Apparently the argument is that while the 4000.1 states what the intended use of an FHA appraisal is, does it require that specific use be stated in the report or will the generic, pre-printed intended use suffice?
That's a large part of the argument.
I'll go with what FHA says (hopefully they'll respond to my email question).
The USPAP is clear: the intended use must be identified in the report.
Prior to the new handbook (as evidenced by the old Appendix excerpt I posted) the FHA protocol identified the pre-printed intended use as the correct intended use to use.
Now, the new handbook has additional language that wasn't in the old protocol (at least I don't think it was).
The OP had an assignment where two entities were named as the client.
The report was completed (presumably) per the FHA protocol. That protocol (as a rule) exceeds what is typically required for a non-FHA, residential-mortgage appraisal inspection SOW.
There was no change of the client; the only change requested was to name one client as the "client' on the pre-printed form's section within the report rather than the other. Presumably, both clients (as per the USPAP) are identified somewhere in the report.
One of the reasons to identify the intended use is to ensure that the SOW is sufficient for that use. If FHA requires that the only use for an appraisal when it is named an intended user is for FHA use only ("solely") then so be it. That should be identified in the report and that ends the issue. But the SOW used for an FHA appraisal is consistent (it actually exceeds, in many cases) what a non-FHA mortgage finance SOW requires.
If FHA is fine with the standard intended use on the pre-printed form ("a mortgage finance transaction") that would not only includes FHA but also include conventional (GSE) and non-conventional as well.
Just as I don't see the reason why an FHA appraisal cannot be used by a lender for (a) an FHA-guaranteed mortgage and a HELOC line of credit (a non-FHA intended use), I don't see why (b) an original client for an FHA appraisal cannot use it for a mortgage finance transaction as-is, if it wants to.... unless that is specifically excluded per FHA.
Now, I didn't want to bring this up because I don't want to make it (or have it misinterpreted) as part of my argument:
It isn't the appraiser's responsibility to ensure that a client is going to use the report for its intended use. It is the appraiser's responsibility to identify the intended use and develop the SOW necessary to complete the assignment consistent with what is required to do so. Identifying the intended use protects the client and the appraiser: the (a) client in that it understands what the appraisal is intended to be used for and (b) the appraiser, because the appraiser is not responsible for consequences that result from using the appraiser for something it wasn't intended to be used for.
In this case, had the appraiser been requested to change the name on page one (put the secondary client on page one and put the primary client in the addendum) with no other information, that request could have been done without any hesitation.
This situation differs in that the appraiser is being told that the reason to switch the client's names (on page one... again, there is no new client here and both client's are identified) is because the first lender passed on the FHA loan and the second lender is going to use the report for a conventional loan. If that use is (a) consistent with what has been identified in the report and (b) does not contravene what FHA requires or expects, I don't see the issue. It could be done and in a USPAP compliant manner (which is the benchmark I'm considering).
Although it isn't the appraiser's responsibility to ensure that a client is going to use the report for its intended use (use the report correctly), if I believe a client is going to incorrectly use the report, I'm not going to comply with that request and state that as the reason: you are not using the report as it is intended and identified, and I'm not going to facilitate that non-intended use. Nor would I recommend anyone else doing so.
But that's what this debate (or at least my question) is all about: Is using an appraisal that was ordered by a client to conform with the FHA protocol so it could be submitted for an FHA lending program acceptable for a non-FHA lending program by the same original client?
Nothing is changing in the report (except for the ID of the client in the pre-printed form). Everything else is the same. Presumably, if there was only one client, they'd use it as-is without any question. Presumably, if the secondary client was named rather than the primary on the form, they'd have what they want and they would use the appraisal for their lending purposes.
The only thing that limits the report for use as an FHA-only report is if it is stated as
the only intended use. If FHA requires that statement, then that ends all debate (IMO). If they don't require that statement to limit the use and they don't care who uses it if they are not going to use it, then it is up to the lender to determine if, as-reported, the appraisal is consistent with what is required for its intended use: a mortgage finance transaction.