FHA Insured Mortgages Require an Appraisal by a State Certified Appraiser

By: Nanci L. Weissgold

Effective December 23, 2011, HUD has finally amended its rules to coincide with its existing practice of allowing only state certified appraisers to conduct appraisals of properties securing an FHA insured mortgage. This means that state licensed appraisers or those with only the certification of a “nationally recognized professional organization” are now permitted on the FHA Appraiser Roster.

Under the final rule, to be eligible for placement on the FHA Appraiser Roster, the appraiser must be state certified with credentials in compliance with the certification criteria established by the Appraisal Qualification Board (AQB) of the Appraisal Foundation. As authorized by FIRREA, the AQB establishes minimum education, experience, and examination requirements that each jurisdiction must follow in order for a real property appraiser to be designated state certified or state licensed. A state certified appraiser must satisfy more stringent education and experience requirements than a state licensed appraiser. For example, a state certified appraiser must hold an associates degree or higher from an accredited college or university (or complete specified college-level education) whereas currently a college degree is not a prerequisite for a state licensed appraiser (the AQB is contemplating strengthening its minimum requirements by January 2015).

Prior to October 1, 2008, state licensed or certified appraisers were eligible for placement on the FHA Appraiser Roster. HUD was mandated to revise its practices when Congress enacted the Housing and Economic Recovery Act of 2008, which, among other measures, amended the National Housing Act to require any appraiser chosen or approved to conduct appraisals on properties secured by an FHA mortgage to be certified by the state in which the property to be appraised is located, or by a nationally recognized professional appraisal organization, and have demonstrated verifiable education in the appraisal requirements established by FHA.

In response to the congressional mandate, HUD issued Mortgagee Letter 2008-39 requiring FHA appraisers to be certified in the state in which the property is located or by a nationally recognized professional organization. However, in the final rule (as was also the case in the proposed rule), “HUD will accept only state certification and not the certification of a nationally recognized professional organization.” HUD recognized in its Mortgagee Letter that there may be other nationally recognized professional organizations, but in the final rule determined that “state certification sufficiently accomplishes the statutory purpose of ensuring higher quality appraisals.”

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