Tagged: Consumer Financial Protection Bureau
WTF Wells Fargo, Freddie Appraisal Fraud List, Appraiser Lunch
I received 2 replies to the request to do an appraiser lunch. (1 from Milwaukee) Anyone else interested? I send out emails to appraisers in the area on a fairly regular basis complete with photos and links. If you would like to be on that list let me know. I put my contact info at the bottom. The photos don’t transfer, so here are the links, sort of.
I found Freddie’s list of what to look for in an appraisal to detect fraud. How many of these things are typically in your appraisal?
Freddie Mac Fraud Screening Guide
What to do if you are put on the Freddie Mac exclusionary list.
WTF Wells Fargo?
Wells Fargo used to have a good name and the stagecoach is cool. Ever since the great depression they have been a leader in earnings. Why are they trying to promote their business as a criminal enterprise?
Here are a few blog posts from the National Real Estate Post.
https://thenationalrealestatepost.com/?s=wells+fargo
Search for Homes Here
Dean Smith
Cell: 608 712-6086
Email: RealEstateEinstein@gmail.com
Secondary Email: Dsmith@starkhomes.com
Blogs: https://realestateeinstein.wordpress.com
https://wisconsinappraiser.wordpress.com/
Website: dsmith.starkhomes.com
I always appreciate referrals
TRID, AMC regulation effects,
I was thinking of starting an “Appraiser Ride” page on the “Wisconsin Appraiser Blog”. I envision it looking something like this. Send your photos and let me know If you want your name on it.
There have been several developments since my last post. HUD has changed the deadline for using the new handbook to September 14, 2015. HUD decided that there are so many changes happening in the mortgage industry that it might be too much for lenders.
The Consumer Financial Protection Bureau (CFPB) introduced new Integrated Disclosure rules that amend existing requirements for mortgage disclosures:
Effective with RESPA applications received August 1, 2015, The Good Faith Estimate and Initial Truth in Lending Disclosure will be replaced with the “Loan Estimate” Disclosure. The HUD-1 Settlement Statement and Final Truth in Lending Disclosure will be replaced with the “Closing Disclosure”.
| What is the Integrated Disclosure Rule? | |
| The CFPB was tasked with simplifying the loan process for consumers. In an effort to simplify the loan process the CFPB is combining the Good Faith Estimate (GFE) and initial Truth In Lending (TIL) disclosure into one document which is called the “Loan Estimate”. In addition to combining the initial disclosures; the Final TIL, Itemization of Amount Financed, and HUD Settlement Statement are also being combined into a single document titled the “Closing Disclosure”. | |
| When does the Integrated Disclosure rule take effect? | |
| The new disclosures are required for loans with a RESPA application date of August 1, 2015. If a loan is disclosed with the current GFE/TIL, the loan must close with the current GFE/TIL/HUD. Lenders are not permitted to begin using the forms before August 1st, 2015.
This may have been extended to October. |
|
| Which transactions are covered under the new TILA-RESPA Integrated Disclosures rule? | |
| The TILA-RESPA rule applies to most closed-end consumer credit transactions secured by real property. Specifically, the TILA-RESPA rule does not apply to HELOCs, reverse mortgages or mortgages secured by a mobile home that is not permanently attached to real property (i.e., land). | |
| When does the Closing Disclosure have to be delivered to the borrower? | |
| The Closing Disclosure must be delivered to the borrower at least 3 business days prior to closing. | |
| What triggers another 3 day waiting period when a revised Closing Disclosure is issued? | |
|
|
| What is the process if circumstances change on the transaction that will impact the Closing Disclosure? | |
| All parties must notify Closing Department immediately so it can be determined if the changes require a new 3 day waiting period or if the revised Closing Disclosure can be delivered at closing. | |
What does this mean for Appraisers?
The new loan estimate is not allowed to increase and they are required to make a distinction between an appraisal and an AVM or HVE. The loan estimate is not allowed to increase compared to the closing disclosure. If the lender under estimates the cost of the appraisal, they may want you or the AMC to eat the difference. Since they have to have the closing disclosure 3 days prior to consummation of the loan, getting the appraisal done the day before closing will not work. There may be more rush appraisals, even though AMC’s have turned all appraisals into rush appraisals. Remember when we were paid a rush fee to get an appraisal done in 48 hours? Now that is the industry standard imposed by AMC’s. Read more at http://www.wolterskluwerfs.com/tila-respa/frequently-asked-questions.aspx
For those who have AMC regulations things are happening.
