When the FHA and HUD published the new single family home loan rules found in HUD 4000.1, the agencies did not provide a list of every single rule or portion of the rules affected by changes in HUD 4000.1. HUD specifically stated at publication time that it’s the lender’s responsibility to be familiar with the rules as they are today.
We’ve been discussing the new rules with that notion in mind. One important area of the new rulebook that’s important to be familiar with? FHA appraisal requirements, which go beyond minimum property standards and other rules. FHA loan rules spell out what is expected of the lender during the appraisal process, starting with this statement found in Section II Part A under “Loan Origination and Processing”:
“The Mortgagee must order a new appraisal for each Mortgage or refinance case number assignment and may not reuse an appraisal that was performed under another case number, even if the prior appraisal is not yet more than 120 Days old.”
Furthermore, the lender is held responsible for, “identifying any problems or potential problems with the integrity, accuracy and thoroughness of an appraisal submitted to FHA for mortgage insurance purposes.”
How does the lender select the appraiser? According to HUD 4000.1, “The Mortgagee must order an appraisal from an Appraiser who is listed on the FHA Appraiser Roster and is qualified and knowledgeable in the specific market area in which the Property is located. The Mortgagee must evaluate the Appraisers education, training and actual field experience to determine whether the Appraiser has sufficient qualifications to perform the appraisal before assignment.”
The lender is permitted to use a third party such as an appraisal management company, but is required to maintain certain standards and observe rules such as the following:
“The Mortgagee may not pay the AMC and other third-party contractors fees in excess of what is customary and reasonable for such services in the market area where the Property being appraised is located. Any management fees must be for actual services related to the ordering process, or review of appraisal for FHA financing.”
What’s more, FHA loan rules require the lender to insure that, “it does not compromise the Appraisers independence.”
“The Mortgagee may not allow the Appraiser to be selected, retained, managed, or compensated by a mortgage broker or any member of a Mortgagees staff who is compensated on a commission basis tied to the successful completion of a Mortgage or who is not independent of the Mortgagees mortgage production staff or processes.”
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