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The New FHA Appraisal Manual: What You Need to Know Rob Frazier, SRA, FRICS, Deputy Director

This article provides an overview of the new FHA appraisal manual, including its transformation goals and programs, changes and enhancements to the appraisal guidance, and the electronic appraisal process. It also discusses the upcoming SF Housing Policy Handbook and the EAD system.

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The New FHA Appraisal Manual: What You Need to Know Rob Frazier, SRA, FRICS, Deputy Director

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  1. The New FHA Appraisal Manual: What You Need to Know Rob Frazier, SRA, FRICS, Deputy Director Home Valuation Policy Division, FHA Office of Single Family Housing

  2. FHA Priorities • Expand Access to Credit • Ensure Long-Term Viability of MMI Fund • Transform current guidance and processes

  3. FHA Priorities • Transformation Goals • Make it easier to do business with FHA • Provide better analysis and quality review • Modernize to improve risk analysis

  4. Transformation Programs -Valuation Related • Provide Clear Guidance and Instructions • Replace 4150.2 and Mortgagee Letters • Update or Replace Old Manuals and Regulations

  5. Transformation Programs -Valuation Related • Create Electronic Appraisal Storage and Analysis • Electronic Appraisal Process (EAP) • Electronic Appraisal Delivery Portal (EAD) • Adopt Industry Data and Format Standards • Minimize Affect to Appraisers

  6. New On-Line Handbook Application Through Endorsement

  7. New SF Housing Policy Handbook • Provide stakeholders with a consistent, authoritative source for Single Family policy: • Transition from multiple Handbooks, Mortgagee Letters, and other guidance to a single policy guide. • Application through Endorsement status: • Finalizing for publication this summer, with significant lead time before effective date.

  8. New SF Housing Policy Handbook • Posting for feedback this summer, with future, aligned effective dates: • Appraiser • 203(k) • Condominiums • To be part of, and used in concert with, future published version of Application through Endorsement section. • Also posting this summer: • Doing Business with FHA section • Quality Control, Oversight and Compliance section

  9. Sections Still to Come • Servicing (under development for posting later this year) • REO & Claims • Title I • HECM (Reverse Mortgages)

  10. Components of Appraisal Guidance • Property Requirements • FHA requires underwriting of property condition as well as valuation. • Observe, Analyze, Report • Appraisers’ requirements spelled out in one place, clearly 6

  11. Components of Appraisal Guidance • Report and Data Format Requirements • A separate section dealing with forms, data and formats required, “how to” instructions • FHA Appraiser Roster • FHA Appraiser Compliance 6

  12. Changes-Enhancements of Note • Zoning and Legal Non-Conforming Use • Stationary Storage Tanks  • Accessory Dwelling Units

  13. Changes-Enhancements of Note • Attic and Crawl Space Inspection Requirements • General Acceptance Criteria, Property Eligibility, Nonresidential Use of Property.

  14. Changes-Enhancements of Note • Cost and Income Approach for Value • Photograph Requirements • Sales history of comps – 3 years+

  15. Changes-Enhancements of Note • Measurement and Reporting of Contributory Value of energy efficiency components or alternate systems (solar, etc.). • Market Conditions Addendum to the Appraisal Report, Fannie Mae Form 1004MC

  16. LOCATION OF DRAFT POLICY • Draft Posted Friday, July 31 at: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/SFH_policy_drafts/appraiser_requirements

  17. Electronic Appraisal Processing

  18. FHA Appraisal Review Process

  19. Appraisal Data and Valuation • Electronic Appraisal Delivery (EAD) • Collects Forms and Data from Lender • Validates identity of appraiser (future) • Leverages industry data and report form standards

  20. Appraisal Data and Valuation • Runs FHA specific rules and scoring • Provides data, PDF of report, results of scoring • Provides First Generation Copy of Appraiser’s Work

  21. Electronic Appraisal Process (EAP) • EAP will: • Use EAD portal to collect scored reports from Vendor • Enable lenders to upload and allow HOCs to use electronic files when needed

  22. Electronic Appraisal Process (EAP) • EAP will: • Move documents and data through FHA Systems • Filename is FHA Case Number with versioning functions • FHA staff members will view the appraiser’s original PDF

  23. MISMO 2.6 Format with embedded PDF • MISMO 2.6 GSE (UAD) Format • FNM1004/FRE70 Single Family Appraisal Report • FNM1073/FRE465 Condominium Unit Appraisal Report • MISMO 2.6 Errata Format • FNM1004C/FRE70B Manufactured Home Appraisal Report • FNM1025/FRE72 2-4 Family Appraisal Report • FNM1004D/442 Update of Appraisal • FNM1004D/442 Completion Report

  24. EAD Unique Features • EAD Edits include 17 new (fatal) edits on 1004; 15 new edits on 1073 to align with FHA guidance • Requires a HUD Case Number • On the appraisal form and in MISMO data • Must be valid in CHUMS • Must match subject address (auto-override allowed)

  25. EAD Unique Features • Appraiser Validation • Must be eligible on FHA appraiser roster • Appraiser certification state must match subject property state • Supervisory appraiser not allowed • Appraiser Digital Signature (auto-override) – phase 2

  26. Lender Options for Submission UCDP EAD LENDERS / SELLERS

  27. EAP System Components • EAD Web Portal • EAP Components inside FHA • Document Classification and Storage • Appraisal Database • Appraisal Scoring Database • Integration of the Databases with Endorsement Platform 9

  28. “Lender Hard Stops” • Hard Stops are the Fannie Mae / Freddie Mac name for Errors in appraisal data submitted • FHA has adopted the “base line” and has added a few of its own. • To be published on the FHA website

  29. “Lender Hard Stops” • FHA is concentrating on data errors that would cause a failure in the upload and matching process • Lender is still responsible for choosing a qualified appraiser • Lender is still responsible for underwriting the appraisal report

  30. Appraisal Data and Valuation • Collect appraisal data and forms • Electronically • earlier in the process • integrate into FHA processes • Utilize data to • enhance analytics • inform policy • inform Appraiser Roster quality control 8

  31. Appraisal Data and Valuation • Leverage industry data standards, systems, and processes where possible. • Provide useful feedback messages aligned with FHA policy. • Provide process efficiencies for lenders by seeding the endorsement screens with EAD data. 8

  32. Thank You For Further information: HUD.GOV Answers@HUD.gov 800-225-5342

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