12th May 2015

Top FHA appraisal questions answered

Answers to the 8 most frequently asked questions about the new FHA Handbook 4000.1

FHA-1The Federal Housing Administration recently announced changes to its appraisal policies found in the Single Family Housing Policy Handbook, or HUD Handbook 4000.1. FHA appraisers must be in compliance with these changes by September 14, 2015 (note the previous compliance date was June 15, 2015).

To help get you started on the changes, we compiled the most frequently asked questions about the new FHA Handbook 4000.1. All of the questions came from students attending our Live Webinars: HUD Handbook 4000.1: Changes, Big and Small.

Is the new FHA Single Family Housing Policy Handbook 4000.1 intended to replace current HUD handbooks, including 4150.2?

Handbook 4000.1 is intended to supersede several HUD Handbooks in their entirety, including 4905.1 – Requirements for Existing Housing One to Four Family Units, 4150.2 – Valuation Analysis for Single Family One to Four Unit Dwellings, and 4240.4 – 203K Rehabilitation Home Mortgage Insurance.

What is the effective date for the requirements of Handbook 4000.1?

The requirements in Handbook 4000.1 apply to case numbers assigned on or after September 14 2015. In industry conference calls, HUD officials have encouraged appraisers and mortgagees to begin using the new Handbook immediately, although they are not required to do so until September 14.

Are appraisers required to complete a three-year sales history on the comparable sales in FHA appraisals?  

One of the significant changes to FHA policy is the requirement for appraisers to complete a three-year prior sales history of the comparable sales and listings used in the appraisal. This is outlined in the Appraisal Report and Data Delivery Guide issued by HUD. In addition, two sources are recommended for this prior sales history search – local MLS and local public records, at a minimum.

How should an appraiser handle the prior sales history requirement in non-disclosure states?

According to the Appraisal Report and Data Delivery Guide, page 34: “A property’s location in a ‘non-disclosure state’ does not remove the appraiser from the requirement to research, report, and analyze the prior sale history of the subject and comparable properties.” The appraiser must make an attempt to obtain this information and is required to report the information that is reasonably obtainable. The appraiser must also “describe the difference between recent transfers versus the current sale or offering and the effect on the appraisal problem.”

Has HUD/FHA changed any of the requirements for observing the attic and crawl space? 

No; the requirements for an appraiser to observe the crawl space and attic have not changed. FHA prefers that the appraiser make a full entry into the attic or crawl space, but if that is not possible, a minimum entry of “head and shoulders” is acceptable. If the attic and/or crawl space are not accessible, the appraiser must state that fact in the appraisal report.  The mortgagee will determine property eligibility.

Is it true that FHA has removed the fall distance requirement for electric power line towers and other towers?

Yes!  The requirement to check fall distance no longer exists. An appraiser is still required to notify the mortgagee if the dwelling or related property improvement is located within an easement or if they appear to be located “within an unsafe distance” of a power line or tower. In addition, neither power transmission lines nor local distribution lines may pas directly over the dwelling, any structure or related property improvement such as pools and spas.

Is it true that the new Handbook 4000.1 contains a requirement for appraisers to operate the appliances in the subject property?

Yes. The Handbook states “Cabinets and built-in appliances that are considered Real Property must be present and operational.” The Handbook goes on to state, “The Appraiser must operate all conveyed appliances and observe their performance.” In industry conference calls, representatives from HUD have reiterated this requirement.

What is the appraiser’s responsibility regarding MPR repairs?  

The appraiser is responsible to observe, analyze and report all repairs necessary for the subject property to meet HUD’s minimum property requirements (MPR) for existing properties or minimum property standards (MPS) for new construction. In addition, the appraiser must provide a cost to cure and a photograph of the deficiency. The mortgagee (i.e., the underwriter) will determine which repairs are required. The mortgagee has the authority to require additional repair items, and/or to waive any or all of the appraiser’s identified repair items.

If you have more specific questions about the NEW FHA Handbook 4000.1, check out our upcoming Live Webinar: HUD Handbook 4000.1 Changes, Big and Small or enroll in an online or live CE FHA seminar today.

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6th May 2015

Freddie announces appraisal changes to the Uniform Collateral Data Portal

Freddie Mac announced April 29 that beginning June 30, the Uniform Collateral Data Portal (UCDP) will deliver new proprietary feedback messages for appraisals submitted to Freddie Mac and also will return a proprietary hard-stop code that will not allow for users to override. Freddie announced that the new proprietary messages are aligned with the government-sponsored enterprise’s effort to provide improved appraisal quality feedback.

