November 17, 2019

Vimeo Channel YouTube Channel

Second Appraisal For An FHA Loan? The Rules You Should Know

There are times when a borrower or even the seller may not agree with the results of an FHA appraisal. Does the FHA loan rule book, HUD 4000.1, permit the request of a second one? Under what circumstances might another one be allowed?

According to page 123 of HUD 4000.1, simply disagreeing with the fair market value determination of the original-likely one of the most common reasons to look into a second attempt-isn’t enough to justify such a request.

“The Mortgagee is prohibited from ordering an additional appraisal to achieve an increase in value for the Property and/or the elimination or reduction of deficiencies and/or repairs required.”

Second appraisals “may only be ordered if the Direct Endorsement (DE) underwriter (underwriter) determines the first appraisal is materially deficient and the Appraiser is unable or uncooperative in resolving the deficiency. The Mortgagee must fully document the deficiency and status of the appraisal in the mortgage file. The Mortgagee must pay for the second appraisal.”

Note that the lender is required to pay the required fees for the second effort in such cases.

What about situations where a borrower has switched lenders at some point? HUD 4000.1 answers this question directly:

“A second appraisal may only be ordered by the second Mortgagee under the following limited circumstances:

  • the first…contains material deficiencies as determined by the underwriter for the second Mortgagee;
  • the Appraiser performing the first appraisal is prohibited from performing appraisals for the second Mortgagee; or
  • the first Mortgagee fails to provide a copy of the appraisal to the second Mortgagee in a timely manner, and the failure would cause a delay in closing and harm to the Borrower, including loss of interest rate lock, violation of purchase contract deadline, occurrence of foreclosure proceedings and imposition of late fees.”

Requesting second appraisals isn’t the same as asking for an update. That is an important thing to remember, and HUD 4000.1 addresses such updates saying, “The Mortgagee may only order an update if (1) it is a Mortgagee listed as an Intended User of the original…or (2) it has received permission from the original client and the Appraiser.”

Joe Wallace - Staff Writer

By Joe Wallace

February 8, 2017

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

Connect with Joe:

 

Browse by Date:

About FHANewsBlog.com
FHANewsBlog.com was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

5850 San Felipe Suite #500, Houston, TX 77057 281-398-6111.
FHANewsBlog.com is privately funded and is not a government agency.

Share This