Ask Henry

Based on the questions being asked online there seems to be a lot of confusion about the new HUD-FHA regulations. Here are the official answers to some of the most common questions.

When do the new HUD-FHA regulations become effective?
Answer: They were supposed to be effective 6/15/2015. The effective date has been postponed until September 14, 2015.

If mortgagees are ready to implement on June 15, will they be allowed to submit cases that use the SF Handbook on or after this date?
Answer: No. Mortgagees must submit cases that use existing FHA policy until the new SF Handbook becomes effective on or after September 14, 2015.

Will FHA publish a “Highlights of Changes” document that summarizes the policy changes contained in Origination through Endorsement?
Answer: No.

Will you publish a new “Harrison’s Illustrated Guide – How to Make an FHA Single Family Appraisal”?
Answer: Yes! I am working on now and plan to have it available in early August. You can make a publication order from Forms and Worms 1-800-243-4545 or www.formsandworms.com. Pre-Order and Save 10%! Pre-order price of $44.95 for orders placed before 9/14/2015. Regular price $49.95

Book Review

FHA-Combo

The Complete HUD-FHA Combo Set
Vol. 1 & Vol. 2


Compiled by Henry S. Harrison, MAI, ASA, IFAS, DREI
Vol. 1 & Vol. 2 Combo Set •  $67.50 + S&H
Publication Date: 2013

phone: 1-800-243-4545
www.formsandworms.com

Any appraiser doing FHA appraisals needs to have a copy of "FHA Handbook HUD-4150.2" and Chapter 4 from FHA Handbook 4155.2 (only chapter 4 apples to appraisers), the 28 mortgage letters that update the Handbooks and the over 150 of the Frequently Asked Questions supplied by the FHA to help understand their publications.

I want to take this opportunity to share with you my experience in compiling these two FHA Handbooks. While this information is available free of charge from the FHA site, downloading it all is a nightmarish undertaking.

My first plan was to combine this updated 2013 material into one book as I had done in the past. Unfortunately, the FHA has expanded this material so much that it will no longer fit into one volume using my printer – the same printer I have used for many years to print my books because of their good quality, fair prices and reliable delivery time.

If you would like to get a free copy of the FHA Handbook HUD-4150.2 by downloading it from the FHA site here is what you do:
1. Go the the FHA site at www.fha.gov
2. Click on the left hand column under Audience Groups click on "Appraisers"
3. Click on the left hand column under Find Answers click on "Mortgagee Letters and Handbooks
4. Click on the right hand column under Reference Materials "Handbook HUD-4150.2

Here is where I ran into trouble. On this page there is a choice of downloading the handbook as a word fillable form or a PDF version. I could not get the "word fillable form" version to work so I resorted to downloading each of the individual nine PDF files. The result is a manual of about 350 pages.

Unfortunately, this is not all you need. You also need to download from the lenders handbook "Chapter 4 "Property Valuation and Appraisals" from HUD Handbook 4155.2. The subjects of interest to appraisers in this Chapter 4 are as follows:

  • the purpose of property valuation
  • lender responsibility for appraisers
  • appraisal management company (AMC) and third party organization fees
  • verification of compliance with property requirements
  • lender responsibility for determination of property eligibility and accuracy of appraisal value
  • variation in property appraisal and underwriting process
  • property eligiblity for FHA insurance
  • property eligibility under section 223 (e)
  • compliance inspection requirements
  • appraisal assignment to ensure appraiser competency
  • preventing improper influences on appraisers
  • prohibition of mortgage brokers and commission based lender staff from the appraisal process
  • appraiser independence safeguards
  • appraiser selection in the FHA connection, and
  • DE underwriter responsibility for quality of appraisal report.

If you would like to get a free copy of the FHA Handbook HUD-4155.2 by downloading it from the FHA site here is what you do:
  1. Go the the FHA site at www.fha.gov
  2. Click on the left hand column under Audience Groups click on "Appraisers"
  3. Click on the left hand column under Find Answers click on "Mortgagee Letters and Handbooks"
  4. Click on the right hand column under Reference Materials "Handbook HUD-4150.2"

The FHA Handbooks are now over four year old and there are 28 mortgage letters that have been issued. All of them are needed to update these FHA Handbooks. Instead of issuing a new edition of their publications, the FHA has issued 150 FAQs that update the texts:
  • HUD ML 2012-23: Loan Origination Procedure Q&A: 4 pages
  • FAQ: Natural Disaster Protocols: 1 page
  • FAQs UAD and Other Appr Forms ML 11-30: Special FHA UAD requirements
  • L 11-07 Elimination of Master Appr Rpt.: When case numbers can no longer be assigned
  • FAQs Declared Disaster Area ML 12-23
  • ML 12-23  Declared Disaster Areas: Included with mortgage letters
  • FAQs Disaster Loans Before 11/16: FAQ; Natural Disaster Protocols, 1 page chart
  • FAQs UAD and Other Appr Forms ML 11-30: Special FHA UAD requirements
  • ML 11-07 Elimination of Master Appr Rpt,: When case numbers can no longer be assigned
  • FAQs Lead Based Paint:Clarifies who can inspect for lead when the property was built before 1978
  • FAQs Reasonable Fees/Time: Spells out the FHA's position on how reasonable fees are determined.
  • FAQs Meth Remediation: Clarifies what to do when there is methamphetamine contamination
  • FAQs Appraiser Valuation: 37 pages covering 16 subjects
  • FAQs Appraiser Roster Link not active as of 8/8/2013
  • FAQs , Update ML 09-51: Claries by whom and when an update report may be prepared.
  • FAQs Appraisal Portability ML 09-29: Clarifies whom and when a second appraisal report is required
  • FAQs Appraiser Independence ML 09-28: 6 pages clarifying by whom and when fees can be collected.

