The Federal Housing Administration published Mortgagee Letter (ML) 2022-11, Revised Appraisal Validity Periods., which extends the initial appraisal validity period from 120 days to 180 days and the appraisal update validity period from 240 days to one year for most FHA Title II mortgages and Home Equity Conversion Mortgages.
FHA announced in FHA Info #2022-71 that these changes align FHA appraisal validity periods with industry practices, making it easier for lenders to operationally manage appraisal validity while potentially reducing appraisal costs for mortgagees and ultimately, borrowers seeking FHA-insured mortgage financing.
“It has been over 12 years since HUD changed the validity period for appraisals from 180 days (6 months) to 120 days (4 months),” says Elly Johnson, President of All Reverse Pro, Hiram, GA and Co-Chair of the HUD Issues Committee. “The announcement this week from HUD changing the validity period back to 6 months comes at an opportune time in our industry given the current market volatility. This change will provide additional time for the loan approval process without concerns that the appraisal may expire before the loan can be closed and funded.”
The appraisal validity period establishes the maximum time mortgagees may use an appraisal report for an FHA-insured mortgage. This also includes the time FHA permits mortgagees to utilize an appraisal update to extend the initial appraisal validity period.
With these changes, the current optional 30-day extension is no longer necessary. In addition, FHA is removing the requirement for an update to be performed before the initial appraisal has expired.
The ML outlines the policy updates noted below:
For Origination through Post-Closing/Endorsement, the ML:
- applies to case numbers assigned on or after June 1, 2022;
- 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 from the effective date of the initial appraisal report; and
- eliminates the optional 30-day extension.
For Servicing and Loss Mitigation, the ML:
- applies to appraisals with effective dates on or after July 12, 2022; and
- 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, the ML:
- applies to case numbers assigned on or after June 1, 2022;
- updates the initial appraisal validity period from 120 days to 180 days from the effective date of the appraisal report; and
- extends the appraisal update validity period from 240 days to one year.
The updates highlighted in this ML will be incorporated in a future version of the Single Family Housing Policy Handbook 4000.1.
