The FHA released four new mortgagee letters late last week that will have a significant impact on the way appraisals will be conducted in the future. Although the mortgagee letters will not go into effect until January 1, 2010, they will cause some of the following significant changes to occur:
– Reduce the amount of time an appraisal remains valid to four months from six months.
– Clarify rules regarding what happens to an appraisal when the borrower changes lenders.
– Reaffirm rules regarding appraiser independence, while adding some new requirements, including the lender’s responsibility for ensuring the correct appraiser is listed in FHA connection, and preventing the lender from using any appraiser who is selected, retained, or compenstated in any manner by the mortgage broker or any member of the lender’s staff who is tied to the loan on a commission basis.
The fourth mortgage letter, while not directly relating to reverse mortgages or appraisals, requires all FHA mortgagees to submit an annual audited financial statement.
Copies of all the letters can be found below. While reducing the amount of time an appraisal is valid to four months from six months could add an expense to borrowers when a loan gets held up in processing, hopefully the change will add some urgency to processing reverse mortgage loans in a timely fashion and will allow borrowers to get a more realistic appraisal in a rapidly changing housing market.