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New USPAP Q & A October 2009

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My My, a struggle between powers. My money is on HUD.

This is a conflict that will have to be resolved by our individual states.
 
FHA does not fund mortgages, they only insure loans.

In the BHC Supervision Manual, Section 2231.0.17 Appendix B-Interagency Statement on Independent Appraisal and Evaulation Functions (October 27, 2003) they following is stated:

Likewise, institutions may not use "readdressed appraisals" --appraisal reports that are altered by the appraiser to replace any references to the original client with the institution's name. Altering an appraisal report in a manner that conceals the original client or intended users of the appraisal is misleading and violates tha agencies" appraisal regulations and the Uniform Standards of Professional Appraisal Practice (USPAP).

Not only does the HUD/FHA Mortgagee Letter conflict with the current version of the USPAP and the 10/2009 USPAP Q & A, it also is in conflict with banking regulations.
 
This clear and unambigious conflict once again shows that USPAP is a Catch 22 classic. So long as the appraiser is trapped between those two worlds, how can you win? You cannot.

I hope it is clear how stupid this situation is - on the one hand, USPAP says we CANNOT DO THIS. On the other hand, it says we must comply with LENDER REQUIREMENTS...and those are totally in conflict.

You cannot comply with both, yet not to puts you in violation of USPAP . Will a STATE board ruling in favor of USPAP trump a FEDERAL regulation? I bet not. You might not be sanctioned by the state, but you certainly will be booted off FHAs board.
 
Denis DeSaix said:
A smart bet. FHA holds a trump card (JE) so they can whip it out if the really want to be in control.
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To be a Jurisdictional Exception, the new assignment for the name change would need official HUD regulations prohibiting a scope of work for the assignment beyond changing the name in the report. Its possible, but highly unlikely, HUD would pass such a regulation, and even more unlikely congress would let such a regulation stand.
 
Why is there a need for this client name change? FHA already has stated it is perfectly okay for Lender B to use the report for a FHA loan with Lender A's name on it. Why don't they just make this the clear cut policy instead of trying to play loophole games?
 
TJSum said:
Why is there a need for this client name change? FHA already has stated it is perfectly okay for Lender B to use the report for a FHA loan with Lender A's name on it. Why don't they just make this the clear cut policy instead of trying to play loophole games?
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Agreed. I really think this will be a non-issue after 1/1/2010 when we have to disclose a prior appraisal of the subject.
 
Couch Potato said:
To be a Jurisdictional Exception, the new assignment for the name change would need official HUD regulations prohibiting a scope of work for the assignment beyond changing the name in the report. Its possible, but highly unlikely, HUD would pass such a regulation, and even more unlikely congress would let such a regulation stand.
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CP-

I am not a lawyer and make no pretense of understanding all the nuances of regulatory law.
The JE Rule states portions of USPAP can be void if "contrary to the law or public policy of any jurisdiction".
I'm not sure HUD needs a new law to enact a specific policy (which would then be a "public policy") that HUD deems appropriate to support or facilitate its current public mission. It has the legal authority to manage its program now- why would it need an act of congress to make this change part of its policy process?

I agree with TJ: I have no clue as to why any change is necessary since an existing (and non-complicated) process exists that allows lender B to use a report that was originally completed for lender A.m2:
 
I don't see what the big deal is.

The appraiser is responsible for making the final SOW decision and cannot allow the client to undermine that SOW to result in a workproduct that is not meaningful to (all of) the intended users. This is not new.

That doesn't mean the appraiser has to ignore what the client is saying.

In this case, one of the intended users is telling the appraiser that they consider the appraisal fine just the way it is. That's a piece of information that the appraiser would consider to be highly relevant to their SOW decision but it's not the only relevant thing to consider. The appraiser now has a new set of intended users (the client has changed), and regardless of what the appraiser is hearing over the phone they still need to identify what the requirements are and take whatever steps are necessary to ensure that the workproduct will be sufficient. Those steps may be limited to weighing the existing "report" against whatever other new information the appraiser has about their new intended user, if any; and if it seems sufficient then maybe nothing needs to be done to "the report" other than swapping names and (as of 01/2010) making the appropriate disclosures about having performed a prior appraisal on the property in the report.

While we're on the subject, the additional disclosure requirement for the prior appraisal that becomes effective with the 2010 version of USPAP (Record Keeping section of the Ethics Rule) alters the content of the report all by itself; so the new assignment is always going to involve more than swapping names anyway.

I'm guessing that FHA's position is based on the idea that they don't want to incur another appraisal fee or portion thereof for these "transfers", which is why they're trying to bend the definition of the "new assignment". But that shouldn't be a problem for appraisers nor should it represent a conflict so long as they're willing to work under those conditions. If not, that's a business decision, not an appraisal standards problem.

The purpose of the requirements of the SOWR are to ensure that the appraiser takes responsibility for rendering services in a manner that is meaningful to the intended users. You do that by asking the question and developing the answer for it. You don't do it by assuming that one intended user (FHA) actually knows in advance what every other intended user (like the client) needs. You don't do it by taking someone else's opinion as fact. You don't do it by making unsupported and unnecessary assumptions.

As I see it, the people who are going to be "frustrated and confused" by all this are the people who want to send out the second invoice for which FHA doesn't want their borrowers to have to pay.

Mark my words, though. If you guys were to merely "readdress" per FHA instructions you'll find yourselves running into the follow-up requirements from the client after the fact. No good deed goes unpunished.
 
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