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.
Ryan, I had this situation come up a while back, and at the time did not know the correct answer. I found out however what you just said. I’m sure a lot of people will find this information very useful since it does seem confusing.
Thanks Tom. I find HUD to be very easy to talk with to when situations arise. There are so many different factors in the housing market and some very out-of-the-ordinary property conditions too that warrant a call into their office.
You are right, there is a lot of confusion in the marketplace. This is great info, thanks for posting it Ryan!
What happens if this situation occurs but the borrower is not going to another lender and the case number is being transferred because its a completely different borrower & lender? Is the new lender required to use the existing appraisal when its a new borrower? Thanks.
Hi David. Thanks so much for the question. Honestly, I would defer to an experienced loan officer for the best answer. My expertise is with appraisals and I’m not really sure on the loan side of things since I am not on that side. I would recommend touching base with a local loan officer. If you are in the Sacramento area I am happy to connect you with someone. Sorry I couldn’t be more help.
Im currantly working with a different lender cause i switched in between and my FHA case # has been released in there name along with the appraisal complete . Im in U/W now but before while waiting for other lender to realse fha case # got email for appraisal to upload bank information . But then they got the realse . So do i still have to pay again??
Thanks so much for the question. Honestly, I’m not entirely sure. I think this is where you might consider asking your loan officer about their procedures and this process. I would think you shouldn’t be paying because the entire concept is the appraisal sticks with the Borrower. I suppose if the new lender starts asking the original appraiser to do more work, clarify things, or put the appraisal in the name of the new lender, then it would be reasonable for extra fees. If the new lender charges you for an appraisal though and there has not actually been any new work done, I would definitely ask them about this to be sure you aren’t paying for something you shouldn’t be.
I just didnt know since we went to U/W same day as our appraisal and FHA case # got realised that day as well to them . But it still shows old lender on the appraisal but case # is the new lenders name. Our email we got said congratulations you have been summited to U/W and that has been a week ago and still nothing back yet.
I understand. Well, I hope you get some clarity and that things go smoothly. Best wishes.