Estate and mortgageWashington Report: FHA News
Lots of big news rumbling out of FHA, which continues to rack up record market shares of the home mortgage business.
New FHA Commissioner David Stevens announced not only comprehensive changes to the agency"s appraisal rules, but also a 10 percent reduction in the amount of money senior home owners can receive from the popular reverse mortgage program.
Stevens" appraisal shakeup adopts some of the features of Fannie Mae"s and Freddie Mac"s controversial "home valuation code of conduct," but not all.
Under the new guidelines, effective this coming January 1, FHA will not accept appraisals ordered by mortgage brokers or by any member of a lender"s staff compensated on a commission basis tied to the successful completion of a loan.
That"s virtually the same rule as Fannie"s and Freddie"s.
But unlike the valuation code, which has encouraged many lenders to employ third-party management companies that pay appraisers low fees, FHA says it wants its appraisers to be paid fair and full fees for their work.
Stevens also said that appraisers doing FHA work can include the amount of the fee they are paid on the completed appraisal report, which is available to the buyers and sellers in the transaction.
Many appraisal management companies, by contrast, prohibit appraisers from revealing what they are actually being paid -- to avoid upsetting consumers. Frequently appraisers working for management companies are paid $175 to $200, while the consumer is charged $400 or more.
Stevens also emphasized in new instructions issued to lenders that FHA expects appraisers to have what he calls "geographic competency" -- that is, they should be intimately familiar with what"s going on the local markets where they work, and they should access to all relevant data, including MLS listings and sales.
That appears to be FHA"s response to widespread reports that appraisal management companies bring in appraisers from outside local markets to conduct valuations. The National Association of Realtors and the National Association of Home Builders have both bitterly criticized this practice - arguing that it leads to inaccurate appraisals that too often low-ball home values.
In a bombshell announcement late last week, Stevens also said that as of October 1, the maximum proceeds available through FHA reverse mortgages will be cut by about 10 percent. That is in response to an $800 million shortfall FHA faces on its insured reverse mortgages because of declining property values.
Since Congress is not likely to give the agency that amount of money anytime soon, the agency will instead have to reduce what it pays out to seniors.