General Announcement 11 19 2013 Subject: FHA Seminars in Texas Points of Misunderstanding On September 12, 2013, several ATA members contacted the ATA about contradictory statements which has caused some misunderstanding resulting from the seminar held in Texas City, Texas this past September. ATA brought those concerns to the Emerging Issues Committee of The Appraisal Foundation Advisory Council (TAFAC) of which they are a member. This presentation of concerns was asked to be presented to the general body of TAFAC and initiated a face to face opportunity to address the FHA representative of TAFAC about those concerns. FHA representative to TAFAC, Ms. Ada L. Bohorfoush, Housing Program Policy Specialist, Valuation Policy Division took those concerns back to FHA and found answers to those questions to FHA and generously took the time to forward those on to ATA. The ATA Board of Directors concurred that this information be shared with not only ATA members, but all of the Appraisers in Texas. 1. Appraisers attending the FHA Seminar heard that they are NOT to crop out pictures with people or religious symbols. It was stated that was a USPAP violation. ATA Question Concern to FHA: This seems contradictory to Fair Housing directives. FHA s Response Regarding photos, HUD requires that appraisers provide photos that they have actually taken of the subject and comparable photos. We do not allow them to be altered in anyway, even to remove people from the photos. Our photo policies are described in ML 2005 48 in the attachment: Subject Photographs Front and rear at opposite angles to show all sides of the dwelling, Any improvements with contributory value that are not captured in either the front or rear photograph, Street scene photo to include a portion of the subject site. If the subject property is proposed construction and the improvement has not started, the appraiser should take a photograph that shows the grade of the vacant lot. 1
Comparable Photos Photos depicting the front view of each comparable sale utilized must be those taken by the appraiser. The photos taken by the appraiser are considered evidence of compliance with the Scope of Work of having inspected each comparable sale from the street. Use of MLS photos to exhibit comparable condition at the time of sale is acceptable; however, the appraiser must include their photos as well to document compliance. The documentation provided by the required attachments/exhibits satisfies FHA s minimum requirements. However, additional exterior and/or interior photos, reports, studies, analysis, or copies of prior listings may be included in support of the appraiser s observation and analysis, e.g. photographs of positive or negative view influences, property deficiencies, or adverse conditions, provides strong supporting documentation of conditions observed on the date of the appraisal. Photo documentation of property condition is always advisable. ATA Additional Comment Please note that it is not a violation of USPAP to crop or not crop photographs. The USPAP requires an appraiser to identify the characteristics of the property. This may include maps, property sketch or photographs to identify relevant characteristics of the subject property. The USPAP states the appraiser must not be misleading. If photographs are altered for another secondary market or private client the appraiser must be clear if the exhibit has been altered. Diana Jacob ATA TAFAC Representative 2. During the FHA Seminar it was heard that PAGE 1 of the URAR is NOT TO BE CHANGED regardless of the wrong information it may contain, i.e. misspelled borrower name, wrong parcel number, incorrect FEMA flood zone, etc. ATA Question Concern to FHA Isn t that an issue with the collection of data based on the UAD communication? FHA s Response FHA does not have a policy regarding changes to the appraisal report. Any changes after the appraisal has been submitted are subject to USPAP rules. 3. Appraisers in attendance of the FHA Seminar heard that they should NEVER put the renegotiated sale price in the contract section. It is to be addressed in the addendum. ATA Question Concern to FHA How does that relate to the BIG SOFTWARE READER IN THE SKY that is collecting and analyzing the data? Lenders often want this information changed so it matches other documents. FHA s Response HUD does not collect UAD data at this point so a discrepancy is not an issue. If the sale price was renegotiated after the date of the appraisal then wouldn t it be misleading to have that information in the subject section instead of an addendum? This issue is also governed by USPAP but I am inclined to think that the HUD instructor would be correct on this issue. (if the appraiser was mistaken or misread the contract then I would think differently) 2
