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Respa- Flipping-appraisal "mistakes"

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Julio E. Sune Jr. (FL)

Senior Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Florida
SOURCE: mortgagegrapevine.com (ask the experts--legal corner)

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IF YOU DID NOT LIKE THE FLIPPING RULE IN MORTGAGEE LETTER 03-7 WAIT UNTIL THIS NEW ONE COMES OUT IN FINAL FORM


This rule addresses property "flipping," the practice whereby a property recently acquired is resold for a considerable profit with an artificially inflated value, often abetted by a lender's collusion with the appraiser. Specifically, the final rule will establish certain new requirements regarding the eligibility of properties for FHA mortgage insurance. The regulatory amendments made by this rule will comply with Congressional mandates to maintain the FHA Insurance Fund in a sound actuarial manner. The new requirements will make flipped properties ineligible for FHA financing, thus precluding FHA home purchasers from becoming victims of property flipping. The rule follows publication of a September 5, 2001, proposed rule, and takes into consideration the public comments received on the proposed rule. (68 FR 23370)

MORAL


All the fraud brought more regulations. Mortgagee Letter 03-7 defines loans not eligible for insurance and loans within twelve months to have additional documentation and/or appraisals. Now it will be further defined.

IF APPRAISER FOULS UP, YOU BUY THE LOAN AND/OR LOSE YOUR APPROVAL OR HOW TO BE THE ABSOLUTE GUARANTOR AND ASSUME THE APPRAISERS LIABILITY FOR BEING WRONG


This rule allows HUD to hold sponsors and loan correspondents liable if the appraiser makes a mistake. The rule provides that lenders are to be held strictly accountable for the quality of appraisals on properties securing FHA-insured mortgages. Further, the rule specifically provides that lenders that submit appraisals to HUD that do not meet FHA requirements are subject to the imposition of sanctions by the HUD Mortgagee Review. The rule applies to both sponsor lenders, who underwrite loans, and loan correspondent lenders, who originate loans on behalf of their sponsors. (68 FR 1766)

MORAL


Isn't this nice. You now will be able to tell the borrowers you are giving them a 100% gold plated guarantee that the appraiser will not make a mistake and if there is a mistake you will be responsible. How nice of you to assume the liability.


:asleep:
 

Ben Vukicevich SRA

Senior Member
Joined
Feb 9, 2002
Professional Status
Certified General Appraiser
State
New Jersey
Julio,

The lender has always been responsible for the appraiser under Direct Endorsement with FHA. I don't know why the lenders think there's something new in the recent mortgagee letter regarding appraisers.

When FHA had the old roster (similar to what VA has today) FHA was responsible for the appraiser's actions. If the appraiser screwed-up, it was FHA's problem because they approved , reviewed and educated the appraisal panel directly.

Once DE went into effect, the lender picked the appraiser and they also ended-up with the full responsibility for the appraiser. I can remember when DE first went into effect, the lenders took this threat seriously and actually went looking for appraisers who were on the former FHA roster as they knew the FHA ropes. But when the threat wasn't strongly enforced, they went looking elsewhere for appraisers.

Ben
 
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