FHA Appraisal Portability: Wisconsin and Illinois
Posted by Joy Lynch on January 8th, 2010
As a reminder, the new appraisal portability requirements are effective for all case numbers assigned January 1st. If the applicant had a prior appraisal done with a different lender, we must be provided with a copy of that appraisal (an electronic copy will be required). Here is a quick summary (in FHA standards) of Mortgagee Letter 09-29:
Occasionally a borrower switches from one FHA lender to another during the loan process. At the borrower’s request, the first lender must transfer the case to the second lender, including the appraisal report. FHA recognizes that the second lender may need to order a new appraisal, but only under limited circumstances. These circumstances include:
- The DE Underwriter for the second lender found material defects with the original appraisal.
- The original appraiser is on the second lender’s exclusionary list.
- The first lender failed to provide a copy of the appraisal in a timely manner, which causes potential harm to the borrower for events outside of the borrower’s control. These events include rate lock expiration, purchase contract deadlines and foreclosure proceedings.
In all cases the lender must document the loan file regarding the reason for the second appraisal and both copies of the appraisal reports must be retained in the case binder.
FHA does not require the client name to be changed on the appraisal report when an appraisal is transferred to another lender. However, if the second lender requires a client name change then the lender and the appraiser must enter into a limited scope engagement for the purpose of changing the client name. The name of the client on the report should include the second lender’s name and HUD.
How does it change or benefit the industry:
These changes help to expedite loan closing when a borrower decides to transfer their application to another lender during the transaction process. The changes also ensure that lenders are not obtaining second appraisals solely for the purpose of getting a higher value or eliminating required repairs.
Your local Wisconsin and Illinois mortgage banker:
Joy Lynch
Phone: 877-240-5810 x102
joy.lynch@madisonmortgageguys.com
www.madisonmortgageguys.com
Visit my blog at http://www.madisonmortgageguys.com/blogs_joy_lynch/
