HVCC and FHA
Appraisal FAQs
Do the HVCC and FHA require lenders to use appraisal management companies?
A lender is not required by the HVCC or FHA Mortgagee Letter 2009-28 to use an appraisal management company. Lenders are permitted to make assignments without the use of third parties.
How can lenders internally comply with the HVCC and FHA?
Compliance with the HVCC and FHA is possible by establishing a firewall between loan production staff and those selecting appraisers and ordering appraisals. In other words, staff ordering appraisals cannot report to anyone who is compensated based upon loan production. This practice is consistent with the banking regulators’ Interagency Appraisal and Evaluation Guidelines.
Do we have to give each appraiser on our roster an equal number of assignments by rotating their selection?
No. You may make assignments based on many factors such as familiarity with the subject’s property type, its location and overall performance. For example, you may provide a larger number of appraisal assignments to an appraiser or appraisal company that consistently meets your expectations for quality, turnaround and customer service.
What role can a mortgage broker play in the appraisal process?
A minimal role. A mortgage broker may, if authorized by its lender, order an appraisal only from a lender designated appraisal management company. A mortgage broker may not select appraisers, order an appraisal directly from an appraiser, or compensate the appraiser.
What’s the difference between a correspondent lender and a mortgage broker?
A correspondent lender closes loans in their name, unlike a mortgage broker, and is able to order appraisals without using an appraisal management company or third party vendor. A correspondent lender who orders appraisals directly is required to establish separation between loan production and staff selecting appraisers and ordering appraisals.
Can my loan production staff communicate with appraisers?
Yes, as long as they do not have a substantive communication with the appraiser or third party vendor relating to or having an impact on valuation. Loan production staff cannot select appraisers and cannot order appraisals.
What can a real estate agent communicate to an appraiser?
Given the constant movement in the market, it is important that real estate agents provide appraisers with verifiable information to help the appraiser develop a reliable opinion of value. Information about comparable properties, including sales concessions, properties under agreement and properties currently on the market provides appraisers with data that can be used to support an opinion of value. Of course, the appraiser has to verify any information received through independent sources and determine its relevancy to the assignment.
Can I still ask an appraiser for a “comp check”?
No, the HVCC and FHA do not allow comp checks without placing an appraisal order with the appraiser. By limiting the scope of work in the assignment, an appraiser would be able to perform an appraisal that answers questions like, “can you tell me if the property is worth at least...” or “can you give me a range of values for this property?” This type of assignment is an appraisal requiring the appraiser to perform sufficient research and document the analysis.
How can we be certain appraisers selected by an appraisal management company are competent?
You can’t. Fannie Mae, Freddie Mac and the FHA place the responsibility for selecting competent appraisers on lenders. When using a third party such as an appraisal management company, the lender retains the responsibility without maintaining the control. You can try to define competency requirements in your contract with your vendor and monitor compliance through quality control audits. Appraisal licensing, while an indication an appraiser has satisfied minimum standards, does not assure you of competency. Fannie Mae comments that appraisers should not be given assignments in market areas or for properties that they are unfamiliar with.
How important are appraisal designations when evaluating the qualifications, education and experience of an appraiser?
To quote the Fannie Mae Selling Guide: “Professional appraisal designations can be helpful to the lender in evaluating an appraiser’s qualifications, particularly when the designation is from a nationally recognized organization that has formal experience, education, and ethics requirements that are strongly administered. If the lender considers an appraisal designation in its evaluation, it should be familiar with the appraisal organization’s specific requirements to ensure that the designation is evaluated appropriately.” And, Freddie Mac Bulletin 2009-18 includes consideration of membership in a professional appraisal organization as a best practice in evaluating appraiser qualifications.
HVCC and FHA Online Resources
Fannie Mae
http://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/
Freddie Mac
http://www.freddiemac.com/singlefamily/home_valuation.html
FHA (Mortgage Letters 2009-28,2009-30,2009-31)
http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/
National Association of REALTORS HVCC Quiz:
http://www.realtor.org/rmoquiz2.nsf/HVCC?OpenForm
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