FHA Regulatory Framework & Compliance 3 — Questions and Answers
Question 1: Under FHA requirements, which of the following must an appraiser report when observed during a property inspection?
- Only defects visible from the street
- All readily observable conditions affecting safety, soundness, or security (Correct answer)
- Only defects disclosed by the seller
- Defects exceeding $5,000 in repair cost
Correct answer: All readily observable conditions affecting safety, soundness, or security
FHA appraisers must report all readily observable deficiencies affecting the property's safety, soundness, or security as part of the minimum property assessment.
Question 2: Which regulatory document governs the conduct of FHA appraisers in addition to USPAP?
- HUD Handbook 4000.1 (Single Family Housing Policy Handbook) (Correct answer)
- OCC Bulletin 2010-42
- Dodd-Frank Act Title XIV
- Fannie Mae Selling Guide
Correct answer: HUD Handbook 4000.1 (Single Family Housing Policy Handbook)
HUD Handbook 4000.1 contains FHA-specific appraisal requirements that supplement USPAP and must be followed by all FHA Roster appraisers.
Question 3: What is the FHA's stance on appraisers using comparable sales from outside the subject's immediate market area?
- It is always prohibited
- It is permitted when necessary with adequate explanation (Correct answer)
- It is required for all suburban properties
- It is only allowed with lender written approval
Correct answer: It is permitted when necessary with adequate explanation
FHA allows appraisers to use comparables outside the immediate market area when sufficient local data is unavailable, provided the appraiser adequately explains the use.
Question 4: When must an FHA appraiser photograph the subject property?
- Only if the property has visible defects
- For the front, rear, street scene, and all rooms and deficiencies (Correct answer)
- Only the exterior front elevation
- Photographs are optional for FHA appraisals
Correct answer: For the front, rear, street scene, and all rooms and deficiencies
HUD requires FHA appraisers to photograph the front, rear, and street scene of the subject, plus all rooms, deficiencies, and comparable sales used in the report.
Question 5: The Appraiser Independence Requirements (AIR) established under Dodd-Frank primarily prohibit:
- Appraisers from working in multiple states
- Lenders from coercing, threatening, or bribing appraisers to reach a target value (Correct answer)
- Appraisers from using electronic signature tools
- Appraisers from accepting rush assignments
Correct answer: Lenders from coercing, threatening, or bribing appraisers to reach a target value
AIR prohibits lenders and other parties from coercing, threatening, or influencing appraisers to adjust their value conclusions to meet predetermined targets.
Question 6: An FHA appraisal report that omits required exhibits such as a location map or floor sketch is considered:
- Acceptable if the value is supportable
- An incomplete report that does not comply with FHA requirements (Correct answer)
- Acceptable if the lender waives the requirement
- Only a minor deficiency requiring a note in the file
Correct answer: An incomplete report that does not comply with FHA requirements
FHA requires specific exhibits including a location map, building sketch, and photographs; omitting required exhibits renders the report non-compliant with HUD requirements.
Question 7: What action should an FHA appraiser take upon discovering evidence of an underground storage tank (UST) on the subject property?
- Note it and assign a negative adjustment
- Require remediation and condition the appraisal subject to inspection by a qualified specialist (Correct answer)
- Ignore it if the tank appears to be unused
- Refuse to complete the appraisal
Correct answer: Require remediation and condition the appraisal subject to inspection by a qualified specialist
Underground storage tanks are an environmental hazard; FHA requires the appraiser to flag the condition and require inspection/remediation by a qualified specialist.
FHA Regulatory Framework & Compliance 3
Under FHA requirements, which of the following must an appraiser report when observed during a property inspection?