The Federal Housing Administration announced new guidelines on ordering appraisals for FHA-insured mortgages (ie HECMs) and reaffirms existing policy on FHA requirements regarding appraiser independence and geographic competence.
According to the announcement, mortgage brokers and commission based lender staff are prohibited from ordering appraisals. However, FHA is not requiring the use of Appraisal Management Companies or other third party providers, but does require that lenders take responsibility to assure appraiser independence.
Appraisal Scoop writes that If lenders do use AMCs and/or other third party organizations, FHA-approved lenders must ensure that:
- FHA Appraisers are not prohibited by the lender, AMC or other third party, from recording the fee the appraiser was paid for the performance of the appraisal in the appraisal report.
- FHA Roster appraisers are compensated at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised.
- The fee for the actual completion of an FHA appraisal may not include a fee for management of the appraisal process or any activity other than the performance of the appraisal.
- Any management fees charged by an AMC or other third party must be for actual services related to ordering, processing or reviewing of appraisals performed for FHA financing.
- AMC and other third party fees must not exceed what is customary and reasonable for such services provided in the market area of the property being appraised.
While FHA’s existing policies regarding appraiser independence are consistent with the Home Valuation Code of Conduct (HVCC), FHA will adopt language from the Code to ensure full alignment of FHA and GSE standards.
So while FHA”s policy follows the HVCC, lenders aren’t being required to use an AMC. The changes are scheduled to become effective January 1, 2010.