www.hudclips.org U. S. Department of Housing and Urban Development Washington, D.C. 20410-8000 November 25, 1997 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER MORTGAGEE LETTER 97-45 TO: ALL APPROVED MORTGAGEES SUBJECT: Single Family Loan Production: Lender Selection of Appraisers, Opportunities for Female and Minority Appraisers, Accuracy of Appraisals The purpose of this Mortgagee Letter is to warn approved mortgagees of certain unacceptable practices that are occurring in the selection and use of appraisers. In Mortgagee Letter 96-36 dated July 11, 1996, the Department urged mortgagees to ensure that female and minority status appraisers receive a fair share of appraisal assignments commensurate with their representation on the appraisal roster. Based upon reports from the Computerized Homes Underwriting Management System (CHUMS) and numerous complaints, it is apparent that minority and female appraisers are not receiving a fair share of appraisal assignments. The Department intends to address this issue aggressively, and will take administrative actions where warranted against mortgagees to ensure that appraisal assignment procedures consistent with Mortgagee Letter 96-36 are followed and that there is no discrimination based on race and sex in the process utilized. To assist lenders and other interested parties in determining who individual lenders are selecting in a local FHA Field Office jurisdiction, the Department intends to post each lender's appraiser selection results on the HUD Internet site. Beginning the first quarter of 1998, and continuing each subsequent quarter thereafter, CHUMS data showing the minority and gender status of the appraisers lenders selected in the previous quarter will be made available. The number and percentage of appraisals performed by white male and female, and minority male and female appraisers, along with the number and percentages each group represents on the Field Office's Roster of Appraisers will be identified for every lender which had completed five or more appraisals per month. The data will be directly from our CHUMS system and no commentary will accompany this data which might indicate an acceptable/unacceptable level of performance. It is simply a raw numerical report of appraiser selection performance. 2 As stated in Mortgagee Letter 94-54 , dated November 7, 1994, mortgagees that select their own appraisers must accept responsibility, equally with the appraisers, for the integrity, accuracy and thoroughness of the appraisals, and will be held accountable by HUD. The Department is investigating concerns that appraisers selected by mortgagees are, in some instances, appraisers who are required by mortgagees to inflate values or disregard repair requirements as a condition of continued selection by the mortgagees. This practice is unacceptable. The Department will take appropriate administrative action against mortgagees that engage in such practices. A list of some of the enforcement actions available to the Department to ensure compliance with these matters is attached. If you have any questions, please contact the local HUD Office. Sincerely yours, Nicolas P. Retsinas Assistant Secretary for Housing- Federal Housing Commissioner Attachment Enforcement Actions Regarding Appraisals 1. Mortgagees. a. Mortgagee Review Board Action pursuant to section 202(c) of the National Housing Act: (1) 24 CFR 25.5(b) - Letter of reprimand. (2) 24 CFR 25.5(c) - Probation. (3) 24 CFR 25.5(d) - Suspension. (4) 24 CFR 25.5 (e)(1) - Withdrawal. b. Cease and Desist Order issued by Secretary at request of the Mortgagee Review Board where violation could result in significant cost to Federal Government/Public (inflated appraisals). c. Civil Money Penalties pursuant to section 536(b)(1) of the National Housing Act and 24 CFR Part 30: (1) 24 CFR 30.35(a)(1) - Incorporates section 536(b)(1)(F) by which the Secretary may impose a Civil Money Penalty for a mortgagee's submission of a false certification by another person (e.g., an appraiser who makes a false certification at the bottom of the USPAP appraisal form about the truth/correctness of data for the appraisal). (2) 24 CFR 30.35(a)(1) - Incorporates section 536(b)(1)(G) by which the Secretary may impose a Civil Money Penalty for a mortgagee's failure to comply with conditions of its application for approval. 2. Appraisers. a. Program Fraud Civil Remedies Act (PFCRA) actions pursuant to 31 USC 3801 and 24 CFR Part 28: (1) Appraiser's statement of value of property on USPAP form is a "false statement" to HUD. (2) Action against appraiser based upon 24 CFR 28.10(b), when false statement is made to HUD through a "fiscal intermediary or other entity" (e.g., the mortgagee). b. Debarment, Suspension, and Limited Denial of Participation (LDP) pursuant to 24 CFR Part 24 -The reasons for debarment (24 CFR 24.305(b)) are incorporated into the suspension/LDP regulations and include the violation of terms of a public transaction so serious as to affect the integrity of agency program.