Have You Heard What FHA is up to?

New FHA Commissioner, David Stevens, announced the agency will be changing their appraisal rules and also including a 10% reduction in the amount senior home owners can receive from the reverse mortgage program. The latter is a discussion for another day.

The new guidelines, which will be instituted January 1, adopt some of Fannie Mae and Freddie Mac's "home valuation code of conduct" (HVCC). They also stipulate that FHA will not accept appraisals ordered by mortgage brokers, lenders, or anyone compensated on a commission tied to the completion of the loan. FHA regulations do differ from Fannie and Freddie, in that FHA wants appraisers to be paid fairly and in full.

Surprisingly, the Commissioner states that appraisers can disclose the amount of their fees, making this information available to the buyers and sellers in the appraisal report. This goes against traditional practice, where it is typically forbidden for appraisers to reveal their compensation.

An informative move for the consumer, as on average they are charged $400, when the appraiser, who works for the management company receives only $175-$200. This will increase consumer awareness of the many appraisers who have been driven out of business by these new regulations involving management companies.

Along with the disclosure fees, Stevens is thankfully mandating what he refers to as "geographic competency". This requires appraisers have a familiarity with the local markets and access to data relevant to the home's sale.

Geographic competency is imperative and a welcome addition to the new rules. Recently I received an offer on a property and the appraisal came in below the contract price. It was revealed the appraiser was not familiar with the area, and in fact resided and worked many hours away.

Does anyone else have a similar tale to tell?