First Enforcement of C&R Fee Provision: Louisiana Makes History
by Isaac Peck, Associate Editor
Nearly five years after Dodd-Frank set forth rules regarding Customary & Reasonable fees (C&R) for appraisers, an agreement last week between a state board and an Appraisal Management Company (AMC) is the first evidence of enforcement. The bottom line for appraisers is that they may be finally on their way back to customary and reasonable fees.
On June 4, 2015, the Louisiana Real Estate Appraisers Board (LREAB) issued a Stipulations and Order Memorandum (SOM) wherein Coester Appraisal Management Group, also known as Coester VMS, offers no admission of guilt but agrees to follow the current Louisiana fee schedule for a period of 12 months and pay $5,000 in administrative costs. Coester also will submit Quarterly reports to the Board for a period of 12 months, which list “all appraisal orders in Louisiana, the fee paid and the date payment was made to the appraiser.”
In the Final Order obtained by WRE under the Freedom of Information Act, Coester agrees not to contest the case while simultaneously alleging that, “it (Coester) complied with the federal law, and as such, it was in compliance with Louisiana Law.” In contrast, the Louisiana Board alleges that “Coester Appraisal Management Group did not use established fees set by an objective third party or use the factors set forth” in Louisiana law, in determining fees paid to appraisers.
Tammie Daugherty posted this on LinkedIn
This information was provided by the Network of Appraisal Organizations. It includes just over 20 state appraiser organizations of which my appraiser association, NCREAA and ICAP are members.
Here is the Facebook page for the Network of State Appraisal Organizations. If your state appraiser organization is interested in joining us to unite as one strong voice of appraisers, you may reach the network organizer Peter Gallo at (704)752-6252 ext 101, or at peterg@homesightllc.com.
https://www.facebook.com/stateappraisalassociationworkgroup?fref=ts
✦ILLINOIS HAS CANCELLED OVER 70 REGISTRATIONS FOR AMC’s DUE TO NON COMPLIANCE✦
So now the AMC’s know you don’t mess around with Illinois. 🙂
The State of Illinois has cancelled AMC registrations for over 70 companies effective immediately because of non-compliance with the AMC Act regarding Bond Requirements.
Section 1452.80 Bonding Requirements
The bond required by Section 50 of the Act shall be for a term concurrent with the term of the registration, commencing with registrations issued by the Division with an expiration date of December 31, 2014 and concurrent with the 2-year term of each renewed registration thereafter. This provision does not prohibit the registrant from maintaining a continuing bond during any registration term. Failure to maintain the bond and to provide the Department with written proof of the bond, upon request, shall result in cancellation of the license without hearing.
ICAP has been asked to notify appraisers that they can’t accept work from an unregistered AMC. The following is a list of the current registered AMC’s which was posted on the States website.
http://www.idfpr.com/realestate/AMCRegistrants.pdf
The State will allow appraisers to complete any appraisal assignments received from an AMC that has been removed from the list up through today, May 8th. The link below is the list of AMC’s who have had their registration cancelled. I would strongly suggest you forward a copy of this alert to any AMC you work with if their name is on this list.
http://www.idfpr.com/realestate/NONCOMPLIANTAMCsConcurrentBondIssue.pdf
The last link below is a copy of the letter the State sent to all AMC’s who hadn’t provided their updated bond information when they renewed their license this year. This letter was sent on March 30th. It warns those AMC’s that they must comply by May 1st or risk cancellation of their registration.
http://www.idfpr.com/realestate/3302015ConcurrentBondEnforcementLetter.pdf
This does not mean that an AMC who has had their license cancelled cannot reapply with the State.
Final Rule Released on Minimum AMC Requirements. They do not include a rule on C & R fees
April 22, 2015
Final Rule Released on Minimum AMC Requirements
The Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the Consumer Financial Protection Bureau the Federal Reserve and the Office of the Comptroller of the Currency released on April 21 its final rule on minimum requirements for state registration and supervision of appraisal management companies, as required by the Dodd-Frank Act.
There was one reference made to customary and reasonable fees made. This was it:
These commenter’s requested that the final rule clarify the extent to which States are expected to investigate and enforce TILA section 129E and its implementing regulations, which includes the requirements to pay appraisers customary and reasonable fees. These commenter’s also expressed concern that States might interpret these rules differently, potentially in ways that may conflict with Federal interpretations.
