The success of the FHA insurance program and HUD's ability
     to protect its financial interest begins with selecting
     qualified and knowledgeable appraisers.  This chapter
     presents the minimum requirements that appraisers must meet
     to be placed on the FHA Register.
     1-1  FHA REGISTER
     The FHA Register lists appraisers who are eligible to
     perform FHA single-family appraisals.  To conduct an
     appraisal for FHA insurance endorsement, the appraiser must
     be on the FHA Register.
                    Appraiser     Appraiser    HUD             Appraiser
                    achieves       applies        reviews          placed on
                    necessary     to HUD       application     FHA Register
          To be eligible for placement on the FHA Register, all
     appraisers must be state-licensed or state-certified and
     must not be listed on any of these:
               o        GSA's Suspension and Debarment List (the government-
                        wide list of parties excluded from federal procurement
                        or non-procurement programs)
               o        HUD's Limited Denial of Participation List
               o        HUD's Credit Alert Interactive Voice Response System
         To be eligible to perform appraisals for FHA, the appraiser
     must also pass a HUD//FHA test on appraisal methods and
     reporting, which focuses on applied knowledge of the new
     Handbook 4150.2 .
          A uniform national examination will be available June 1,
        1999.  The examination contains fifty questions in a
        multiple-choice format.  The test will be administered by a
        national provider and the cost paid by the appraiser.
        Appraisers currently on the FHA Register will be
        grandfathered until January 30, 2000.
          The application process is the first screening of the
     appraiser's qualifications to perform HUD/FHA appraisals.
     To apply, appraisers must submit the following to FHA:
               o    Updated form HUD-92563 "Register Appraiser Designation
               o    A copy of a current valid appraisal license and/or
                    certification verification that the appraiser has
                    passed the FHA Examination
          HUD will review this information to determine the
     appraiser's eligibility for the FHA Register.
     To verify that the appraiser is eligible to perform HUD/FHA
     appraisals, REAC performs a detailed review of the
     appraiser's professional qualifications and checks for any
     negative information.  The review does the following:
               o    verifies that the appraiser is state-licensed or state-
                    certified under the Appraisal Qualifications Board
                    (AQB) criteria
               o    verifies that the appraiser has passed the FHA
                    Appraisals Methods and Procedures test
               o    pre-screens the appraiser's social security number in
                    the HUD/FHA Credit Alert Interactive Voice Response
                    System (CAIVRS)
               o    reviews HUD records to ensure that the appraiser has no
                    pending suspensions, disqualifications or debarments
               o    verifies with the appraiser's signature that there are
                    no actions or pending judgments against the appraiser
                    for waste, fraud, abuse or breach of professional
                    ethics or standards
               o    reviews the previous period's performance, if
     When the review of the application is complete, the
     appraiser is designated to the FHA Register.  New appraisers
     recently added to the FHA Register may be monitored and
     reviewed more frequently to ensure that their performance is
     consistent with HUD/ FHA guidelines and to monitor training
     Because the initial application to the FHA Register will
     occur after the appraiser has become state-licensed or
     state-certified, the first term will coincide with the
     remaining period of state licensing for the home state.
     After this initial period, the FHA Register period will be
     consistent with the home state license period.
     Each period, every appraiser must re-apply to the FHA
     Register, concurrent with the appraiser's application for
     state licensing and/or re-certification.  HUD reviews the
     appraiser's performance and compliance with new testing
     requirements and verifies that the appraiser is state-
     certified or state-licensed.
     For more information on the review process, see Chapter 6 of
     this Handbook.
               Lender         Lender       Lender         Appraiser     Lender
               selects          assigns      transmits     performs      reviews
               appraiser      appraiser   case #, if      appraisal     appraisal
     When the lender selects an appraiser from the FHA Register,
     the FHA Connection processes a case number for the lender.
     The lender may assign the appraiser before receiving the
     case number, but the case may not be submitted for
     endorsement without the case number.  The case number must
     be placed on all copies of the URAR as well as the VC form
     and summary.  The mortgagee will give the appraiser:
     o    the property address
     o    type of construction
     o    number of units
     o    other information necessary for the assignment
     If the property is a condominium or a Planned Unit
     Development (PUD), the lender will verify that it is HUD-
     approved before ordering a case number or having an
     appraisal performed.  The lender will give the appraiser the
     project name and ID number and all available property
     information.  If it is proposed construction for a PUD or
     Condominium, it must be FHA-approved before ordering a case
     number.  The name of the Condominium or PUD must be given.
          The Department's regulations on choosing appraisers
          state that there shall be no discrimination on the
          basis of race, color, religion, national origin, sex,
          age or disability.
          HUD expects lenders to comply with anti-discrimination
          requirements and affirmatively select female and
          minority appraisers for a fair share of appraisals
          commensurate with their representation on the FHA
          Register.  HUD will monitor lenders' choice of
          appraisers by their sex and race.
          The appraiser is hired by the lender, and therefore has
          a contractual responsibility to the lender.  However,
          the appraiser provides services for HUD programs, and
          therefore, has an obligation to perform these services
          commensurate with the standards and requirements of
          HUD.  This dual responsibility of the appraiser is
          recognized in the review and reporting requirements of
          HUD.  The lender and the appraiser must meet their
          respective obligations as prescribed by HUD/FHA.
          Therefore, the intended user of the appraisal report is
          also HUD.  These contractual obligations to the lender
          and HUD/FHA are in addition to the appraiser's legal
          obligations to his or her credentialing state.
(1-2)     HUD/FHA mortgage insurance is initiated when a lender
          selects an appraiser from the FHA Register.  Once the
          appraiser agrees to perform the appraisal, the
          appraiser is in a contractual relationship with the
          lender.  The appraiser will send the completed
          appraisal directly to the lender.  HUD advises the
          appraiser to discuss the appraisal only with the
          underwriter.  No other individual should contact the
          appraiser before the appraisal has been completed.
          Real estate brokers and agents should consider the
          lender their sole source of information on the
          appraisal and all matters related to the appraisal.
               D.   APPRAISAL FEES
          The appraiser and the lender will negotiate the price
          and due date.  HUD does not establish fees or due
          dates.  The fee is paid for market value estimate based
          on guidelines consistent with HUD policy and procedure
          established in this Handbook.  The fee is not based on
          a requested minimum valuation, a specific valuation or
          the approval of a loan.  Lenders may charge the
          borrower only what is customary and reasonable in the
          area to obtain an appraisal.
          Appraisal management firms may charge the mortgagor a
          fee for the appraisal that may encompass fees for
          services performed by the firm as well as fees for the
          appraisal itself.  However, the total of these fees is
          limited to the customary and reasonable fee for an
          appraisal in the market area where the appraisal is
          performed.  Such arrangements must comply with all
          aspects of the Real Estate Settlement Procedures Act
          (RESPA) and its implementing regulations, including
          restrictions against:
               o    kickbacks and referral fees
               o    charges for settlement services that were not
                    actually performed
               o    payments in affiliated business arrangements other
                    than return on ownership