Responding to a flood of criticism concerning numerous ambiguities in the new FHA Homebuyer Protection Plan, the Department of Housing and Urban Development has created a special website and added a special toll-free phone number to answer queries from appraisers, lenders, real estate professionals and consumers.

In addition, FHA Commissioner William Apgar has issued yet another mortgagee letter to "eliminate any confusion" regarding the plan, which is intended to improve the accuracy and thoroughness of the FHA appraisal process, thereby affording buyers an added measure of security that the homes they are buying are habitable.

In the letter, Apgar again stressed that the appraiser does not act as a home inspector, nor is it the appraiser's responsibility to guarantee the condition of the property, its equipment and appliances or to certify it is free from defects.

"Rather," the assistant secretary for housing wrote, "an appraiser is required to make reasonable observations...and provide that information to the lender."

It's the lender, not the appraiser, that is responsible "for ensuring that a property securing an FHA-insured mortgage is in compliance with FHA's minimum property requirements and standards," he said.

The detailed, four-page letter also address appraisers' liability issues, fees, the new five- day rule and the various forms associated with the buyer protection plan. But if the pasting FHA officials took at the National Association of Realtors' convention in Orlando earlier this month is any indication, it isn't likely to stem the tide of complaints.

The new "valuation conditions" form is so detailed that it leaves appraisers "way out on a limb for liability," a Michigan appraiser grumbled. To be "totally protected," he said, valuers need the same kind of "hold harmless" caveat allowed home inspectors.

"It's one thing to say we're not responsible, but the reality of it is, we are," he said.

Another appraiser, Johnnie Hall of Fayetteville, N.C., worried that lenders would hold him liable for errors or omissions. But Vance Morris, director of the FHA's single-family home mortgage insurance division, told him that "if a lender takes action against you, notify the department."

"We realize appraisers are not competent to judge electrical or plumbing systems," Morris explained. "The lender is responsible. We are holding lenders responsible."

The FHA official pleaded with NAR's Public Policy Committee to give the agency time to work out kinks in the new program, which took effect in July. "This was a massive undertaking," he said. "I can find contradictions in the Bible."

But Francois Gregoire, a St. Petersburg, Fla., appraiser who is vice chair of NAR's Appraisal Section Subcommittee, blamed the misinformation squarely on HUD, which has repeatedly stated that "nothing" in the appraisal process has really changed.

Quoting Sec. Andrew Cuomo that the "new system" would "protect (consumers) from bad appraisers" and provide "thorough systems reviews," Gregoire asked, "Where can we go to find the truth?"

That, Morris said, would be the new toll free help desk at 888-245-4860, which has taken the responsibility for answering questions from regional call centers, and the new website at:

• http://www.hud.gov/hmbuyprt.html

which will update a list of frequently asked questions on a bi-monthly basis for the next six months.

"We're in the process of collecting comments so we can take out the errors and inconsistencies," Morris said, noting that the call center would operate around the clock by a staff of ten.

HUD "is not trying to hurt appraisers," he added. "If someone gives us constructive criticism, we will make the necessary improvements. We are paying a contractor tons of money to money to collect instances where the manual doesn't match common practice. But you've got to help by telling us specifically how we can make improvements."

The latest mortgagee letter, meanwhile, says the FHA has no intention to sanction appraisers for minor mistakes. Rather, it advises, enforcement activities will be focused only on those who "knowingly and deliberately" violate federal appraisal rules.

It also counsels that buyers may waive the requirement they be provided with and sign the new summary form covering needed repairs or conditions that need to be satisfied at least five days prior to closing. The five-day requirement can be waived if repairs have been completed, conditions have been satisfied, or if no repairs are necessary or there are no conditions to be satisfied.

But the letter does not address concerns raised by appraisers and NAR that at least four states Kentucky, Colorado, Nevada and Arizona have issued rulings warning valuers that they may be violating license laws by provide the details the FHA is now requiring. Seventeen states regulate home inspectors.

And it only offers passing attention to another NAR concern, that of increased costs to consumers.

Noting that it should take only six more minutes to fill out the one new form, the Homebuyer Summary, Apgar said "there is no reasonable explanation" for the significant increase in fees that have been recorded in some markets.

But. Gregoire, the St. Petersburg appraiser, said it takes him "noticeably" more time to complete his work.

"It used to be ten minutes," he said. "But now it takes as much as an hour partly because of the new form and partly because you have to be extra careful because there's a chance for an error" in transcribing notes from one form to another.

Also See:

"HomeBuyer Protection Plan" May Mean Jail For Appraisers

Does HUD's Homebuyer Protection Plan Hurt the Real Estate Industry?

Published: November 23, 1999

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