May 8, 2024
The FHA and HUD have revised appraisal rules for FHA single-family loans. Among the changes, FHA lenders must now provide home buyers with “clarified guidelines to contest an appraisal or request a reconsideration of value (ROV.) “root out racial, ethnic, or national origin bias in residential property valuations” on homes purchased with FHA mortgages.”
HUD Publishes Its New Appraisal Guidelines
A HUD mortgagee letter published in May 2024 says there are important changes in HUD’s Nondiscrimination Policy, Appraiser Conduct, and other Federal Housing Administration (FHA) Roster Appraiser requirements.
The goal is to create more equity in the appraisal process and “ensure appraisals for insured Mortgages are performed in a competent, independent, impartial, and objective manner” and that appraisers conform to what HUD calls the “Competency Rule.”
Changes To FHA Appraisal Policy
The FHA and HUD have revised the guidelines for a borrower-initiated reconsideration of value, which happens when the borrower challenges the appraisal results formally.
You won’t get a reconsideration of value in cases where there’s a simple disagreement over the appraised value or condition of the home.
When an ROV is warranted, HUD’s new guidelines say an FHA lender must “establish an appeal process that includes steps for the Borrower to receive a copy of the appraisal report and request an ROV when the Borrower believes the appraisal report is inaccurate or deficient.”
Inaccurate Or Deficient Appraisals Are The Key To An ROV
Borrowers often overlook the key to a reconsideration of value, and this point is so crucial we’ll repeat it again here: A simple disagreement over dollar amounts won’t justify an ROV.
When an appraisal is deficient or defective, HUD commonly recognizes borrower-initiated challenges to it.
Now, under a borrower-initiated ROV, an FHA lender has a due diligence requirement. The loan officer “must thoroughly assess all borrower-initiated ROV requests to determine the applicability of an ROV and the relevance and appropriateness of information before communicating with the Appraiser.”
The Lender’s Job
Under the new rules, your FHA loan officer must take steps to ensure the ROV meets FHA and HUD requirements before sending it to the FHA fee appraiser.
The reports a house hunter gets after requesting a reconsideration of value must be consumer friendly, meaning they should be simple to understand, with instructions “that explain the borrower-initiated ROV process, the expected ROV processing times,” as well as “the process for requesting clarifications or corrections unrelated to the value conclusion…”
HUD rules have been updated to reference situations where a borrower-initiated reconsideration of value has been made but the request “is unclear, deficient, or requires additional information…”
In such cases, the Mortgagee must “remediate with the Borrower, as applicable.”
Be sure to speak with an FHA lender if you don’t know how this may affect your home loan.
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.
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