www.hudclips.org U. S. Department of Housing and Urban Development Washington, D.C. 20410-8000 September 16, 1991 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER Mortgagee Letter 91-43 TO: ALL APPROVED MORTGAGEES SUBJECT: Single Family Loan Production - State Licensing Requirements for Appraisers and its Impact on the Direct Endorsement Program As you know, many states have begun the process of appraiser licensure and certification in accordance with Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). As part of the licensure and certification procedures, states and the federal financial regulatory agencies are adopting the Uniform Standards of Professional Appraisal Practice (USPAP), as promulgated by the Appraisal Standards Board of the Appraisal Foundation. Under USPAP, a person who signs an appraisal report as a "review appraiser" that was prepared by another appraiser, must accept full responsibility for the contents of the report. In addition, the "review appraiser" must be licensed or certified. Under HUD's Direct Endorsement (DE) program, the outstanding instructions in Handbook 4000.4 REV-1, Paragraph 3-3G, require the DE approved underwriter to sign and date the appraisal report as evidence of underwriting review. The purpose of this Mortgagee Letter is to change those instructions so that the DE underwriter does not have to sign and date the appraisal report and thereby, not conflict with the USPAP. Attached to this Mortgagee Letter is a format for a "Direct Endorsement Underwriter/HUD Reviewer Analysis of Appraisal." Instead of the DE underwriter signing the appraisal report, the underwriter should complete this format and include it in the case binder when the case is submitted with the request for endorsement if the underwriter has comments or corrections to make to the appraisal. The appraisal report itself should not be "marked up" or changed in any way by the DE underwriter. If the _____________________________________________________________________ 2 DE underwriter has no comments or corrections to make to the appraisal, then the attached format need not be completed by the DE underwriter. The DE underwriter's execution of the Form BUD 54113 will be sufficient evidence, otherwise, of the underwriter's review of the appraisal report. Generally, the attached format is self-explanatory. However, we offer the following additional guidance: 1. Additional information or entries may be added to the heading or body, if needed, to further identify the case or expand responses and/or comments. 2. Question 3 - If the comparables do not appear to be acceptable, the DE underwriter should return the appraisal to the appraiser or contact the appraiser for an explanation. HUD expects there to be communication between the DE underwriter and the appraiser to resolve inconsistencies. (Generally, appraisers should not be contacted by lender personnel other than the DE underwriter to discuss the contents of the appraisal report.) If the appraiser does not respond to the DE underwriter's requests for clarification or explanation, the underwriter should report such non-cooperation to the HUD Field Office for resolution. 3. Question 5 - For HUD/FHA loan purposes, the DE underwriter has HUD's authority to correct the value, up or down, if justified. However, DE underwriters are cautioned that some state appraiser licensure laws do not permit any change in the value on an appraisal report unless the individual making the change is a licensed appraiser. Therefore, DE underwriters must determine for themselves whether they can change the value on a particular appraisal report. 4. Question 6 - For HUD/FHA loan purposes, the DE underwriter has HUD's authority to remove or add repair conditions required by the appraiser. If the DE underwriter makes no changes to the repair items, the underwriter may simply enter "As required by appraisal" on this line. 5. The attached format will also be used by HUD for agency processed cases. _____________________________________________________________________ 3 As state licensing laws become effective in the coming months, HUD may have to adjust the procedures set forth in this letter. In the meantime, if you have any questions concerning this memorandum, please contact your local HUD Office for further guidance. Very sincerely yours, Arthur J. Hill Assistant Secretary for Housing-Federal Housing Commissioner Attachment _____________________________________________________________________ DIRECT ENDORSEMENT UNDERWRITER/HUD REVIEWER ANALYSIS OF APPRAISAL BORROWER:________________________________ FHA CASE NUMBER:_________________ PROPERTY ADDRESS_________________________ LENDER LOAN NUMBER:______________ _________________________ APPRAISER: _____________________ APPRAISER'S ESTIMATE OF VALUE:___________ 1. Does the appraisal report present a consistent and fair analysis of the property? YES NO (EXPLAIN)__________________________________________ ________________________________________________________________________ ________________________________________________________________________ 2. Comment on the report's quality, completeness, consistency and accuracy. ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ 3. Are the comparables acceptable? YES NO If not, appraisal should be returned to appraiser. ________________________________________________ ________________________________________________________________________ 4. Are the adjustments acceptable both as to items adjusted and the amount allocated to each item adjusted? YES NO (EXPLAIN) ___________________ ________________________________________________________________________ ________________________________________________________________________ 5. Is the value acceptable for HUD/FHA loan purposes? YES NO If not, should it be corrected for HUD/FHA loan purposes? YES NO Value for HUD/FHA loan purposes $__________Justification for correction: ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ 6. Repair Conditions: ____________________________________________________ ________________________________________________________________________ ________________________________________________________________________ 7. Other Comments: ________________________________________________________________________ ________________________________________________________________________ D.E. Underwriter Name___________________Chums#_________Date________________ D.E. Underwriter Signature_________________________________________________ HUD Reviewer (Name and Signature) _________________________________________