Lets just ignore the problem. The following are some excerpts from the rule that I thought were interesting. It is worth reading. I threw in a few quotes from the Appraisal Institute.
States will have 3 years from the release of the rule to set up AMC registration and supervision systems. Some commenter’s actually complained that 3 years is not enough time.
Highlights of the rule include:
Under the final rule, these Federally regulated AMCs do not need to register with a State, but are subject to the same minimum requirements as State-regulated AMCs.
What if we do not have state regulation
Only some of the worst AMC’s would be allowed to operate, those that are big bank owned. You know they are going to cut fees even more.
Section 1124 does not compel a State to establish an AMC registration and supervision program, nor is a penalty imposed on a State that does not establish a regulatory structure for AMCs within 36 months of issuance of this final rule.15 However, in a State that has not adopted the AMC minimum requirements established by this rule, AMCs are barred by section 1124 from providing appraisal management services for Federally related transactions, unless they are owned and controlled by a Federally regulated depository institution.16 Thus, appraisal management services may still be provided for Federally related transactions in non-participating States by individual appraisers, by AMCs that are below the minimum statutory panel size threshold, and as noted previously, by Federally regulated AMCs.
In participating States, the minimum requirements apply to any AMC that provides appraisal management services, as defined in the final rule, and meets the statutory panel size threshold, which is that the AMC oversees an appraiser panel of more than 15 State-certified or State-licensed appraisers in a State or 25 or more appraisers in two or more States in a calendar year or 12-month period under State law. States may establish requirements for AMC registration and supervision that are in addition to these minimum requirements..
The implementation of the AMC minimum requirements does not affect the responsibility of banks, Federal savings associations, State savings associations, bank holding companies, and credit unions to ensure that appraisals for their institutions comply with applicable laws and regulations and are consistent with supervisory guidance. If these regulated financial institutions use an AMC to engage appraisers on their behalf, the AMC must be acting as an agent for these institutions.
If after the 36-month period following issuance of the final rule (or any extended period permitted by the ASC), a State has not yet adopted an AMC registration and supervision program, many options exist for creditors to obtain appraisals for Federally related transactions. Creditors that do not wish to hire in-house appraisers can engage third-party appraisers directly.101 Smaller AMCs (those that have fewer than 15 appraisers in the State on their panel or fewer than 25 appraisers in two or more States) as well as Federally regulated AMCs can still perform services in Federally related transactions. AMCs that exceed the statutory size threshold may also continue to service transactions that are not Federally related and, if the State does later participate, can also then provide services in Federally related transactions.
in non-participating States, non-Federally regulated AMCs will be at a competitive disadvantage, because these AMCs will be barred by statute from providing appraisal management services for Federally related transactions.
an AMC shall not be registered by a State or included on the AMC National Registry if the company, in whole or in part, directly or indirectly, is owned by any person who has had an appraiser license or certificate refused, denied, cancelled, surrendered in lieu of revocation, or revoked in any State.103 Section 1124(d) provides further that each person who owns more than 10 percent of an AMC must be of good moral character, as determined by the State appraiser certifying and licensing agency, and must submit to a background investigation carried out by the State appraiser certifying and licensing agency.
Section 1124(c) provides that AMCs that are owned and controlled subsidiaries of an insured depository institution or an insured credit union and regulated by a Federal financial institutions regulatory agency, are not required to register with a State.109 These Federally regulated AMCs are, however, subject to the same minimum requirements as AMCs that are not regulated by a Federal financial institutions regulatory agency.
The OCC believes the final rule will not have a significant economic impact on a substantial number of small entities for several reasons. First, the final rule imposes requirements primarily on States, not on national banks or Federal savings associations. Second, to the extent that the final rule imposes burden on national banks or Federal savings associations that own and control an AMC, there are only two such AMCs, and these are owned by large national banks. For these reasons, the OCC believes that the final rule will not have an impact on a substantial number of OCC-supervised small entities. Therefore, the OCC certifies that the final rule would not have a significant economic impact on a substantial number of small entities.
