FHA Appraisal Guidlines Change 2/15/2010

The new Appraiser Independence (ML 2009-28) requirements for Federal Housing Administration (FHA) loans officially took effect February 15, 2010. Originally planned for a January 1, 2010 implementation, the enactment was delayed to provide the FHA and lenders with additional time to adjust systems to accommodate the changes.

Many of the new guidelines are similar to the Home Valuation Code of Conduct (HVCC), which has been in place since May 1, 2009 for Freddie Mac and Fannie Mae loans. Under FHA’s rules, appraisers are required to receive reasonable and customary compensation and cannot be affiliated with lending agencies. In addition, appraisers are required to have familiarity, experience, and knowledge in the geographic location of the properties being appraised, and higher standards have been adopted for the process of ordering appraisals.

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New FHA Loan Guidelines Remove 90 Day Holding Rule For Foreclosed Homes

Lenders have recently held investors to standards that require them to hold a property for at least 90 days. That was until Friday January 15, 2010. Both the government and major lenders are have finally realized that bank owned properties (REO) and short sales are becoming the norm in today's market place.

According to HUD Secretary Shaun Donovan, a temporary ban on the "90 day holding rule" (also known as the "90 day no flip rule") will be relinquished for one year. There are certain restrictions, but "this temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties" (www.hud.gov). In short, the FHA has finally realized that the purchase, rehab and resell of a foreclosed property can often take less that 90 days in today's market.

This reversal of the "90 day no flip rule" is the first step toward stabilizing home prices and preventing any further deterioration of this economy. The effective date of this new ruling will begin February 1, 2010. In order to protect borrowers from fraudulent practices, the following guidelines must be upheld.

• If the resell of the home is 20% greater than the original purchase price then the lender must meet specific conditions.

• All transactions must be within arms length of both buyer and seller parties.

• The waiver of the "90 day no flip rule" will not apply to Home Equity Conversion Mortgages.

See the original post at the official HUD website at www.hud.gov.

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