HUD HOC Reference Guide
Fees and Forms: Appraisal & Inspection
Appraisal & Property Requirements
A: Appraisal fees (Reference: HUD Handbook 4150.2 paragraph (1-2 D) and 4155.2, Mortgagee Letter 2009-28)
- HUD does not establish fees or due dates. See: Mortgagee Letter 97-22 and 97-46.
- HUD believes the marketplace best determines what is reasonable and customary in terms of establishing fees for appraisal services. Fees are established and negotiated between the FHA Roster Appraiser and the client whether that is an FHA approved lender, Appraisal Management Company (AMC) or third party. Fees are never contingent upon the appraiser arriving at a predetermined specific value, a predetermined minimum value, a range or direction in value, a value that favors the cause of any party, or the attainment of a specific result or occurrence of a specific subsequent event such as loan approval.
- Appraisal Management Companies (AMC) - FHA does not require the use of AMCs or other third party organizations for appraisal ordering, but recognizes that some lenders use AMCs and/or other third party organizations to help ensure appraiser independence. For more information please refer to Mortgagee Letter 2009-28.
B: Appraiser Independence and Appraisal Portability
- Appraiser independence - To ensure appraiser independence, FHA approved lenders are now prohibited from accepting appraisals prepared by FHA Roster Appraiser who were selected, retained or compensated in any manner by a real estate agent, mortgage broker, or any member of the lenders staff who is compensated on a commission basis tied to the successful completion of the loan. Please refer to Mortgagee Letter 2009-28.
- Appraisal Portability - FHA does not permit appraisal shopping in an effort to assure the highest possible value and/or the least amount of deficiencies or repair requirements, however a second appraisal may be ordered when a borrower switches from one FHA approved lender to another FHA approved lender under limited circumstances; such as, the first appraisal contains material deficiencies, or the appraiser performing first appraisal is on the second lenders exclusionary list, or failure of the first lender to provide a copy of the appraisal to the second lender in a timely manner. The lender must document why a second appraisal was ordered and retain the explanation in the case binder along with a copy of both appraisals. Please refer to Mortgagee Letter 2009-29.
C: Inspection Fees
- Inspection and Mileage Fee - HUD no longer establishes fees. Please see Mortgagee Letter 2006-04.
- 203(k) Inspections - The fees for 203(k)s are outlined in HUD Handbook 4240.4 Rev-2 and Mortgagee Letter 95-40.
D: Appraisal Forms
- Mortgagee Letter 2005-34 announced the adoption of four property specific appraisal reporting forms and released the revised Appendix D of Handbook 4150.2. Mortgagee Letter 2005-48 provides guidance regarding FHA's repair and inspection requirements for existing properties and the use of the Fannie Mae/Freddie Mac appraisal reporting forms. Mortgagee Letter 2009-09 announced the adoption of the Market Conditions Addendum (Fannie Mae Form 1004MC/Freddie Mac Form 71) for all FHA appraisals as well as provided appraisal reporting requirements for properties located in declining markets. Revised Appendix D of Handbook 4150.2 provides line-by-line instructions as well as protocols for completing the following appraisal forms and addendum:
- Uniform Residential Appraisal Report (FNMA 1004)
- Manufactured Home Appraisal Report (FNMA 1004C)
- Individual Condominium Unit Appraisal Report (FNMA 1073)
- Small Residential Income Property Appraisal Report (FNMA 1025)
- Mortgagee Letter 2009-51 adopted the Appraisal Update and/or Completion Report (FNMA 1004D/Freddie Mac Form 442) Part A - Summary Appraisal Update Report may be used to extend the validity period of an existing appraisal.