In the Board’s regulatory flexibility analysis for this Rule, the Board determined that approximately 32 entities would be subject to direct regulation and supervision by Federal financial institutions regulatory agencies. These entities would be subject to direct regulation and supervision under the Rule because the entities are appraisal management companies owned and controlled by insured depository institutions and regulated by a Federal financial institutions regulatory agency (Federally regulated AMC). The number of these 32 entities that actually would be subject to regulation under the AMC Rule is currently unknown because some of the entities may have a network or panel of contract appraisers that is too small to satisfy a threshold requirement of the AMC Rule and therefore would be exempt from regulation and supervision under the AMC Rule.
Data currently available to the Board indicate that approximately five State member banks operate a Federally regulated AMC. Data available to the Board are not sufficient to estimate how many of the approximately five entities subject to Board regulation and supervision would be classified as “small entities.”
Geographic Competency and independence
Establish and comply with processes and controls reasonably designed to ensure that the AMC, in engaging an appraiser, selects an appraiser who is independent of the transaction and who has the requisite education, expertise, and experience necessary to competently complete the appraisal assignment for the particular market and property type”; and
Independent Contractor Definition: The rule revises the standard used to determine if an appraiser is an independent contractor based on whether or not the appraiser is treated as an independent contractor by the AMC for federal income tax purposes.
AMC/Appraisal Firm Distinction:The rule distinguishes between AMCs and appraisal firms based on their respective use of fee appraisers and employees. Each employee appraiser must pay a registration fee to the state or states where they practice. An AMC will only be subject to a registration fee once state registration and supervision regulations become effective pursuant to Dodd-Frank. The rule also provides coverage for “hybrid” firms, meaning entities that both hire appraisers as employees to perform appraisals and engage independent contractors to perform appraisals.
AMC Panel Threshold Size:The rule clarifies that when the number of appraisers is counted for the purpose of determining the size of an AMC’s panel threshold, that the count be based on the number of appraisers listed on the roster who potentially are available to perform appraisals and not on the number of appraisers actually engaged to perform appraisals.
Trainee Appraisers Not Barred:The rule clarifies that AMCs may engage appraisers who use trainee appraisers to assist on assignments.
DATES:
Effective date. This final rule will become effective on [INSERT 60 DAYS FROM DATE OF PUBLICATION IN THE FEDERAL REGISTER].
Compliance date: Federally regulated AMCs must comply with the minimum requirements for providing appraisal management services under 12 CFR 34.215(a) no later than 12 months from the effective date of this final rule. The participating State or States in which a State-regulated AMC operates will establish the compliance deadline for State-regulated AMCs.
To estimate the impact of the final rule on small AMCs, the Bureau conducted a survey. The Bureau called nine AMCs, selected randomly from a list of approximately 500 AMCs provided by industry trade associations. The AMCs were asked for certain basic data including the number of States in which they operate, their revenue (including the revenue from any non-appraisal business), and the number of appraisals that they performed in 2012.130 The Bureau estimated the revenue to be the number of appraisals performed in 2012 multiplied by $350 – the average appraisal cost assumed in the Agencies’ analysis under section 1022 of the Dodd-Frank Act in the 2013 Interagency Appraisals Rule. This revenue estimate is likely to be underestimated, given that several AMCs out of nine reported additional revenue that was not due to the residential appraisal business. Out of the nine AMCs, six had revenues of less than $7,500,000 in 2012, and thus would be within the scope of the RFA analysis based upon SBA guidelines.131 The Bureau computed the cost of registration and renewal fees in States that do not already have them, allocated these costs to individual AMCs based upon the number of States in which the AMC operated,132 and computed the ratio of these allocated costs to the AMCs’ revenues.
The Bureau acknowledges that requiring AMCs to send letters to the appraisers that the AMC decides to remove from its panel might add burden in States that do not already have registration requirements (which typically include notice provisions). The Bureau does not possess any evidence on the number of appraisers to whom an AMC would have to send these letters. According to the Bureau of Labor and Statistics’ August 2014 preliminary numbers, 1.9 percent of the labor force in the real estate and rental and leasing industry was either laid off or discharged in the most recent month. Thus, the Bureau estimates that an AMC will dismiss approximately a quarter of appraisers from its panel in any given year. The Bureau assumes that each AMC will have several standardized letters explaining the reason for dismissal: for example, changing economic conditions or the appraiser’s violation of USPAP or work performance issues. Each AMC might incur a minimal one-time cost to draft these letters, with some industry associations potentially providing templates. After this minimal one-time cost is incurred, the ongoing cost would include a minimal adjustment of the letter based on the appraiser’s particular circumstances and the actual printing and mailing cost. These letters also could be sent in batches, periodically, such as on an annual basis. Thus, for the purposes of this analysis, the Bureau implicitly accounts for these costs in the sensitivity analyses below (which use a State fee of $5,150 and include a $300 administrative expense).
