HUD Gets Letter From Appraisers on AMCs

The Department of Housing and Urban Development is revising its appraisal policies on Federal Housing Administration-insured loans with respect to appraisal management companies, according to an agency spokesman. Appraisal groups have been complaining that HUD's restrictions on appraisal fees and the lenders' increasing reliance on AMCs is driving many experienced appraisers away from taking assignments that involve Federal Housing Administration-insured loans. "The loss of these seasoned professionals is adding unnecessary and substantial risk to the FHA program," according to four appraisal trade groups which sent a letter to HUD secretary Shaun Donovan. "We already have a mortgagee letter in the clearance process addressing this issue," the HUD spokesman said. FHA borrowers are expected to pay no more than the "customary fee" for an appraisal, according to a 1997 HUD mortgagee letter on appraisal management companies. To cover their management fees, AMC hires appraisers that will accept a reduced fee, according to the appraisal coalition. As a result, "the consumer is receiving a much lower level of service - often from appraisers who do not know the local market - in many cases," the coalition says in its letter to HUD. The Appraisal Institute, American Society of Appraisers, American Society of Farm and Rural Appraisers and National Association of Independent Fee Appraisers signed the letter.