FHA Adopting Appraiser Independence

FHA appraisals will soon seem similar to those of Fannie and Freddie's HVCC.   I'm hopeful from reading the Mortgagee Letter 2009-08 that FHA's route of improving the relationship between appraisers and loan originators will be healthier than HVCC's (where the banks are profiting from their ownership interest in the unregulated AMCs).

The new requirements go into effect on loans with FHA case numbers issued on or after January 1, 2010.  From the Mortgagee Letter:

"Historically FHA prohibited mortgagees from accepting appraisal reports completed by an appraiser selected, retained or compensated, in any manner by real estate agents.  To ensure appraiser independence, FHA-approved lenders are now prohibited from accepting appraisals prepared by FHA Roster appraisers who are selected, retained or compensated in any manner by a mortgage broker or any member of a lender’s staff who is compensated on a commission basis tied to the successful completion of a loan….

FHA does not require the use of AMCs or other third party organizations for appraisal ordering, but recognizes that some lenders use AMCs and/or other third party organizations to help ensure appraiser independence."

This could be my favorite part:

FHA-approved lenders must ensure that…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.

Currently with HVCC (Fannie/Freddie) many appraisers are losing 40-60% of their appraisal fee to AMCs.  Imagine if the AMCs had to disclose this on the HUD to the consumer on conventional loans.  If an appraisal cost $500, the AMC is earning around $250 just for ordering an appraisal.  

Will FHA help right the wrongs of HVCC?  Let's hope so.   You can read some interesting comments on my post about this matter at Rain City Guide.



  1. This week, FHA actually adapted the guidelines referred to in this post (it was delayed).

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