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Lender Name Change

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Working on this assignment as I post:

The intended use of the appraisal is solely to assist FHA in assessing the risk of the Property securing the FHA-insured Mortgage (24 CFR § 200.145(b)).

FHA and the Mortgagee are the intended users of the appraisal report.

The FHA Appraiser does not guarantee that the Property is free from defects. The appraisal establishes the value of the Property for mortgage insurance purposes only. A Home Inspection by a licensed Home Inspector is recommended.

And what's there to call HUD about? Apparently the client wanted to get double duty by having two lender names - one for each of two possible scenarios. The OP can't just change the lender name because the intended use of that lender was for conventional versus FHA. New appraisal assignment.
 
I think you may not have correctly interpreted what I wrote.

I guess I did; sorry about that!

The OP and the client are trying to serve two masters in that they're trying to use one intended use for two possible scenarios. IMO, this is unacceptable.
(my bold)
That's the crux of the matter. Everyone knows that FHA is an intended user for an FHA report. But is the intended use limited (as is stated in the new handbook) to only FHA-use for FHA-appraisal, or can it be used for a mortgage-finance transaction as well, as was the case before?


OK, you posted while I was writing.
Are you saying that the intended user statement must be in every FHA report (as you excerpted) and is required to be so as per FHA?
Then, I stand corrected.

And what's there to call HUD about?
Well, I emailed my first source (you!) last night but you never responded. So, I thought I'd go to HUD and email them.

Apparently the client wanted to get double duty by having two lender names - one for each of two possible scenarios. The OP can't just change the lender name because the intended use of that lender was for conventional versus FHA. New appraisal assignment.
Unless the intended use is limited to only FHA (which is what I asked you last night and am asking you today), I'm not sure that an assignment completed to FHA-protocol cannot be used for conventional financing since all the minimum reporting requirements are meant and, unless modified in the report, the stated intended use of the appraisal is for mortgage finance and the client is the named client from the get-go.
 
I thought I referenced that it was from Appendix D and asked if it was still in effect (because it is still referenced on the HUD page; that's where I captured the segment)?

I've emailed HUD to ask about this scenario. I'll share the answer with everyone when they reply (as well as the question as I asked it so everyone can judge if it addresses the specific OP issue).

But, my one question remains (which I don't know the answer to and I'll take your, RSW's, response as fact, if you happen to know):
Does FHA require that the intended use on the 1004 be modified as it is stated in the protocol you posted? Is that specific statement added to the report?
If so, then (as I said before) I stand corrected. :cool:
(notwithstanding, I'll still share the response I receive from HUD).

I would assume it has to be modified since it not only shows up in the 4000.1, but also in the Appraisal Report & Data Delivery Guide which replaced the Revised Appendix D in the 4150.2 handbook.
 
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?
 
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.
 
4150.2, Chapter 4


D. INTENDED USE OF APPRAISAL/FUNCTION

(4-1) The intended use or function for all appraisals

prepared for FHA is to support the underwriting requirements

for an FHA-insured mortgage.



E. USE OF THE APPRAISAL

The use of the appraisal is to support FHA's decision to

provide mortgage insurance on the real property that is the

subject of the appraisal. Therefore, intended users include

the lender and HUD.



Appendix D to 4150.2

Intended Use of Appraisal

The intended use for all appraisals prepared for FHA is to support the underwriting requirements for an FHA-insured mortgage.


Also in Appendix D to 4150.2

Intended Use

The intended use of this appraisal report is for the lender/client to evaluate the property that is the subject of this appraisal for a mortgage finance transaction.

Intended User

The intended user of this appraisal report is the lender/client and HUD/FHA


More from Appendix D 4150.2

Enter the name of the lender/client who ordered and will receive the appraisal report. After the client’s name add “its successors or assigns”.

• The use of the appraisal is to support FHA’s decision to provide mortgage insurance on the real property that is the subject of the appraisal; therefore, intended users include the lender/client and FHA.

• Enter the lender/client’s address.


I found numerous variations on the intended use verbiage – it depends on how far back you want to go.


One feller states:


FHA requires a different intended use and intended user statement than Fannie
Mae.

The INTENDED USE of this appraisal
is to support FHA’s decision to provide mortgage
insurance on the real property that is the subject of the appraisal. This
INTENDED USE statement supersedes the preprinted statement on page four of this
report. (See Appendix D, 4150.2 Handbook, page 15)




The INTENDED USER of this
appraisal report is the lender/client and FHA. This INTENDED USER statement
supersedes the preprinted statement on page four of this report. (See Appendix
D, 4150.2 Handbook, page 15)




https://everythingappraisal.wordpress.com/2008/04/08/FHA-intended-useuser/
 
Like I was saying in our own private discussion, If it's not going to FHA (the first lender named) then it doesn't matter if the statement was included or not included in context with what they want for the other named lender who want's to do a conventional loan so the pre-printed intended user statement would probably suffice. No one is going to find out and no one will get into trouble.

Has anyone asked the OP if he used the FHA intended use statement in the appraisal report with the FHA case number on it?
 
I would assume the OP knows FHA Appraisal Protocol and knows the statement is required. But, then again, you know what happens when you assume something.
 
The lender can use the appraisal for an in house lending decision provided it meets, or exceeds, their requirements from a safe and sound banking practice (bank policy).
If it is to be sold on the secondary market the appraisal must be addressed to the seller of that loan (FNMA/Freddie policy). That may be the issue in this case.
 
If I did an appraisal for Lender Bob and a few hours later Lender Bobbi wanted one too I could just swap the names out and no one would be the wiser. Except for me.
 
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