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FHA

FHA to require valuing green improvements?

Another great commentary from Dave Towne, the appraiser who keeps up on what is happening!! His comments are below this summary of a letter sent by the Appraisal Institute.

Excerpts from AI comments, contained in their Letter about the proposed letter:

Appraisal Institute Lauds FHA for Green Valuation Proposal
The Appraisal Institute and the American Society of Farm Managers and Rural Appraisers on Sept. 2 lauded the Federal Housing Administration’s proposal to allow appraisers to utilize residual techniques – such as cost and income approaches – to analyze market reaction to green and energy-efficiency improvements in the absence of comparable sales.

Under the draft handbook, appraisers would be required to analyze and report the local market acceptance of special energy-related building components and equipment, including solar energy components, high-energy efficiency housing features and components such as geothermal systems and wind powered components. The draft explains that in the absence of sufficient data to perform a paired sales analysis, the appraiser must consider the cost or income approach to calculate an appropriate adjustment.

AI article
http://www.myappraisalinstitute.org/ano/DisplayArticle/PastIssue/Default.aspx?volume=15&numbr=17/18&id=22399

Direct link to original FHA document:
http://portal.hud.gov/hudportal/documents/huddoc?id=SFH_POLI_APPR_PROP.pdf  See page 68. Dated August 27, 2014.

NOTE: this is proposed, not final. If you read the full document, I could not tell what is existing and what is proposed. The comment period has closed.

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Dave Towne’s email comments, sent to those who subscribe to his emails.

On the surface, this appears to be fair … primarily for the property owner/borrower who has applied for a FHA mortgage loan guarantee.

This appraiser agrees that appraisers who do these kind of assignments must have the appropriate competency, training and experience.  Appraisers are going to have to take specialized ‘green home’ appraising CE courses as one aspect of increasing their knowledge.

But the back end unintended consequence of this proposal is how much in additional fee will the appraiser be allowed to charge for providing an ‘approach’ documentation that is Not Required to be completed by USPAP?  The ‘requirement’ to include a CA or IA becomes an additional assignment condition, added to an already more complicated FHA Scope of Work for FHA assignments.

Secondly, these ‘approaches’ rely on accurate documentation for various component costs and analysis of the income stream resulting from the use of various ‘energy efficient attachments’ to the dwelling … something the average home owner/purchaser/borrower may not have access to or knowledge of.  Yet this proposed REQUIREMENT places the appraiser squarely in the middle of the bulls eye.

Third, adding this level of detail extends the time requirement for report completion.  For these kinds of assignments, a cheap fee and the desire of a “48 hour turn time” after inspection probably won’t be realistic.  Everybody connected to this kind of assignment is going to have to realize that the appraiser will need to be properly compensated and is going to need many more hours or days between assignment acceptance and report submittal … and they are just going to have to live with that reality.  (Appraisers are also going to have to learn to say ‘NO’ and negotiate fees and DD’s when it is appropriate.)

If this just becomes another layer-upon-layer of Scope Creep with no ability to recoup time spent with an appropriate additional fee for the REQUIRED added reporting documentation, then FHA may find itself hurting for appraisers willing to commit to this kind of assignment.  (Re-read the sentence above.)

Dave Towne, AGA, MAA
towneappraisals@clearwire.net
www.towneappraisals.com

My comments: I have never seen any adjustment indicated in my market for energy saving residential improvements except maybe once for a new infill completely “green” home. Of course, I live in the “mild climate” San Francisco Bay Area ;> This has been going on for a long time, without requiring dollar adjustments. The old Fannie Mae URARs had grid adjustment lines for energy efficient improvements.

 

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Help for appraisers who have been kicked off the FHA Roster

Help for appraisers who have been kicked off the FHA Roster

Awhile ago an appraiser who had been removed from the FHA Roster contacted me. Unfortunately, I didn’t have any advice at that time except to google and see if anything turned up. I told him that when I was on the old FHA panel in 1986-1988 I heard about appraisers who went to court to be put back on the panel. Since I was new to FHA then many of my appraisals were reviewed by the local FHA regional office, so I knew if I was doing them correctly. VA still has a policy of reviewing.

I don’t know if FHA regularly reviews its appraisers now. There are many, many more appraisers since the Roster was set up, open to all licensed appraisers. Only certified appraisers are eligible now.

This is much more important now, as FHA will be suspending or removing appraisers from their roster.

Fortunately, the National Appraiser Association
http://www.naappraisers.org  contacted Ted Whitmer, a Texas MAI and attorney, who defends appraisers. On June 26, he filed an Amicus Curae brief for NAA in support of reversal of appraisers who had been removed from the panel. Link to the brief posted on the NAA web site: http://www.naappraisers.org/HUD-AMICUS-NAA-6-14.pdf

Here are some excerpts from the brief:

Our organization is (National Association of Fee Appraisers) concerned that The Department of Housing and Urban Development (HUD), by its own admission, was removing appraisers from their roster from 2001 until 2012 with no “due process whatsoever. HUD only started “due process” of removing its appraisers after appellant filed a lawsuit in Federal Court in 2012

By HUD’s own admission they failed to provide any “Due Process” to appellant from January 2010 until April 2012 when he was simply deleted from HUD’s approved list of appraisers in January 2010. The District Court omitted from its opinion an explanation for the lack of any “Due Process” provided to
appellant from January 2010 until April 2012. Depriving an appraiser of his FHA license can be devastating to his livelihood.

What do you think? Post your comments below!!

Appraisal Today newsletter

VA loans up and FHA loans down

VA loans up and FHA loans down because FHA increased its mortgage insurance cost
Excerpts:
Of the 16.4 million active-duty service members and military veterans with mortgages, less than 12% have a loan guaranteed by the Department of Veterans Affairs.
A sharp increase in Federal Housing Administration mortgage insurance premiums is making the VA more competitive, according to Megan Booth, senior policy representative at the National Association of Realtors.
“There is not a Realtor alive today that thinks FHA is a better deal” for veterans, Booth said. “That is helping the VA grow and it will continue to help the VA grow.”
VA lenders originated a record 629,300 single-family loans in fiscal 2013, which ended Sept. 30. The agency endorsed 90,820 single-family loans in the fiscal second quarter, totaling $20.1 billion, down 10.5% from the prior quarter. FHA endorsements declined at twice that rate over the same period. Sixty-three percent of VA loans are going to homebuyers rather than for refinancing, according to agency officials.
…..
Meanwhile, lenders continue to complain that there is a shortage of VA-approved appraisers and underwriters, which slows processing times. …
But the VA is becoming more responsive. “VA is trying to get more appraisers and weeding out the bad ones,” Booth said at the conference.”

http://www.nationalmortgagenews.com/news/origination/underused-va-mortgage-program-makes-inroads-as-fha-costs-rise-1041954-1.html

If you can’t access the full article without registering, there is a summary at: http://realtormag.realtor.org/daily-news/2014/06/13/va-loans-gain-popularity-fha-costs-rise

The June 2014 issue of the paid Appraisal Today had an article on how to get on the VA panel. It is very different than applying for panels for AMCs, Lenders, or FHA. No AMCs, C&R fees, appraisers treated as professionals, etc. I spent a lot of time interviewing many appraisers and VA personnel to find out about reference letters, re-applying, etc.

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