FHA Mortgagee Letter 2022-11 — Revised Appraisal Validity Periods

For Origination through Post-Closing and Endorsement, this ML: • updates the initial appraisal validity period from 120 days to 180 days from the effective date of the appraisal report; • extends the appraisal update validity period from 240 days to one year; and • removes the optional 30-day extension. For Servicing and Loss Mitigation, this ML: • updates the initial appraisal validity period from 120 days to 180 days from the effective date of the appraisal report. For HECM Financial Assessment and Property Charge Guide, this ML: • updates the initial appraisal validity period from 120 days to 180 days from the effective date of the appraisal report; • extends the appraisal update validity period from 240 days to one year; and • removes the optional 30-day extension. Single Family Housing Policy Handbook 4000.1 Origination Through Post-Closing/ Endorsement The policy changes will be incorporated into Handbook 4000.1 as follows: Maximum Age of Mortgage Documents (II.A.1.a.i(A)(1))

(a) General Document Age Documents used in the origination and underwriting of a Mortgage may not be more than 120 Days old at the Disbursement Date, except for appraisals, which are subject to separate validity period requirements. Documents whose validity for underwriting purposes is not affected by the passage of time, such as divorce decrees or tax returns, may be more than 120 Days old at the Disbursement Date. For purposes of counting Days for periods provided in this Handbook 4000.1, Day one is the Day after the effective or issue date of the document, whichever is later.

(b) Appraisal Validity (i) Initial Appraisal Validity The initial appraisal validity period is 180 Days from the effective date of the appraisal report (see Ordering Appraisals (II.A.1.a.iii(B)(6)). (ii) Appraisal Update Where the initial appraisal report will be more than 180 days at Disbursement Date, an appraisal update may be performed to extend the appraisal validity period (see Ordering an Update to an Appraisal (II.A.1.a.iii(B)(10)). Where the initial appraisal is updated, the updated appraisal is valid for one year after the effective date of the initial appraisal report that is being updated. Ordering Appraisals (II.A.1.a.iii(B)(6)) The Mortgagee must order a new appraisal for each case number assignment and may not reuse an appraisal that was performed under another case number, even if the prior appraisal is not yet more than 180 Days old. Ordering an Update to an Appraisal (II.A.1.a.iii(B)(10)) The Mortgagee may only order an update if (1) it is the Mortgagee listed as an Intended User of the original appraisal or (2) it has received permission from the original client and the Appraiser. The Appraiser incorporates the original appraisal report being updated by attachment rather than by reference per Advisory Opinion 3 of the USPAP. The Mortgagee may use an appraisal update only if: • it is performed by an FHA Appraiser who is currently in good standing on the FHA Appraiser Roster; o if a substitute Appraiser is used due to the lack of the original Appraiser availability, the substitute Appraiser must state they concur with the analysis and conclusions in the original appraisal report, and the Mortgagee must document in the case binder why the original Appraiser was not used; • the Property has not declined in value; • the building improvements that contribute value to the Property can be observed from the street or a public way; • the exterior inspection of the Property reveals no deficiencies or other significant changes; • the appraisal update was performed by the Appraiser within one year from the effective date of the initial appraisal being updated; and • the appraisal update is performed before the Disbursement Date. Pre-closing Appraisal Validity in Disaster Areas (II.A.7.c.iii.) For Mortgages that are not closed prior to the Incident Period, as defined by FEMA, in PDMDAs where a damage inspection report reveals property damage, the appraisal validity period is extended from 180 Days to a maximum of one year from the effective date of the original appraisal. In no instance will an appraisal be acceptable for a mortgage closing that has an effective date beyond one year. Mortgages with appraisals having effective dates in excess of one year require a new appraisal. Single Family Housing Policy Handbook 4000.1 Servicing and Loss Mitigation The policy changes will be incorporated into Handbook 4000.1 as follows: Appraisal Validity Period (III.A.2.l.ii.(D)(1)(c)) The as-is appraisal used for a PFS transaction is valid for 180 Days from the effective date of the appraisal report. If a Mortgagee determines that a subsequent as-is appraisal is required, the Mortgagee may obtain a new as-is appraisal, even if the Property was appraised by an FHA Roster Appraiser within the preceding 180 Days. If a third or any subsequent appraisal is required, the Mortgagee must request approval from the NSC through EVARS. Appraisal Validity Period (III.A.2.r.iii(A)(1)) The appraisal must be valid on the date of the foreclosure sale. Appraisals are valid for 180 Days from the effective date of the appraisal report. Updated Appraisals due to Postponed Foreclosure Sales (III.A.2.r.iii(D)) If the foreclosure sale does not take place within 180 Days from the effective date of the appraisal, and within such additional time provided under Extension to Appraisal Validity Period, the Mortgagee must request an updated appraisal and obtain an updated CAFMV. HECM Financial Assessment and Property Charge Guide Maximum Age of Mortgage Application Documents (Section 1.12) Documents used in the financial assessment may not be more than 120 Days old at the Disbursement Date, except for appraisals, which are subject to separate validity period requirements. Documents whose validity for financial assessment purposes is not affected by the passage of time, such as divorce decrees or tax returns, may be more than 120 Days old at the disbursement date. For purposes of counting days for periods provided in this Guide, Day one is the Day after the effective or issue date of the document, whichever is later. Appraisal Validity (Section 1.13) The initial appraisal validity period is 180 Days from the effective date of the appraisal report. An appraisal update may be performed when the initial appraisal validity period report is inadequate to meet the Disbursement Date. Where the initial appraisal is updated, the updated appraisal is valid for a period of one year after the effective date of the original appraisal report that is being updated.