View a copy of the final rule for Minimum Requirements for Appraisal Management Companies.
View a copy of the Appraisal Institute’s comment letterto the federal agencies on their proposed rule addressing “Minimum Requirements for Appraisal Management Companies.” (log-in required).
New HUD Handbook 4000.1 has finally come out after 16 years
New HUD Handbook 4000.1 has finally come out after 16 years of the old inadequate book that required searching for applicable Mortgagee letters we can finally get all our questions answered in one place. This is supposed to be effective in June.
The only problem is that to some degree it requires us to be an Appliance operator, Electrician, Geologist, Electrical Transmission line Analyst, Aviation Flight Path Analyst, Well driller, Pipe line Analyst, Engineer, Chemist, Soil Analyst, Septic expert and it sounds like FHA wants us to look in the freezer, cook something in the microwave and oven, do a load of laundry, have a drink of water, and wash the dishes while we are there.
They want us to use list prices to determine a market condition adjustment.
Seems like some of these things will require more Mortgagee letters to understand. Here are a few things that I thought stood out. You can follow the link below to see some info. Click on Handbooks to see the whole thing. Most of the appraiser stuff starts on page 421. Here are the answers to all of your HUD questions.
Handbook 4000.1 421
Publish Date: 03/18/2015 | Effective Date: 06/15/2015
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/handbook_4000-1
The Appraiser must obtain all of the following from the Mortgagee before beginning an appraisal:
a complete copy of the executed sales contract for the subject, if a purchase transaction;
the land lease, if applicable;
surveys or legal descriptions, if available;
any other legal documents contained in the loan file; and
a point of contact and contact information for the Mortgagee so that the Appraiser can communicate any
noncompliance issues.
(B) Standard
The Appraiser must identify defective conditions.
Defective Conditions Requiring Repair
The Appraiser must identify defective conditions that are curable and will make the Property comply with
HUD’s MPR, and provide an estimated cost to cure.
- Inspection by a Qualified Individual or Entity
If the Appraiser cannot determine that a Property meets FHA’s MPR or MPS, an inspection by a qualified individual
or Entity is required.
Conditions that require an inspection by qualified individuals or Entities include:
- standing water against the foundation and/or excessively damp basements;
- hazardous materials on the site or within the improvements;
- faulty or defective mechanical systems (electrical, plumbing or heating/cooling);
- evidence of possible structural failure (e.g., settlement or bulging foundation wall, unsupported floor joists, cracked
masonry walls or foundation);
- evidence of possible pest infestation;
- leaking or worn-out roofs; or
- any other condition that in the professional judgment of the Appraiser warrants inspection.
Required Analysis and Reporting
The Appraiser must observe, analyze and report defective conditions and must also provide photographic documentation
of those conditions in the appraisal report.
If inspection is required, the Appraiser must cite the reason for requiring an inspection.
- Minimum Property Requirements and Minimum Property Standards
MPR and MPS form the basis for identifying the deficiencies of the Property that the Appraiser must note within the
appraisal report.
- Legal Requirements
(A)Real Estate Entity
The Appraiser must contact the Mortgagee if the subject Property is not a single, marketable real estate entity, and/or does
not consist of a primary plot with a secondary plot contributing to the use and marketability of the Property as a single
marketable real estate entity.
There are also definitions for:
Planned Unit Development
Leasehold Interests
Reverse Mortgage (HECM) Requirements
- Legal and Land Use Considerations
(A)Party or Lot LineWall
(1) Standard
A building constructed on or next to a property line must be separated from the adjoining building by a wall extending
the full height of the building from the foundation to the ridge of the roof.
(2) Required Analysis and Reporting
The Appraiser must note if the party or lot line wall does not extend to the roof or beyond.
B)Non-Residential Use of Property
(1) Standard
The non-residential portion of the total floor area may not exceed 49 percent.
Any non-residential use of the Property must be subordinate to its residential use, character and appearance. Non-residential
use may not impair the residential character or marketability of the Property. The non-residential use of the Property must be
legally permitted and conform to current zoning requirements.
