FHA Ethical Standards & Professional Conduct 2 — Questions and Answers
Question 1: Under USPAP's Ethics Rule, which of the following actions constitutes a violation of the Conduct section?
- Accepting an assignment with a predetermined value conclusion (Correct answer)
- Charging a flat fee regardless of property complexity
- Disclosing prior services on the same property
- Certifying the report was prepared in compliance with USPAP
Correct answer: Accepting an assignment with a predetermined value conclusion
Accepting an assignment contingent on a predetermined value conclusion violates the Conduct section of USPAP's Ethics Rule.
Question 2: An FHA appraiser discovers mid-assignment that the lender's loan officer is the property owner's brother. What is the most appropriate action?
- Complete the appraisal since the conflict involves the lender, not the appraiser
- Disclose the relationship and withdraw if independence is compromised (Correct answer)
- Adjust the value downward to offset any potential bias
- Proceed but note the relationship only in the workfile
Correct answer: Disclose the relationship and withdraw if independence is compromised
When a conflict of interest is discovered, the appraiser must disclose it and withdraw if it impairs independence, per USPAP Ethics Rule.
Question 3: The USPAP Management section of the Ethics Rule prohibits appraisers from doing which of the following?
- Entering into co-appraiser agreements
- Paying referral fees to mortgage brokers for appraisal assignments (Correct answer)
- Accepting assignments from AMCs
- Charging higher fees for complex properties
Correct answer: Paying referral fees to mortgage brokers for appraisal assignments
The Management section prohibits paying referral fees or other compensation to secure appraisal assignments, as this impairs independence.
Question 4: Under HUD guidelines, how long must an FHA appraiser retain the appraisal workfile?
- 1 year from the date of the report
- 3 years from the date of the report or 3 years after final disposition of any legal proceeding, whichever is later (Correct answer)
- 5 years from the date of the report
- 7 years from the date of the report
Correct answer: 3 years from the date of the report or 3 years after final disposition of any legal proceeding, whichever is later
USPAP requires workfile retention for at least five years from the date of the report or two years after final disposition of any legal proceeding, but HUD/FHA imposes a minimum of three years.
Question 5: An appraiser is asked by a borrower to 'make the value work' for their refinance. The appraiser should:
- Attempt to find additional comparable sales that support a higher value
- Decline the request and maintain an independent value opinion (Correct answer)
- Inform the lender but still adjust the value slightly upward
- Complete the assignment and note the request in the addendum
Correct answer: Decline the request and maintain an independent value opinion
Requests to predetermine value conclusions must be declined to preserve appraiser independence under USPAP and FHA requirements.
Question 6: Which party is responsible for selecting and engaging an FHA-approved appraiser under current HUD Appraiser Independence Requirements?
- The borrower
- The real estate agent
- The lender or its approved AMC (Correct answer)
- HUD directly
Correct answer: The lender or its approved AMC
Under HUD's Appraiser Independence Requirements, the lender or its approved AMC is responsible for selecting and engaging the appraiser.
Question 7: A trainee appraiser co-signs an FHA appraisal report with their supervising appraiser. Who bears primary responsibility for the report's compliance with USPAP?
- The trainee, since they performed the inspection
- Both the trainee and supervisor share equal responsibility
- The supervising appraiser, who must review and accept responsibility (Correct answer)
- The lender who ordered the assignment
Correct answer: The supervising appraiser, who must review and accept responsibility
The supervising appraiser who co-signs the report is responsible for the work and must review it for USPAP compliance.
FHA Ethical Standards & Professional Conduct 2
Under USPAP's Ethics Rule, which of the following actions constitutes a violation of the Conduct section?