FHA Extends Appraisal Validity Period
On July 12, 2022, the FHA announced that it is extending the initial appraisal validity period from 120 days to 180 days and the appraisal update validity period from 240 days to one year. This applies to case numbers assigned on or after June 1, 2022.
This just seems like a bad idea at a time where many markets are seeing price declines.
FHA INFO 2022-71 — July 12, 2022
In this Announcement:
- FHA Implements Revised Appraisal Validity Period Guidance
- Appraisal Logging Changes in FHA Connection
See below for details.
FHA Implements Revised Appraisal Validity Period Guidance
Today, the Federal Housing Administration (FHA) published Mortgagee Letter (ML) 2022-11, Revised Appraisal Validity Periods.
For most Title II forward and Home Equity Conversion Mortgage (HECM) originations, FHA is extending the initial appraisal validity period from 120 days to 180 days and the appraisal update validity period from 240 days to one year. These changes align FHA appraisal validity periods with industry practices, making it easier for lenders to operationally manage appraisal validity while potentially reducing appraisal costs for mortgagees and ultimately, borrowers seeking FHA-insured mortgage financing.
The appraisal validity period establishes the maximum time mortgagees may use an appraisal report for an FHA-insured mortgage. This also includes the time FHA permits mortgagees to utilize an appraisal update to extend the initial appraisal validity period.
With these changes, the current optional 30-day extension is no longer necessary. In addition, FHA is removing the requirement for an update to be performed before the initial appraisal has expired.
The ML, which applies to the following FHA Single Family Title II Forward and HECM programs, outlines the policy updates noted below:
For Origination through Post-Closing/Endorsement, the ML:
- applies to case numbers assigned on or after June 1, 2022;
- updates the initial appraisal validity period from 120 days to 180 days from the effective date of the appraisal report;
- extends the appraisal update validity period from 240 days to one year from the effective date of the initial appraisal report; and
- eliminates the optional 30-day extension.
For Servicing and Loss Mitigation, the ML:
- applies to appraisals with effective dates on or after July 12, 2022; and
- updates the initial appraisal validity period from 120 days to 180 days from the effective date of the appraisal report.
For HECM Financial Assessment and Property Charge, the ML:
- applies to case numbers assigned on or after June 1, 2022;
- updates the initial appraisal validity period from 120 days to 180 days from the effective date of the appraisal report; and
- extends the appraisal update validity period from 240 days to one year.
The updates highlighted in this ML will be incorporated in a future version of the Single Family Housing Policy Handbook 4000.1.
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Its a government entity. They are always behind.
These are the borrowers that need the most help. Their loans really need to know the value today with all that is going on.
No one ever learns.
And when the values are less than market appraisers will be blamed for misappraising again.
It amazes me that HUD wants to completely ignore what condition the property might be in from the date of appraisal to a year later. Cut the appraisal cost, but blame the appraiser for the evaluation when the loan goes south. Here we go again!!!! This is just one of the many mistakes to follow!!
I remember when FHA wanted the comps to have closed within 90 days. LOL
Well, if they ask for an update, then our due diligence would be to note if in fact there is market decline, and report accordingly.
Start charging higher fees for updates because most likely you’ll have to back up your claims of price changes if need be. In my area in Sacramento, there appears to be no decline in the ‘near future’. But depending on market inflection, that can change over night in about 1 year. So just be on your toes and charge for your expertise.
As a Chinese valuer, I am very interesting in the term Validity Period. Is it conflict with the concept of effective date of valuation? Technically the valuation result is only effective in the effective date of valuation. It could not be effective for a period of time after that date.
We do have similar term in China. It is first called the validity period of the valuation result. We tried to change it to validity period of the use of the report, which should be determined by the user and means the user could not use the report out of the validity period of use.
I do appreciate if any valuer could kindly let me know your opinion in US in this regard.
Please kind leave your opinion here. Many thanks!
This makes little to no sense! We are just extending the appraisal time so that people don’t panic. Instead of constantly trying to manipulate the market, we need to allow the boom/bust cycles that are intrinsically a part of a free economy. There are ups and downs, this is naturally. The downs are in place so that people do not pull their money out of the markets, that way they don’t take a lose.
We causing irrational and in predictable causes because of over manipulation.