(2) Required Analysis and Reporting
The Appraiser must calculate the non-residential portion of any residential Property. Storage areas or similar spaces that are
integral parts of the nonresidential portion must be included in the calculation of the non-residential area.
The Appraiser must comment on any non-residential use within the Property and state the percentage of the total floor area
that is utilized as non-residential. The Appraiser must report whether the non-residential usage is legal and in compliance with
current zoning requirements.
The Appraiser must contact the Mortgagee if the non-residential portion of the Property exceeds 49 percent.
(2) Airport Noise and Hazards
The Appraiser must identify if the Property is affected by noise and hazards of low flying aircraft because it is near an airport.
The Appraiser must review airport contour maps and analyze accordingly. The Appraiser must determine and report the
marketability of the Property based on this analysis.
(3) Special Airport Hazards
The Appraiser must identify if the Property is located within a Runway Clear Zone (also known as a Runway Protection Zone)
at a civil airport or Clear Zone
military airfield and consider the effect of the airport hazards on the marketability when valuing the subject Property.
For Properties located in an Accident Potential Zone 1 (APZ 1) at military airfields, the Appraiser must require compliance
with the Department of Defense (DoD) Guidelines and a buyer’s acknowledgement.
(a) Existing Dwelling
The Appraiser must condition the appraisal on the Borrower’s acknowledgment of the hazard.
(b) Proposed Construction, Under Construction, and Existing Less than
One Year
The Appraiser must note that the Property is ineligible for FHA insurance and notify the Mortgagee.
(4) Proximity to High Pressure Gas Lines
The Appraiser must identify if the dwelling or related property improvement is near high-pressure gas or liquid petroleum
pipelines or other volatile and explosive products, both aboveground and subsurface. The Appraiser must determine and
report the marketability of the Property based on this analysis. The Appraiser must notify the Mortgagee of the deficiency
of MPR or MPS if the Property is not located more than 10 feet from the nearest boundary of the pipeline Easement.
(7) Stationary Storage Tanks
The Appraiser must notify the Mortgagee of the deficiency of MPR or MPS if the subject property line is located within
300 feet of an aboveground or subsurface stationary storage tank with a capacity of 1,000 gallons or more of flammable or
explosive material. This includes domestic and commercial uses as well as automotive service station tanks.
The Appraiser must note whether there is safe pedestrian access and Adequate Vehicular Access to the site and analyze any
effect on value or marketability.
The Appraiser must report evidence of a permanent Easement.
The Appraiser must ask if a maintenance agreement exists and comment on the condition of the private road or lane.
- New Construction Site Analysis
The Appraiser must obtain a fully executed form HUD-92541, Builder’s Certification of Plans, Specifications, and Site,
signed and dated no more than 30 Days prior to the date the appraisal was ordered, before performing the appraisal on
Proposed Construction, Properties Under Construction or Properties Existing Less than One Year.
The Appraiser must review the form and analyze and report any discrepancies between the information provided by the
builder and the Appraiser’s observations.
(A)Definition
Excess Land refers to land that is not needed to serve or support the existing improvement. The highest and best use of the
Excess Land may or may not be the same as the highest and best use of the improved parcel. Excess Land may have the
potential to be sold separately.
Surplus Land refers to land that is not currently needed to support the existing improvement but cannot be separated from
the Property and sold off. Surplus Land does not have an independent highest and best use and may or may not contribute
to the value of the improved parcels.
(B)Required Analysis and Reporting
The Appraiser must include the highest and best use analysis in the appraisal report to support the Appraiser’s conclusion of
the existence of Excess Land. The Appraiser must include Surplus Land in the valuation.
If the subject of an appraisal contains two or more legally conforming platted lots under one legal description and ownership,
and the second vacant lot is capable of being divided and/or developed as a separate parcel where such a division will not
result in a non-conformity in zoning regulations for the remaining improved lot, the second vacant lot is Excess Land.
The value of the second lot must be excluded from the final value conclusion of the appraisal and the Appraiser must provide
a value of only the principal site and improvements under a hypothetical condition.
(D)Modular Housing
(1) Definition
Modular Housing refers to Structures constructed according to state and local codes off-site in a factory, transported to a
building lot, and assembled by a contractor into a finished house. Although quality can vary, all of the materials – from
framing, roofing and plumbing to cabinetry, interior finish and electrical – are identical to what is found in comparable quality
conventional “stick-built” housing.
