FHA Office of Single Family Housing The New FHA Appraisal Manual: What You Need to Know Rob Frazier, SRA, FRICS, Deputy Director Home Valuation Policy Division, FHA Office of Single Family Housing

FHA Office of Single Family Housing FHA Priorities Expand Access to Credit Ensure Long-Term Viability of MMI Fund Transform current guidance and processes 2

FHA Office of Single Family Housing FHA Priorities Transformation Goals – Make it easier to do business with FHA – Provide better analysis and quality review – Modernize to improve risk analysis 3

FHA Office of Single Family Housing Transformation Programs - Valuation Related Provide Clear Guidance and Instructions Replace and Mortgagee Letters Update or Replace Old Manuals and Regulations

FHA Office of Single Family Housing Transformation Programs - Valuation Related Create Electronic Appraisal Storage and Analysis – Electronic Appraisal Process (EAP) – Electronic Appraisal Delivery Portal (EAD) – Adopt Industry Data and Format Standards – Minimize Affect to Appraisers

FHA Office of Single Family Housing New On-Line Handbook Application Through Endorsement

FHA Office of Single Family Housing 7 New SF Housing Policy Handbook Provide stakeholders with a consistent, authoritative source for Single Family policy: Transition from multiple Handbooks, Mortgagee Letters, and other guidance to a single policy guide. Application through Endorsement status: Finalizing for publication this summer, with significant lead time before effective date.

FHA Office of Single Family Housing Posting for feedback this summer, with future, aligned effective dates:  Appraiser  203(k)  Condominiums To be part of, and used in concert with, future published version of Application through Endorsement section. Also posting this summer:  Doing Business with FHA section  Quality Control, Oversight and Compliance section 8 New SF Housing Policy Handbook

FHA Office of Single Family Housing Servicing (under development for posting later this year) REO & Claims Title I HECM (Reverse Mortgages) 9 Sections Still to Come

FHA Office of Single Family Housing Components of Appraisal Guidance Property Requirements – FHA requires underwriting of property condition as well as valuation. Observe, Analyze, Report – Appraisers’ requirements spelled out in one place, clearly 6

FHA Office of Single Family Housing Components of Appraisal Guidance Report and Data Format Requirements – A separate section dealing with forms, data and formats required, “how to” instructions FHA Appraiser Roster FHA Appraiser Compliance 6

FHA Office of Single Family Housing Changes-Enhancements of Note Zoning and Legal Non-Conforming Use Stationary Storage Tanks Accessory Dwelling Units

FHA Office of Single Family Housing Changes-Enhancements of Note Attic and Crawl Space Inspection Requirements General Acceptance Criteria, Property Eligibility, Nonresidential Use of Property.

FHA Office of Single Family Housing Changes-Enhancements of Note Cost and Income Approach for Value Photograph Requirements Sales history of comps – 3 years+

FHA Office of Single Family Housing Changes-Enhancements of Note Measurement and Reporting of Contributory Value of energy efficiency components or alternate systems (solar, etc.). Market Conditions Addendum to the Appraisal Report, Fannie Mae Form 1004MC

FHA Office of Single Family Housing LOCATION OF DRAFT POLICY Draft Posted Friday, July 31 at: =/program_offices/housing/sfh/SFH_polic y_drafts/appraiser_requirements

FHA Office of Single Family Housing Electronic Appraisal Processing

FHA Office of Single Family Housing FHA Appraisal Review Process

FHA Office of Single Family Housing Appraisal Data and Valuation Electronic Appraisal Delivery (EAD) Collects Forms and Data from Lender Validates identity of appraiser (future) Leverages industry data and report form standards 19

FHA Office of Single Family Housing Appraisal Data and Valuation Runs FHA specific rules and scoring Provides data, PDF of report, results of scoring Provides First Generation Copy of Appraiser’s Work 20

FHA Office of Single Family Housing 21 EAP will:  Use EAD portal to collect scored reports from Vendor  Enable lenders to upload and allow HOCs to use electronic files when needed Electronic Appraisal Process (EAP)

FHA Office of Single Family Housing 22 EAP will:  Move documents and data through FHA Systems  Filename is FHA Case Number with versioning functions  FHA staff members will view the appraiser’s original PDF Electronic Appraisal Process (EAP)

FHA Office of Single Family Housing 23 MISMO 2.6 GSE (UAD) Format FNM1004/FRE70 Single Family Appraisal Report FNM1073/FRE465 Condominium Unit Appraisal Report MISMO 2.6 Errata Format FNM1004C/FRE70B Manufactured Home Appraisal Report FNM1025/FRE Family Appraisal Report FNM1004D/442 Update of Appraisal FNM1004D/442 Completion Report MISMO 2.6 Format with embedded PDF

FHA Office of Single Family Housing EAD Unique Features EAD Edits include 17 new (fatal) edits on 1004; 15 new edits on 1073 to align with FHA guidance Requires a HUD Case Number – On the appraisal form and in MISMO data – Must be valid in CHUMS – Must match subject address (auto-override allowed) 24

FHA Office of Single Family Housing EAD Unique Features Appraiser Validation – Must be eligible on FHA appraiser roster – Appraiser certification state must match subject property state – Supervisory appraiser not allowed Appraiser Digital Signature (auto-override) – phase 2 25

FHA Office of Single Family Housing Lender Options for Submission 26 UCDP LENDERS / SELLERS EAD

FHA Office of Single Family Housing EAP System Components EAD Web Portal EAP Components inside FHA Document Classification and Storage Appraisal Database Appraisal Scoring Database Integration of the Databases with Endorsement Platform 9

FHA Office of Single Family Housing “Lender Hard Stops” Hard Stops are the Fannie Mae / Freddie Mac name for Errors in appraisal data submitted FHA has adopted the “base line” and has added a few of its own. To be published on the FHA website 28

FHA Office of Single Family Housing “Lender Hard Stops” FHA is concentrating on data errors that would cause a failure in the upload and matching process Lender is still responsible for choosing a qualified appraiser Lender is still responsible for underwriting the appraisal report 29

FHA Office of Single Family Housing Appraisal Data and Valuation Collect appraisal data and forms – Electronically – earlier in the process – integrate into FHA processes Utilize data to – enhance analytics – inform policy – inform Appraiser Roster quality control 8

FHA Office of Single Family Housing Appraisal Data and Valuation Leverage industry data standards, systems, and processes where possible. Provide useful feedback messages aligned with FHA policy. Provide process efficiencies for lenders by seeding the endorsement screens with EAD data. 8

FHA Office of Single Family Housing Thank You For Further information: HUD.GOV