The Federal Housing Administration (“FHA”) recently issued Mortgagee Letter 2021-27 to announce upcoming changes to the Department of Housing and Urban Development (“HUD”) Single Family Housing Policy Handbook (Handbook 4000.1) regarding appraiser compliance with Fair Housing laws. This announcement follows the creation of the Interagency Task Force on Property Appraisal and Valuation Equity (“PAVE”), a federal interagency initiative created to look at discrimination in the appraisal and homebuying process.
Additional language is being added to multiple sections of Handbook 4000.1 that emphasizes FHA’s requirement for appraisers and mortgagees to be knowledgeable about and in compliance with all applicable anti-discrimination laws, including the Fair Housing Act as it relates to appraisals.
Notable changes include:
- Section I.B.1.d.i. Compliance with Law: Additional language added to read, “The Appraiser’s performance must comply with all applicable federal, state, and local laws, including the Fair Housing Act and other federal, state, or local antidiscrimination laws.”
- Section II.A.3.a.v. Quality of Appraisal: Additional language added to read, “The Mortgagee must evaluate the appraisal and ensure it complies with the requirements in Valuation and Reporting Protocols, any additional appraisal requirements that are specific to the subject Property, and complies with all applicable federal, state, and local laws, including the Fair Housing Act and other federal, state, or local antidiscrimination laws.
- Section II.D.2.a. Nondiscrimination Policy: New section that states that the appraisal analysis or reporting may not be “based on the race, color, religion, sex, actual or perceived sexual orientation, actual or perceived gender identity, age, actual or perceived marital status, disability, familial status, national origin of either the prospective owners or occupants of the Property, present owners or occupants of the Property, or the present owners or occupants of the properties in the vicinity of the Property, or on any other basis prohibited by federal, state, or local law.”
- Section II.D.2.c. Appraiser Conduct: New section which states that all FHA appraisal assignments must be performed in a competent, independent, impartial, and objective manner. “The Appraiser must avoid all practices that could affect the reliability of the appraisal report opinions and conclusions.”
The changes apply to all FHA Single Family Title II Forward and Reverse Mortgage Programs. The guidance is effective immediately and will be added to Handbook 4000.1 in a future update.
