January 25, 2022
Sometimes a home loan goes smoothly from start to finish. Other times, it may not. In some cases, a borrower may choose not to purchase a particular home after all and continue looking. In others, a borrower may be happy with the home, but not so pleased with the lender.
In situations where a borrower wants to switch lenders, is it possible to transfer an FHA appraisal to the new lender? This is a not-so-common question, but an important one for those who need to know. What does HUD 4000.1 have to say about appraisal transfers?
Quite a bit, it turns out. From HUD 4000.1:
“In cases where a Borrower has switched Mortgagees, the first Mortgagee must, at the Borrowers request, transfer the appraisal to the second Mortgagee within five business days.”
Note the phrase, “at the borrower’s request”. FHA loan rules say the appraiser is not automatically required to perform the transfer, as we note from HUD 4000.1:
“The Appraiser is not required to provide the appraisal to the new Mortgagee. The client name on the appraisal does not need to reflect the new Mortgagee. If the original Mortgagee has not been reimbursed for the cost of the appraisal, the Mortgagee is not required to transfer the appraisal until it is reimbursed.”
The new lender cannot request a re-appraisal simply to change the amount of the home loan. In fact, FHA loan rules address re-appraisals specifically in the context of transferring to a new lender:
“The second Mortgagee may not request the Appraiser to re-address the appraisal. If the second Mortgagee finds deficiencies in the appraisal, the Mortgagee must order a new appraisal.”
Furthermore, HUD 4000.1 says when a lender is using an existing appraisal, but the borrower (as opposed to the lender) has changed, “the Mortgagee must enter the new Borrowers information in FHAC. The Mortgagee must collect an appraisal fee from the new Borrower and refund the fee to the original Borrower.”
“If a Case Transfer is involved, the new Mortgagee must enter the Borrowers information in FHAC. The new Mortgagee must collect an appraisal fee from the Borrower, and send the fee to the original Mortgagee, who, in turn, must refund the fee to the original Borrower.”
As you can see, FHA loan rules anticipate many of the issues connected with appraisal transfer from lender to lender, and even from borrower to borrower.
Learn About the Path to Homeownership
Take the guesswork out of buying and owning a home. Once you know where you want to go, we’ll get you there in 9 steps.
Step 1: How Much Can You Afford?
Step 2: Know Your Homebuyer Rights
Step 3: Basic Mortgage Terminology
Step 4: Shopping for a Mortgage
Step 5: Shopping for Your Home
Step 6: Making an Offer to the Seller
Step 7: Getting a Home Inspection
Step 8: Homeowner’s Insurance
Step 9: What to Expect at Closing
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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