RISMEDIA, September 23, 2009—The Appraisal Institute, one of the nation’s largest organizations of real estate appraisers celebrated a significant victory for the appraisal profession in the wake of the Federal Housing Administration’s (FHA) announcement that it was reversing a policy that inadvertently capped fees to appraisers.
“FHA’s action is tremendously important to appraisers, and we’re thrilled with this result that benefits the profession and our members,” said Appraisal Institute President Jim Amorin, MAI, SRA. “We’ve long spoken out about the issue of transparency, so we’re pleased to see that FHA has heeded our consumer-friendly recommendations.”
First identified by the Appraisal Institute and its partner appraisal organizations earlier this year, FHA’s new policy correctly separates fees for services charged by appraisers from the fees charged by appraisal management companies (AMCs), allowing each to float at reasonable and customary levels. The previous policy inappropriately restricted the total combined fees to the customary and reasonable fee for just the appraisal in the market area where the appraisal was being performed.
The Appraisal Institute, the American Society of Appraisers, the American Society of Farm Managers and Rural Appraisers, and the National Association of Independent Fee Appraisers in July urged FHA to rescind its previous policy, which was effectively accomplished in the new policy recently released.
Specifically, under Mortgagee Letter 09-28, FHA lenders must ensure that:
-FHA appraisers are not prohibited by the lender, AMC or other third party from recording the fee the appraiser was paid for the performance of the appraisal in the appraisal report.
-FHA Roster appraisers are compensated at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised.
-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.
-Any management fees charged by an AMC or other third party must be for actual services related to ordering, processing or reviewing of appraisals performed for FHA financing.
-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.
“This policy change marks a significant victory for consumers and residential appraisers, and it is part of the Appraisal Institute’s ongoing efforts to address disclosure and fairness concerns,” Amorin said.
The policies also address lender, appraisal management company and appraiser requirements relating to geographic competency, appraiser independence, appraisal portability (Mortgagee Letter 09-29) and appraisal validity periods (Mortgagee Letter 09-30). Many of the changes are favorable for appraisers, Amorin said. He noted that the Appraisal Institute will seek to work with Freddie Mac and Fannie Mae in order to address other concerns.