HVCC has been a pain in some situations. Although I have to say I've been lucky that it has not caused many issues for me personally.
One more change seems par for the course. What is next?
Jeff - From what i have seen of couple griping about HVCC it mostly stems from the AMC's. I am sure you read the whole HVCC guideline and in there i found away to not use AMC's. As for FHA's modified HVCC, it doesnt really seem that bad. Portability is good, cutting the expiration date down to 4 months makes sense to me, having only certified appraisers seems smart (i mean how many different liceneses and continuing educations courses do loan officers have to take). All in all not that bad. Now on the other hand, FHA raising hte networth to $1million. That will be a problem.
JP Lowry--President--Preferred Financial Funding
Jeff, lots of great information here. Down here, the problems seem to be related to the lender one uses. The huge guys are the ones that are making us crazy in the appraisal department.
Thanks Jeff. I heard this was coming and your post explains it very nicely.
I'll say this once for the world to hear. There is so much misinformation, uneducated information and incomplete information it becomes DISINFORMATION. I heard about this as well. Fortunately, the post that you were referring to is being called out. If consumers want the true information they should subscribe to your blog. Home Run JB....Home Run.
Jeff:
You are correct - "FHA is adopting HVCC" is not a fact - neither HVCC nor "Home Valuation Code of Conduct" is mentioned ANYWHERE in Mortgagee Letter 2009-28.
Jeff,
Good to see you front and center on this. As an appraiser, it's great to see the correct information for a change! By the way, did you notice the verbage regarding appraisers fees being defined as customary and reasonable. Hope that means full fee.
LISA.... . thanks for the follow and for the kind words. I went back to that other post and I am not sure if they actually changed it up some, now to say that FHA adopted some of the changes... oh well.. PS... I like your new picture...
PAUL.... . we talked about this in my group yesterday and many of us said the same thing. I think if it's set up correctly, the HVCC issues aren't as bad. I think brokers will have a worse experience by far. thanks for the feedback.
JOHN.... . just as Paul mentioned above you, I think many of us good loan officers, working for good companies also, haven't had the problems that we have seen complained about on AR. PS... I like your new picture... it must be new picture week... ;o) I have seen many change their pictures.
PATRICK.... . yea, but if you read these mortgagee letters, a lot of what I mentioned aren't really changes. HUD is just reinforcing some stuff from 12 years ago.
JP.... . We actually went over this yesterday, that you actually don't have to use AMC's.... but the way my company has this set up, I haven't had problems with this, when I have had to use it. And yes, the changes make sense... and yes, the networth one could knock many companies out.... I guess time will tell.... and maybe they are saying they don't want fly by nights?
PAT.... . I would agree with that statement, just as what JP and a few others had mentioned. And yes, I think many of these appraisal issues stem from the larger banks, because of the appraisers that are within their AMC companies or those on their approved list.
ERIK... . thanks for the compliment and for stopping by. I agree, when writing something, we should be worried about accurate information and not how quickly we can get it out there.
GABE.... . thanks for the compliment...
LARRY.... . yea, yea, yea.. lol You and I know this... we talk about it often. But how does one know if the information is good and acurate? And what happens if I might be wrong or read something in a different context? In any case, thanks for those kind words at the end....
JESSE..... . bingo, those words aren't mentioned in the mortgagee letters at all, that they are using them... but that they are adopting a few things. Overall, much of what was stated in the mortgagee letter are things that were stated 12 years ago. HUD is just reaffirming them over again... thanks
DAN.... . yes, I saw that.... I didn't include that in here, because of it's interpretation. To me, it wasn't 100% clear.... question, how did you come across this blog of mine? thanks for stopping by.
Hey Jeff, if I'm reading it right, it said appraisers are to be paid the market rate for a FHA appraisal, not the discounted AMC rate. What's you take on this?
Jeff
I was the one who wrote this blog. I did say HUD was NOT adopting the HVCC in whole, only the main points of the HVCC and I outlined some of the same things you did as to the new provisions in the letter.
There are many other posts out there on the internet that state the same thing I did about HUD. But TODAY I get clarification from the horses mouth...FHA...Atlanta Center. HOC, They stated "FHA has not adopted any language from the HVCC and by extension does not recognize, authorize or enforce its provisions." I am getting clarification from them on FEES how do they define reasonable and customary as the AMC's are forcing appraisal fees downward.
I plan to post another BLOG about HVCC and HUD to clarify, did not mean to mislead, but in essence many of the same things have been or are already in place by HUD that the HVCC intended with Fannie Mae. I also just heard BUT have to confirm that now instead of January 2010 the new rules will not take place until July, have you heard this?
Thanks, Mary