(2) Required Analysis and Reporting
The Appraiser must treat Modular Housing the same as stick-built housing, including reporting the appraisal on the same form.
The Appraiser must select and analyze appropriate comparable sales, which may include conventionally built housing,
Modular Housing or Manufactured Housing.
(E) Identifying an Accessory Dwelling Unit
(1) Definition
An Accessory Dwelling Unit (ADU) refers to a habitable living unit added to, created within, or detached from a primary
one-unit Single Family dwelling, which together constitute a single interest in real estate. It is a separate additional living
unit, including kitchen, sleeping, and bathroom facilities.
(2) Required Analysis and Reporting
As part of the highest and best use analysis, the Appraiser must make the determination to classify the Property as a Single
Family dwelling with an ADU, or a two-family dwelling. The conclusion of the highest and best use analysis will then
determine the classification of the Property and the analysis and reporting required.
An ADU is usually subordinate in size, location and appearance to the primary Dwelling Unit and may or may not have
separately metered utilities or separate means of ingress or egress. The Appraiser must not include the living area of the
ADU in the calculation of the Gross Living Area (GLA) of the primary dwelling. The Appraiser must notify the Mortgagee
of the deficiency in MPR or MPS if more than one ADU is located on the subject Property.
Additional Manufactured (F) Home on Property
The Appraiser may consider a Manufactured Home to be an ADU if it meets the highest and best use and FHA requirements.
The Appraiser may value a Manufactured Home on the Property that physically or legally may not be used as a dwelling and
does not pose any health and safety issues by its continued presence as a storage unit.
(G) Leased Equipment, Components, and Mechanical Systems
The Appraiser must not include the value of leased mechanical systems and components in the Market Value of the subject
Property. This includes furnaces, water heaters, fuel or propane storage tanks, solar or wind systems (including power purchase
agreements), and other mechanical systems and components that are not owned by the property owner. The Appraiser must
identify such systems in the appraisal report.
- Partially Below-Grade Habitable Space
(A)Definition
Partially Below-Grade Habitable Space refers to living area constructed partially below grade, but has the full utility of GLA.
(B)Required Analysis and Reporting
The Appraiser must report the design and measurements of the subject, the market acceptance or preference, how the levels and
areas of the dwelling are being calculated and compared, and the effect that this has on the analysis. Regardless of the
description of the rooms, bedrooms or baths as above grade or below grade, the Appraiser must analyze all components of the
subject Property in the valuation process.
- Appliances
- Definition
Real Property refers to the interests, benefits, and rights inherent in the ownership of physical real estate.
Personal Property refers to tangible property, other than Real Property, such as cars, recreational vehicles, stamps, coins or other
collectibles.
- Standard
Cabinets and built-in appliances that are considered Real Property must be present and operational.
iii. Required Analysis and Reporting
The Appraiser must note appliances present in the house at the time of observation and indicate whether that appliance is
considered Personal Property or Real Property. The Appraiser must operate all conveyed appliances and observe their performance.
The Appraiser must notify the Mortgagee of the deficiency of MPR or MPS if any conveyed appliances are inoperable.
Central air conditioning is not required but, if installed, must be operational. If the air conditioning system is not operational,
the Appraiser must indicate the level of deferred maintenance, analyze and report the effect on marketability, and include the
cost to cure.
The Appraiser must examine the water heater to ensure that it has a temperature and pressure-relief valve with piping to safely
divert escaping steam or hot water.
- Limited Required Repairs
The Appraiser must limit required repairs to those repairs necessary to:
maintain the safety, security and soundness of the Property;
preserve the continued marketability of the Property;
(B) Standard
When an Individual Water Supply System is present, water quality must meet the requirements of the health authority with
jurisdiction. If there are no local (or state) water quality standards, then water must be potable, which may be demonstrated by
compliance with the current EPA Manual of Individual and Non-Public Water Supply
Systems.
A pressure tank with a minimum capacity of 42 gallons must be provided.
However, pre-pressured tanks and other pressurizing devices are acceptable if delivery between pump cycles equal or exceed
that of a 42-gallon tank. Tanks must be equipped with a clean-out plug at the lowest point and a suitable pressure relief valve.