The bottom line is this: Any appraiser who is doing FHA appraisals needs to have a copy of "FHA Handbook HUD-4150.2" and Chapter 4 from FHA Handbook 4155.2 (only chapter 4 apples to appraisers), the 28 mortgage letters that update the Handbooks and the over 150 of Frequently Asked Questions supplied by the FHA to help understand their publications. I have compiled these documents and sell them as a combined set with included CD-ROMs of all of the resources for your convenience.

The Complete HUD-FHA Combo Set is available from
Forms and Worms 1-800 243-4545 or www.formsandworms.com for 25%-off when you buy the combination.

HSH
askhenryharrison@revmag.com


FHA Ad

Editorial

The Rise and Fall of Fannie Mae and Freddie Mac
by Henry S. Harrison

fannie-freddie-pic
Last June, I answered an “Ask Henry” question from a reader: “When will the residential real estate recession end?” My answer was that I thought that it would end in the term of whoever was elected President in November 2016. Between June and when Barack Obama was reelected President, the news media was full of press releases and commentator predictions that the country was well on its way to a real estate recovery.


Real Estate Appraisers — whose livelihood is closely tied to the fate of Fannie Mae and Freddie Mac — as a group seem to be ignoring how the future of these two organizations will affect their businesses. The latest figures show that these two giants are now guaranteeing about 90% of all the single family home mortgages in the US.

On December 29, 2000, the price of Fannie Mae stock hit an all-time high of $86.75 per share. Eleven years later, it hit rock bottom at a low of $0.20 per share. As of September 18, 2013, it closed at $1.17 per share. So the question remains, why is it trading at all, given the government takeover?

The answer is there are a number of people and hedge funds who believe that Fannie Mae and Freddie Mac will survive the present governmental conservatorship and will once again become publicly traded companies. What makes this unlikely, in my opinion, is that the government created a new government senior preferred shares which placed the common stock last in line to receive any assets of the company that remain if and when the conservatorship is terminated. If you are looking for a very long shot investment, Fannie Mae stock should be considered. Your stock broker should be able to tell you how to do this. However, this is not a recommendation.

Most appraisers know that Fannie Mae and Freddie Mac are in trouble. But who they are and what they have done politically to prompt the federal government to announce it is standing by with a possible multibillion-dollar bailout remains unknown to most.

Here is their history.

Read More...

Ask Henry

Final Utilities Inspection
Dear Henry
I'm a huge fan of your articles and Q and A for a long time.

I’ve been asked by a lender to do a "final inspection" on a HUD resale for just the utilities hookup. The original appraisal was done a few months ago by a different appraiser for a different client. The new lender (my client) is asking specifically that only the utilities be checked. Can I do that? And what form would I use (all the standard forms imply that the appraiser doing the final inspection is the one that did the original appraisal). Any suggestions on what form might protect me from being tied to the original appraisal?

Thanks!
Paul Ryan
paulgryan@cox.net

Dear Paul,
It does not make any difference what form you use (or maybe just a letter) as long as it is crystal clear that you are not making an appraisal or rendering any opinion as to what affect the connection of the utilities will have on the value of the property. If you give such an opinion, you are making an appraisal and must conform to all the USPAP requirements for making an appraisal.

Thanks for your kind comments.

HSH
askhenryharrison@revmag.com

Ask Henry

Remaining Economic Life

Hello Henry,

I have an underwriter saying that the economic life needs to be included on all reports, even though the URAR form 1004 says it is needed for HUD/VA only. Have I missed something in this regard? Thanks in advance for your time.

Yours,
Dianne Mendel
mndcns@att.net

Dear Dianne,

The USPAP states that for every appraisal, the appraiser and the lender client must have a scope of work dialogue. The designers of the URAR 1004 have incorporated some of their scope of work requirements into the URAR. What the URAR is telling you is that Fannie Mae and Freddie Mac do not require that you estimate the remaining economic life while the HUD/VA does require it. However, if the appraiser feels it is necessary in order to make a credible appraisal (which is required by the USPAP) it should be included. What the underwriter is saying to you is that for the lender/client they represent, it is required, which is their right.

HSH
askhenryharrison@revmag.com