FHA appraisal requirements are changing for lenders

In late September the U.S department of Housing and Urban Development released FHA Mortgagee Letter 2009-28 in efforts to reaffirm FHA appraisal requirements which relate to appraiser independence to support prudence lending practices. This letter details a series of changes that will take affect as of Jan 1st 2010. These changes will have a significant impact on the way that lenders currently do business.

Here is a list of the changes that will be made.

1) Mortgage brokers and commission based lenders will be prohibited from involvement in the appraisal process.

2) FHA-approved lenders have new responsibilities to ensure that FHA appraisers are ".compensated at a rate that is customary and reasonable for appraisal services in the market area."

3) "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." "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."

In my opinion this is a benefit to the appraiser as they will not have additional work to complete for the brokers such as estimated value requests to help the lender determine loan to value ratios. There will also be a gray area of questions as to what is a customary and reasonable cost for the appraisal process which may result in big differences in the cost of appraisal for the comsumers.