When I do appraisals for FHA loans, this situation comes up quite a bit, and my sense is there is confusion in the marketplace about this issue. When an FHA appraisal has been done in the name of one lender, but then the loan transfers to a new lender, does the new lender need to ask the appraiser to “reassign” the appraisal so that the appraisal is in the name of the new lender? Nope. See below.
Here is all you ever wanted to know – verbatim from FHA/HUD:
FAQ : When a case number is transferred with a completed appraisal, may a new appraisal be requested?
Solution Details : When a borrower has switched lenders, the 1st lender must transfer the case to the 2nd lender upon borrower request. FHA does not require that the client name on the appraisal be changed when it is transferred to another lender.
In accordance with USPAP, the lender is not permitted to request that the appraiser change the name of the client within the appraisal report unless it is a new appraisal assignment. The appraiser cannot ‘readdress’ (transfer) the original appraisal report to another party and must perform a new appraisal assignment in compliance with Advisory Opinion #26 and FAQ # 74 in the 2008-2009 edition of USPAP.
For cases assigned on or after January 1, 2010, a 2nd appraisal may be ordered by the 2nd lender when:
1. The 1st appraisal contains material deficiencies determined by the DE underwriter for the 2nd lender.
2. The appraiser performing the 1st appraisal is on the 2nd lender’s exclusionary list.
3. Failure of the 1st lender to provide a copy of the appraisal to the 2nd lender in a timely manner would cause a delay in closing, posing potential harm to the borrower. Potential harm includes events outside of the control of the borrower such as loss of interest rate lock, purchase contract deadline, foreclosure proceedings, and late fees.
For cases in 1 and 2 above, copies of both appraisals must be retained in the case binder. For cases in 3 above, the 1st appraisal must be added to the case binder when it is received. In all cases, the lender must document why a 2nd appraisal was ordered and retain the explanation in the case binder.
FHA prohibits appraiser shopping where lenders order additional appraisals in an effort to assure the highest possible value for the property and/or the least amount of deficiencies and/or repairs are noted and required by the appraiser.
I hope this was helpful. If you have any questions, feel free to call me at 916-595-3735 or email ryan@LundquistCompany.com.