Two FHA Mortgagee Letters Become Effective

On February 15, 2010, the long-delayed requirements of FHA Mortgagee Letters 2009-28 and 2009-51 went into effect.  These letters, issued in September and December, respectively, were originally scheduled to be effective on January 1, 2010, but were delayed until February in order to allow FHA and lenders additional time to modify their systems to accommodate these new requirements.

ML 2009-28, titled “Appraiser Independence”, establishes requirements similar to the Home Valuation Code of Conduct (HVCC), including a prohibition on mortgage  brokers and commission-based lender staff selecting appraisers and ordering appraisals.  It prohibits FHA lenders and AMCs from asking appraisers to provide “comp checks” or preliminary estimates of value, and also prohibits lenders and AMCs from providing an  appraiser with an anticipated, encouraged, or desired value, or a proposed loan amount (except that a copy of a purchase contract must be provided). One of the more interesting aspects to this mortgagee letter is that FHA-approved lenders must ensure that FHA appraisers are not prohibited by the lender, AMC, or other third party  from recording the fee that the appraiser was paid for the appraisal in the appraisal report.  In other words, FHA does not require that the appraiser put the amount of the fee in the report, but the lender may not prohibit the appraiser from putting the amount of the appraisal fee in the report, if he or she wishes to.

ML 2009-51 is titled “Adoption of the Appraisal Update and/or Completion Report”, and will require the use of the Fannie Mae 1004D form, replacing HUD form 92051.  The 1004D can be used for either updating a previously completed FHA appraisal, or for repair and compliance inspections.  Part A of the 1004D form is to be used for updating a previous appraisal, in order to extend the validity period of an existing appraisal.  Part B of the form is to be used for reporting the completion of a repair or the satisfaction of requirements and conditions noted in the original appraisal report.

More detailed information can be found in the Mortgagee Letters, which are available online here.