|New RESPA Changes and Appraisal Fees|
|Written by Jonathan Asker|
|Thursday, 28 January 2010 05:00|
The major changes under the new RESPA rules took effect on January 1, 2010. A notable departure from the old form is the revised Good Faith Estimate. It gives the borrower a summary of the terms of the loan as well as the settlement costs. Under the new law, if the charges, including appraisal fees, from the GFE are outside of a 10% tolerance level compared to the charges under the Settlement Statement, the lender is unable to collect those charges from the borrower.
Appraisal fees generally do not change when the correct appraisal type is ordered. There are instances where an increase in fee is necessary due to an extraordinary amount of work required to complete a “non typical” residence (i.e. oceanfront mansion, sprawling ranch or historic property). In these cases, the increase is not 10% but more likely 30 to 100%! Appraisers rarely bother to increase a fee by 10%.
How can appraisers and lenders avoid an appraisal fee dispute?
First, HUD allows a tolerance of 10%, however, the 10% is not specific to the appraisal fee, but to the aggregate fees charged in block 3. If the other charges in the block are accurate, an increase of 50% of the appraisal fee (or $175), is allowed and the lender takes no loss.
Second, according to HUD FAQ (page 17),dated December 30, 2009, “after the GFE is issued, it is determined that an additional service such as an additional pest, structural or other inspection, upgraded appraisal, certification or survey is required…” HUD answer, “This could constitute a changed circumstance” – Upgrade of appraisal fee would be allowed not subject to the 10% tolerance.
Third, at the time of application, an interview with the borrower to determine whether the property has any unusual characteristics or amenities would allow the opportunity for a quick call to the appraiser for a fee quote, saving time and preserving relationships.
Communication between lender and appraiser is the key to avoiding problems and staying in compliance.