Comments on: Appraising the FHA — and the Mortgage Marketplace http://www.fhaloanpros.com/2008/03/appraising-the-fha-and-the-mortgage-marketplace/ The Unofficial Guide to FHA Loans & Mortgages Mon, 12 May 2008 23:08:16 +0000 http://wordpress.org/?v=2.0.5 by: Marc Brinitzer http://www.fhaloanpros.com/2008/03/appraising-the-fha-and-the-mortgage-marketplace/#comment-4309 Wed, 26 Mar 2008 13:35:28 +0000 http://www.fhaloanpros.com/2008/03/appraising-the-fha-and-the-mortgage-marketplace/#comment-4309 I agree that FHA appraisal requirements have provided an extra pound of prevention for the consumer. This has often been a hidden blessing for the first time buyer. Past FHA requirements turned the FHA appraiser into a quasi home inspector, and provided a check and balance against over-eager Realtors, lenders, inspectors and buyers. I also strongly believe that increased educational and experiential requirements are key to weeding out the bad people who jumped into appraisal and lending industries for the quick buck. So look at what is happening now. FHA has recently reformed itself and loosened its loan and appraisal requirements to match conventional loans. No more mandatory pest inspection and clearance of both Section I & Section II report items, no roof inspection, no buyer non-allowable costs (except tax service fee). And while Andrew Cuomo is busy negotiating with the GSE's to take the choice of appraiser out of the mortgage broker's hand--another retarded brainchild that will create more problems than it will solve--FHA is lowering the requirements for becoming an FHA appraiser, ensuring that those with less experience will now flood the FHA market. In tandem, these two trends will create opportunities for bad people to become bad appraisers and make lousy appraisals even more prevalent. As they say, guns don't kill people, people do. Same goes for appraisals, loan, and uh...lawsuits. I agree that FHA appraisal requirements have provided an extra pound of prevention for the consumer. This has often been a hidden blessing for the first time buyer. Past FHA requirements turned the FHA appraiser into a quasi home inspector, and provided a check and balance against over-eager Realtors, lenders, inspectors and buyers.

I also strongly believe that increased educational and experiential requirements are key to weeding out the bad people who jumped into appraisal and lending industries for the quick buck.

So look at what is happening now. FHA has recently reformed itself and loosened its loan and appraisal requirements to match conventional loans. No more mandatory pest inspection and clearance of both Section I & Section II report items, no roof inspection, no buyer non-allowable costs (except tax service fee).

And while Andrew Cuomo is busy negotiating with the GSE’s to take the choice of appraiser out of the mortgage broker’s hand–another retarded brainchild that will create more problems than it will solve–FHA is lowering the requirements for becoming an FHA appraiser, ensuring that those with less experience will now flood the FHA market. In tandem, these two trends will create opportunities for bad people to become bad appraisers and make lousy appraisals even more prevalent.

As they say, guns don’t kill people, people do. Same goes for appraisals, loan, and uh…lawsuits.

]]> by: Carl Pruitt http://www.fhaloanpros.com/2008/03/appraising-the-fha-and-the-mortgage-marketplace/#comment-4295 Wed, 26 Mar 2008 03:04:23 +0000 http://www.fhaloanpros.com/2008/03/appraising-the-fha-and-the-mortgage-marketplace/#comment-4295 This was once a bad problem. However, it is a problem which the market has already substantially solved on its own. There aren't many lenders left, if any, who don't have multiple levels of appraisal review by both automated systems and in-house appraisal review departments. Appraisals are routinely picked apart every way to Sunday once they are turned in for underwriting. As irritating as this procedural change has been to real estate agents, appraisers, mortgage brokers and even customers, it has been a very favorable development for the future of the mortgage industry. The days when one appraiser could get a bad appraisal through without it being challenged ended almost 2 years ago. The problem with appraisals over the last couple of years is not that they weren't valid at the time of the loan, but that the foreclosures caused by mortgage fraud and ridiculously lenient loan programs have caused property values to crash. Please also note that HUD is very specific in warning that the appraiser is there to inspect the condition of the property for the benefit of HUD should a foreclosure occur. The borrower must sign specific disclosures stating that HUD recommends they have their own property inspection done. This was once a bad problem. However, it is a problem which the market has already substantially solved on its own. There aren’t many lenders left, if any, who don’t have multiple levels of appraisal review by both automated systems and in-house appraisal review departments. Appraisals are routinely picked apart every way to Sunday once they are turned in for underwriting.

As irritating as this procedural change has been to real estate agents, appraisers, mortgage brokers and even customers, it has been a very favorable development for the future of the mortgage industry.

The days when one appraiser could get a bad appraisal through without it being challenged ended almost 2 years ago. The problem with appraisals over the last couple of years is not that they weren’t valid at the time of the loan, but that the foreclosures caused by mortgage fraud and ridiculously lenient loan programs have caused property values to crash.

Please also note that HUD is very specific in warning that the appraiser is there to inspect the condition of the property for the benefit of HUD should a foreclosure occur. The borrower must sign specific disclosures stating that HUD recommends they have their own property inspection done.

]]>