HUD and the AMC
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Mortgagee letter on choosing FHA appraiser, AMC &/or 3rd party fees…
Does HUD have a Better Understanding of the Role of AMCs?
Recently an old HUD/ FHA mortgagee letter has resurfaced. The mortgagee letter, 2009-28 has to do with choosing a FHA approved Roster Appraiser and Appraisal Management Company and / or Third Party Organization Fees. This mortgagee letter specifically states
“the fee for the actual completion of an FHA appraisal may not include a fee for management of the appraisal process any activity other than the performance of the appraisal.”
This mortgagee letter was written prior to the Final Rules and VaCAP reached out to the HUD Resource Center to determine if the mortgagee letter was still in effect or had been updated. From a conversation with the representative, we learned there have been a number of complaints received by HUD for extremely high appraisal fees when an AMC is involved. These complaints are coming from FHA borrowers. At the present time, no action has been taken; be assured, this is being monitored.
As we are all well aware, the mortgagee letters have been combined, sliced, diced and tossed into Handbook 4000.1. Here is what the Resource Center provided from 4000.1. FHA no longer states the appraisal fee must be separate from the AMC fee. It states:
“The Mortgagee must ensure that all fees charged to the borrower comply with all applicable federal, state and local laws and disclosure requirements”
Read the full text of what the Resource Center provided below, but here are some highlights from the information:
- “The Mortgagee may engage an appraisal management company for the services of obtaining an appraisal”
– Does this mean staff appraisers of the AMC are not allowed?
- “The Mortgagee may not pay the AMC and other third-party contractors fees in excess of what is customary and reasonable for such services in the market area where the property being appraised is located.”
– Who is paying the AMC? Borrower or Lender?
– Who is enforcing customary & reasonable fees to the AMCs?
- “Any management fees must be for the actual services related to the ordering process, or review of appraisal for FHA financing”
– Does this also mean no AMC staff appraiser can complete the appraisal report?
- The Mortgagee must evaluate the appraiser’s education, training and actual field experience to determine whether the appraiser has sufficient qualifications to perform the appraisal before assignment.
– How does blasting orders to multiple appraisers satisfy this?
Direct from HUD Resource Center/ Handbook 4000.1
Does FHA establish or regulate the appraisal fee or appraisal fee due dates?
The appraiser and the Mortgagee or Mortgagee-designated third party will negotiate the appraisal fees and due date. FHA does not establish appraisal fees or due dates. The Mortgagee must ensure that it does not:
- compensate the appraiser at a rate that is not commensurate in the market area of the property being appraised with the assignment type, complexity and scope of work required for the appraisal services performed;
- withhold or threaten to withhold timely payment or partial payment for an appraisal report;
- prohibit the Appraiser from recording the fee paid for the performance of the appraisal in the appraisal report;
- condition the ordering of an appraisal report or the payment of an appraisal fee, salary, or bonus on the opinion, conclusion or valuation to be reached, or on a preliminary value estimate requested from an appraiser
The Mortgagee may engage an Appraisal Management Company (AMC) to perform services related to the obtaining of an appraisal. The Mortgagee remains responsible for the acts of its AMC or third-party contractors. The Mortgagee may not pay the AMC and other third-party contractors fees in excess of what is customary and reasonableAny management fees must be for actual services related to the ordering process, or review of appraisal for FHA financing.
The Mortgagee must ensure that all fees charged to the borrower comply with all applicable federal, state and local laws and disclosure requirements.
For additional information see Handbook 4000.1 I.B.1.d.iv; II.A.1.a.iii.(B)(6)(c); II.A.6.a.x.
What are the Mortgagee’s responsibilities when selecting the appraiser?
The Mortgagee must order an appraisal from an appraiser who is listed on the FHA Appraiser Roster and is qualified and knowledgeable in the specific market area in which the property is located.
The Mortgagee must evaluate the appraiser’s education, training and actual field experience to determine whether the appraiser has sufficient qualifications to perform the appraisal before assignment.
The Mortgagee may not discriminate on the basis of race, color, religion, national origin, sex, age, disability, or actual or perceived sexual orientation and gender identity in the selection of an appraiser.
The Mortgagee may engage an Appraisal Management Company (AMC) to perform services related to obtaining an appraisal. The Mortgagee remains responsible for the acts of its AMC or third-party contractors.
The Mortgagee may not allow the appraiser to be selected, retained, managed, or compensated by a mortgage broker or any member of a Mortgagee’s staff who is compensated on a commission basis tied to the successful completion of a mortgage or who is not independent of the Mortgagee’s mortgage production staff or processes.
For additional information see Handbook 4000.1 II.A.1.a.iii.(B)(6).
DISCLAIMER: All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.