4. Appraisers in attendance of the FHA Seminar heard it said to Suggest the underwriter perform the final inspection instead of the appraiser. ATA Question Concern to FHA That s just not really possible for the appraiser to request. This is a lender s decision as to who will perform that final. FHA s Response The underwriter is ultimately responsible for the appraisal and the property so the underwriter gets to make decisions regarding who performs the final inspection. See: 4155.2 4.2.h When examination of existing or newly constructed property reveals noncompliance with the General Acceptability Criteria, an appropriate specific condition (repair) to correct the deficiency is required, if correction is feasible. The lender must reject the property if correction is not feasible, and only major repairs or alterations can affect compliance. Note: The appraiser must note those repairs necessary to make the property comply with FHA s General Acceptability Criteria, together with the estimated cost to cure. The lender will determine which repairs for existing properties must be made for the property to be eligible for FHA insured financing. Certainly the appraiser and the underwriter can discuss the appraisal and the final inspection but the underwriter ultimately must make the decision. 5. During the FHA Seminar is was heard that Assessor s Parcel number MUST go on all appraisals including NEW CONSTRUCTION ATA Question Concern to FHA This is often impossible to do as the Tax Office has not yet assigned a parcel number because the property is new and often a site which has been recently sectioned off from another parcel FHA s Response The only guidance HUD has regarding the Assessor s Parcel # is in ML 2005 48: Enter the parcel number assigned by the local tax assessor. For those areas that do not have an assessor s parcel number, enter the tax identification number. This is the only guidance we have about parcel numbers. I understand why the trainer indicated that the appraisal must contain the information, if the particular jurisdiction does not assign numbers until late in the development process the appraiser should indicate that in an addendum to explain why the parcel number is not included. 6. Appraisers heard during the FHA Seminar that Builder s Certification IS NOT REQUIRED TO START an FHA Appraisal. It s nice to attempt to get the Builder s Cert., but the report can be finished without it. ATA Question Concern to FHA That is a FALSE statement based on the form itself. ML 06 33 says FHA does not require a copy to be in the appraisal report, but this ML DOES NOT STATE that the appraiser doesn t have to receive the Builder s Certification. The language is very clear on the Builder s Certification (Form HUD 92541) itself. 3
FHA s Response The Builder s Certification is required to be given to the appraiser at the time of assignment. The directions on page 3 of the Builder s Certification clearly instruct the appraiser not to perform the appraisal without this information. 7. Appraisers in attendance of the FHA Seminar heard that Final Inspections for houses less than 1 year old requires a Compliance Inspection Report (CIR) to be completed. ATA Question Concern to FHA Based on an email from HUD: If the appraisal was performed and the house was less than 90% complete, HUD Handbook 4145.1 Chapters 4 and 6 do not allow the appraiser to do the Final. It must be done by a fee inspector and the CIR is to be used. If the house is 90% or more complete, the appraisal is marked subject to repairs and the 1004D can be used. The Form 1004D was adopted by FHA per ML 09 51. FHA s Response No specific response to the concern was issued. It is ATA s position that the ML and Handbook references be followed. 8. During the FHA Seminar, appraisers heard that Real Estate Taxes ARE REQUIRED on NEW CONSTRUCTION ATA Question Concern to FHA We/ATA believe that is FALSE! Most new construction has not been assessed, thus taxes are not known. Real estate taxes are based on a different definition of value called Assessed Value. The Definition of Market Value is used in the appraisals performed for HUD/FHA. Appraisals for HUD/FHA are not based on Assessed Value. If an appraiser provides an estimate of taxes, they should make a statement that this information is only an estimate and may be misleading. If the appraiser does not make such a statement, and the taxes are determined to be quite different, then someone has recourse against the appraiser for false information. FHA s Response HUD Handbook 4150.1, Section 4 19 (B) (page 4 10): Unassessed Properties. Where the tax burden is unknown, as with a proposed new building or a newly constructed building not yet listed for tax purposes, an estimate is made of the probable tax. 9. During the FHA Seminar appraisers heard that FHA/HUD MUST BE LISTED as an Intended User along with the Mortgage Company. ATA Question Concern to FHA This is TRUE. However, the form is problematic because the Fannie Mae Form 1004 states there CANNOT BE ANY ADDITIONS to the INTENDED USERS, and FHA as adopted this report form. Wouldn t it be prudent for the Appraisal Standards Board (ASB) to write an FAQ on this contradiction of complying with 4
the assignment condition of FHA without violating the SIGNED Statement of Certification that follows the pre printed directives of Intended Users? FHA s Response No specific response to the concern was issued. It is ATA s position that the ASB should be contacted and this should be an FAQ. At this point it is our recommendation that within the body of the addendum the appraiser state for FHA Appraisal Reports FHA/HUD is also considered an intended user. It is our hope that this information has provided those who received conflicting information the clarification necessary to continue their appraisal reporting in a conforming manner when performing FHA appraisal assignments. If you are not a member of ATA we are encouraging you to consider joining us. We are unique in that we re a home grown; grass roots organization that believes in getting answers and sharing those answers with its members. For more information about ATA contact us at www.txappraisers.org and begin enhancing your skills and professionalism through membership in a state appraisal organization that has its eye on current issues with the Texas Real Estate Appraiser in mind. Board of Directors Association of Texas Appraisers (ATA) 5