Payment of Fees

Who is allowed to pay for fees associated with the appraisal process?

FHA does not prohibit the borrower from paying the appraisal report fee, AMC fee or additional fees charged by the lender for management or review functions.

Customary and Reasonable Appraisal Fees

What does FHA consider customary and reasonable fees for preparing an appraisal report?

Customary and reasonable appraisal fees are reflective of those fees established and negotiated by an FHA approved self employed independent fee appraiser or an appraisal firm that may directly employ FHA approved roster appraisers or retain FHA approved roster appraisers as independent contractors, for appraisal services rendered, regardless of whether a lender, AMC or a 3^rd party company or vendor is ordering/requesting appraisal services. The fee charged must be commensurate with the level of services provided and should reflect the amount of research, level of difficulty, and due diligence required on the appraiser’s part to produce a credible, reliable and accurate appraisal report that is in compliance with all FHA guidelines and USPAP.

Customary and reasonable Appraisal fees, for purposes of FHA, do not include:

· AMC or other third party fees.

· Management or review fees charged by lenders.

Appraisal Fee

Will FHA set appraisal fees, AMC fees or lender fees for appraisal management or review functions?

No. FHA does not set fees or fee schedules for appraisers or other real estate

related service providers and believes that the marketplace best determines

what is reasonable and customary in terms of fees for these types of services.

Appraisal Fee Disclosure

Disclosure of appraisal fees is not required by FHA. However, FHA approved lenders must ensure that appraisers are not prohibited by the lender, AMC or other third party, from recording the fee the appraisal firm or self employed independent fee appraiser was paid for the performance of the appraisal within the appraisal report.

Does the term fee refer to the amount the appraisal firm is paid for an assignment or the amount the appraisal firm actually pays as income to the FHA roster approved employee or independent contractor for completing the assignment?

An accurate reflection of customary and reasonable fees does not include fee splits or other internal compensation arrangements in the appraisal fee disclosure. Because lenders must ensure that appraisers are paid a reasonable and customary fee, appraisers are encouraged to record the fee received so the lender may utilize this information as a data point in order to comply with the requirement that appraisers are compensated commensurate with the level of services provided.

The appraisal fee recorded within the appraisal report must not include:

· AMC or other third party fees.

· Management or review fees charged by lenders.

Adoption of HVCC

Is FHA adopting HVCC by releasing this mortgagee letter?

No. FHA is explicitly excluded from the agreement that produced the HVCC. However, FHA is adopting language from HVCC to ensure alignment with the rest of the residential mortgage lending industry. This new guidance reinforces FHA’s long-standing policy of appraiser independence.

AMC

What is an Appraisal Management Company (AMC)?

An appraisal management company (AMC) is a business entity that — for a management fee — administers a network of certified and licensed appraisers to fulfill real estate appraisal assignments on behalf of mortgage lending institutions. The AMC recruits, qualifies, verifies licensure, and negotiates fees and service level requirements with a network of 3rd party appraisers. Services typically include appraisal ordering and assignment, tracking and delivery, record retention and often include appraisal review and other quality control measures.

An appraisal management company, therefore, is an outsourcing action or solution that is paid by a lender-client to act on the lender/client’s behalf to engage real estate appraisers and to perform the administrative functions involved in the appraisal ordering, tracking, and delivery process.

Mortgage Broker

How does FHA define mortgage broker for the purposes of Mortgage Letter 2009-28?

Mortgage Broker

One who facilitates transactions between mortgage borrowers and lenders. Mortgage brokers typically are responsible for providing paper work between the parties and generally streamline the process of making a mortgage. A broker must be FHA approved and affiliated with an FHA approved “Full Eagle” lender in order to participate in the origination of an FHA insured loan. An FHA approved broker may not order an appraisal.

Ordering Appraisals

Are there situations in which a mortgage broker may order an appraisal?

Yes. A mortgage broker may place a “blind” order for an appraisal in a data system or web-based workflow platform in which the broker has no ability to select the appraiser or influence which appraiser is awarded the appraisal assignment.

Separating

Fees

Does FHA expect lenders to separate appraisal fees from AMC fees and other 3^rd party real estate service provider fees on the HUD-1?

No. FHA expects lenders to ensure that appraisers and other real estate service providers are paid fees that are reasonable and customary and reflect the level of service provided but does not expect lenders to break out or itemize these fees on the HUD-1, which is consistent with RESPA guidelines.

Appraiser Competency

How does a lender determine if an appraiser is competent to appraise in a particular market or appraise a particular property type?

In order to demonstrate competency in a particular market or for a property type, an appraiser should be able to demonstrate:

· Ready access to sources for market data unique to that market such as MLS.

· Familiarity with the market by way of actual field experience in and working knowledge of the market.

· Experience in appraising property types such as manufactured housing or 2-4 unit single-family homes.

· Educational qualifications.