Home Lenders FAQs - Lenders Under what circumstances can a lender order a second FHA appraisal?
Under what circumstances can a lender order a second FHA appraisal?

In Mortgagee Letter 2009 (dated September 2009-29, effective: January 01, 2010) FHA/HUD outlines the limited circumstances that a second appraisal may be order for an FHA Loan. 

FHA prohibits “appraiser shopping” where lenders order additional appraisals in an effort to assure the highest possible value for the property and/or the least amount of deficiencies and/or repairs are noted and required by the appraiser. However, a second appraisal may be ordered by the second lender under the following limited circumstances: 

  1.  The first appraisal contains material deficiencies as determined by the Direct Endorsement underwriter for the second lender. 
  2. The appraiser performing the first appraisal is on the second lender’s exclusionary list of appraisers. 
  3. Failure of the first lender to provide a copy of the appraisal to the second lender in a timely manner would cause a delay in closing, posing potential harm to the borrower.

Potential harm includes events outside the control of the borrower such as loss of interest rate lock, purchase contract deadline, foreclosure proceedings, and late fees. For cases in 1 and 2 above, the lender must ensure that copies of both appraisals are retained in the case binder. For cases in 3 above, the first appraisal must be added to the case binder when it is received. In all cases, the lender must document why a second appraisal was ordered and retain the explanation in the case binder.

Source: www.hud.gov, Mortgagee Letter 2009-29, HUD Handbook 4155.2 4.45.j


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