FHA Appraisal Process: Someone Finally Says Something Good About It

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One of my biggest pet peeves is the phrase I often hear bandied about that ‘FHA is the new subprime.”

No, it isn’t. And knock on wood, it never will be. FHA does provide an opportunity for borrowers who have had credit problems to get a loan. But the differences between FHA doing that and subprime loans doing that are that FHA requires common sense from the underwriter and FHA holds the lender accountable for their default rate. There isn’t an arbitrary rule that says “OK, you’ve been late 1×30 on your mortgage in the last twelve months, so you qualify. We don’t care why it happened, or whether the situation is likely to happen again in the next 3 months. You fit the matrix, you get the loan.”

One of the other issues I hear gripes about from loan officers is the FHA appraisal requirements. Given that my point of reference is from a time when those requirements were much more stringent than they are now, this is actually amusing to me.

This morning while catching up on the news, I came across this post by Tanta at Calculated Risk referencing the FHA appraisal process in a different light. Turns out the condition of some properties is resulting in lenders actually walking away from properties they could foreclose on because they don’t even want to be responsible for the property taxes! After reading that post, no one can say the mortgage landscape hasn’t changed. Good grief!