Currently, if lenders receive hard-stop code “FRE800,” Freddie Mac proprietary messages automatically are overridden, and the code does not prevent lenders from receiving a “successful” status when the appraisal is submitted in the UCDP. Beginning June 30, when the following three Freddie Mac proprietary fatal edits are activated on all UAD forms, lenders will receive a new hard-stop code, “FRE700,” which will prevent them from receiving a “successful” submission status. These fatal edits must be addressed, and an updated appraisal must be submitted to the UCDP before a “successful” status can be received.

  • FRE1086 Signature Date Check: Triggers if the signature date of the appraisal is before the effective date of the appraisal.
  • FRE1087 Appraiser Name Check: Triggers if the appraiser’s name is missing from the appraisal.
  • FRE1040 Subject Legal Description: Triggers when the legal description is missing.

Freddie also announced that four new feedback messages will be returned on all UAD forms submitted to UCDP to complement the “Single-Family Seller/Servicer Guide” requirements related to appraisal eligibility. The presence of these feedback messages may indicate that the appraisal and associated mortgage are not eligible for delivery to Freddie Mac. These feedback messages will be implemented as warning messages and will not prevent lenders from receiving a “successful” status.

  • FRE1093 Condominium Zoning: Triggers if the Site Zoning Compliance Type is Legal Nonconforming and the Site Zoning Permit Rebuild to Current Density Indicator is “no.”
  • FRE1095 Subject Highest and Best Use: Triggers if the present use of the subject property does not represent the highest and best use of the property.
  • FRE1094 Sales Contract Review: Triggers if the contract of sale was not analyzed by the appraiser on a purchase transaction.
  • FRE1092 Condominium Hotel Project: Triggers if the condo project name appears to be a condominium hotel.

Finally, new appraisal quality feedback messages primarily will focus on overall completeness of UAD appraisal forms and will be initially activated only for the Uniform Residential Appraisal Report(Freddie Mac Form 70). Freddie Mac will provide sufficient notice as these messages are activated for additional and applicable UAD forms. Although Freddie said it anticipates these messages will be returned infrequently, appraisals with missing data occasionally get through. These feedback messages serve to assist and build on the quality control checks lenders currently have in place. The messages also will be implemented as warning messages and will not prevent lenders from receiving a “successful” status.

http://www.valuationreview.com/VR/ArticlesVR/Freddie-announces-appraisal-changes-to-the-UCDP–63691.aspx

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5th May 2015

Appraiser gets jail time for inflated appraisals

An appraiser from Collier was sentenced today to 42 months in federal prison in mortgage fraud schemes involving two properties and three banks.

After a two-day sentencing hearing, U.S. District Judge Terrence McVerry imposed that term on James Lignelli, 59, and ordered him to pay $300,000 in restitution to the lenders he ripped off by preparing false appraisals.

Lignelli was found guilty of bank fraud at trial last summer, although the jury acquitted him on counts of bank and wire fraud conspiracy.

Federal prosecutors said he provided inflated appraisals for loan applications in two schemes.

The first involved Michael Pope, operator of Pope Financial Services, and Tiffany Sprouts, who ran Sprouts Mortgage. Assistant U.S. Attorney Brendan Conway said at trial that Lignelli prepared fake appraisals with the co-conspirators for a property in Peters, which was sold for $1.2 million.

In a second scheme, Mr. Conway said Lignelli worked with Michael Staaf, operator of Beaver Financial Services, and prepared a fake appraisal for a property on Perry Highway in the North Hills.

Lignelli and his lawyer argued that he was a dupe for the others, who he said had supplied him with false information about the properties. In trying to avoid jail, he also said he had already been punished because he’s lost his career and reputation.

But Mr. Conway said Lignelli was no dupe, but a white-collar crook who knew exactly what he was doing. In addition, he said Lignelli deserves no breaks because he was a trained, intelligent professional appraiser who deliberately inflated appraisals. In addition, he said, the relatively small group of appraisers in Pittsburgh need to realize that fraud will be punished by jail.

“Over at least a four-year period, [Lignelli] was faced with a decision over and over again – should I do another fraudulent appraisal for Pope and/or Staaf?,” Mr. Conway asked in pre-sentencing filings. “Time and time again, the defendant, motivated by greed, answered that question ‘yes’ and engaged in the repeated fraudulent conduct.”

 

http://www.post-gazette.com/local/region/2015/04/28/Ex-Collier-appraiser-gets-42-months-in-mortgage-fraud-schemes/stories/201504280189

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