September 23, 2005

> MORTGAGEE LETTER 2005-34

##### TO: ALL APPROVED MORTGAGEES

#####  ALL FHA ROSTER APPRAISERS

> SUBJECT: Adoption of Revised Appraisal Reporting Forms and Update to
> FHA Appraisal Protocol

The Federal Housing Administration (FHA) will be adopting four of the
revised appraisal reporting forms recently released by Fannie Mae. For
all appraisals of properties that are to be security for FHA-insured
mortgages, and which are performed on or after January 1, 2006, the
appraisal must be reported on one of the following Fannie Mae appraisal
reporting forms as per property type:

1.  Uniform Residential Appraisal Report (Fannie Mae Form 1004) for all
    1 unit single family dwellings

2.  Manufactured Home Appraisal Report (Fannie Mae Form 1004C) for all
    manufactured homes

3.  Individual Condominium Unit Appraisal Report (Fannie Mae Form 1073)
    for all individual condominium units

4.  Small Residential Income Property Appraisal Report (Fannie Mae
    Form 1025) for all 2 to 4 unit single family dwellings

These forms are available online at:
[http://www.efanniemae.com/index.jsp]{.underline}

FHA Roster Appraisers are instructed to continue to use the existing
(pre March 2005) Fannie Mae appraisal reporting forms until the January
1, 2006 implementation date. FHA Mortgagees and Roster Appraisers are to
continue to rely upon existing FHA procedures for guidance in the
valuation of single family properties until the adoption of the revised
appraisal reporting forms. Appendix D of Handbook 4150.2, CHG-1,
Valuation Analysis for Home Mortgage Insurance for Single Family One- to
Four- Unit Dwellings, has been updated and becomes effective for all
appraisals performed on or after January 1, 2006. Revised Appendix D is
attached to this Mortgagee Letter and will be available online at:

[http://www.hudclips.org/cgi/index.cgi]{.underline}.

Upon implementation of the four revised Fannie Mae appraisal reporting
forms,

form HUD-92564-VC, Notice to the Lender (Valuation Conditions/VC form),
and form HUD-92564-HS, Notice to The Homebuyer (Homebuyer Summary) will
be retired and are not to be submitted as part of an appraisal valuation
package. Upon elimination of these two forms, all valuation conditions,
including repairs, alterations and/or required inspections, must be
reported within the appropriate section of the applicable Fannie Mae
appraisal reporting form.

Upon receipt of the completed appraisal report, the Mortgagee must note
any physical deficiency or adverse condition requiring repair,
alteration or further inspection on form HUD-92800.5B (Conditional
Commitment Direct Endorsement Statement of Appraised Value) and provide
a copy of the completed form to the mortgagor at least five business
days prior to loan closing. Mortgagees are reminded to advise mortgagors
of their right to request and receive a copy of the completed appraisal
report.

The appraisal reporting guidance contained in Handbook 4150.2, CHG-1
remains in effect with the exception of any instruction(s) or policy
that is in conflict with that provided in Revised Appendix D, in which
case Revised Appendix D shall prevail. Any and all references to
Valuation Condition (VC) items addressed in Chapters 2 and 3 of Handbook
4150.2 are to be addressed in the appropriate section of the applicable
appraisal reporting form. For example, Chapter 2, Section 2-2-E,
entitled "Slush Pits" instructs: "if there is any readily observable
evidence of slush pits, mark the "yes" column in VC-1." The new protocol
will require the appraiser to address this condition in the site section
of the appraisal report and note that the property may not be eligible
for FHA financing, referencing the information contained in Chapter 2.

Upon elimination of the two forms that comprise the three-part CVP, only
one copy of the appraisal report will be required to be retained in the
origination binder.

If you have any questions regarding this Mortgagee Letter, please
contact your local Homeownership Center (HOC) in Atlanta (888-696-4687),
Denver (800-543-9378),

Philadelphia (800-440-8647), or Santa Ana (888-827-5605).

Sincerely,

> Brian D. Montgomery
>
> Assistant Secretary for Housing-

Federal Housing Commissioner

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