(2) Required Analysis and Reporting
The Appraiser must note any readily observable deficiencies regarding the well and require test or inspection if any of the following apply:
- the water supply relies upon a water purification system due to the presence of contaminates;
- corrosion of pipes (plumbing);
- areas of intensive agricultural uses within one quarter mile;
- coal mining or gas drilling operations within one quarter mile;
- a dump, junkyard, landfill, factory, gas station, or dry cleaning operation within one quarter mile; or
- an unusually objectionable taste, smell, or appearance of well water.
The Appraiser must also be familiar with the minimum distance requirements between private wells and sources of pollution and,
if discernible, comment on them. The Appraiser is not required to sketch or note distances between the well, property lines,
septic tanks, drain fields, or building Structures but may provide estimated distances where they are comfortable doing so.
When available, the Appraiser should obtain from the homeowner or Mortgagee a copy of a survey or other documents
attesting to the separation distances between the well and septic system or other sources of pollution.
- Photograph, Exhibits and Map Requirements
The Appraiser must include a legible street map showing the location of the subject and each of the comparable properties,
including sales, rentals, listings, and other data points utilized. If substantial distance exists between the subject and
comparable properties, additional legible maps must be included.
The Appraiser must include a building sketch showing the GLA, all exterior dimensions of the house, patios, porches, decks,
garages, breezeways, and any other attachments or out buildings contributing value. The sketch must show “covered” or
“uncovered” to indicate a roof or no roof (such as over a patio). The Appraiser must show the calculations used to arrive at the
estimated GLA. The Appraiser must provide an interior sketch or floor plan for Properties exhibiting functional obsolescence
attributable to the floor plan design.
Front and rear at opposite angles to show all sides of the dwelling
Improvements with Contributory Value not captured in the front or rear photograph
Street scene photograph to include a portion of the subject site
For New Construction, include photographs that depict the subject’s grade and drainage
For Proposed Construction, a photograph that shows the grade of the vacant lot
Subject Property
Interior
Kitchen, main living area, bathrooms, bedrooms
Any other rooms representing overall condition
Basement, attic, and crawl space
Recent updates, such as restoration, remodeling and renovation
For two- to four-unit Properties, also include photographs of hallways, foyers, laundry rooms and other common areas
Comparable Sales, Listings, Pending Sales, Rentals, etc.
Front view of each comparable utilized
Photographs taken at an angle to depict both the front and the side when possible
Multiple Listing Service (MLS) photographs are acceptable to exhibit comparable condition at the time of sale. However,
Appraisers must include their own photographs as well, to document compliance
Subject Property Deficiencies
Photographs of the deficiency or condition requiring inspection or repair Condominium Projects
Additional photographs of the common areas and shared amenities of the Condominium Project
- Intended Use and Intended Users of Appraisal
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.
Standard
The Appraiser must utilize Arm’s Length Transactions for comparable properties except when there is evidence that REO
sales or short sale/Pre- Foreclosure Sale (PFS) transactions are so prevalent that normal Arm’s Length Transactions are not
present or supported by the market trend.
A transaction involving a foreclosure transfer to a mortgagee is not evidence of the Market Value, and is not a valid type of
comparable sale for an FHA-insured Mortgage.
The common types of property transfers listed below require investigation and analysis to ensure that they meet the
definition of an Arm’s Length Transaction:
REO sale – transfer from mortgagee to new owner;
short sale/PFS;
estate sale;
court ordered sale;
relocation sale; and
flip transactions.
The Appraiser must include a minimum of two active listings or pending sales on the appraisal grid (in addition to at least
three recently settled sales).
For active listings or pending sales, the Appraiser must:
ensure they are market tested and have reasonable market exposure to avoid the use of overpriced properties as comparable properties;
use the actual contract purchase price, or, when not available, adjust comparable properties to reflect listing to sale price ratios;
include the original list price, any revised list prices, and calculate the total Days on Market (DOM). The Appraiser must
provide an explanation for the DOM that does not approximate periods reported in the “Neighborhood” section of the
appraisal reporting form;
reconcile the Adjusted Values of active listings or pending sales with the Adjusted Values of the settled sales provided; and
if the Adjusted Values of the settled comparable properties are higher than the Adjusted Values of the active listings or
pending sales, determine if a Market Condition Adjustment is appropriate.
Wisconsin Appraiser 