HUD vs. USPAP
A recent HUD MORTGAGEE LETTER 2009-29 states "In accordance with the Uniform Standards of Professional Appraisal Practice (USPAP), the lender is not permitted to request that the appraiser change the name of the client within the appraisal report unless it is a new appraisal assignment. To effect a client name change, the second lender and the original appraiser may engage in a new appraisal assignment wherein the scope of work is limited to the client name change. A new client name should include the name of the client (lender) and HUD."
The Appraisal Foundation immediately published the October USPAP Q&A that states "USPAP requires the scope of work performed to produce credible assignment results. USPAP clearly establishes that the scope of work is determined by the appraiser. If a client's instructions (i.e. assignment conditions) limit the appraiser's scope of work in a new assignment to simply identifying a new client, the client, not the appraiser, has made the scope of work decision."
The Q&A goes on to state "In addition, even if the appraiser accepted the client's proposed scope of work as his or her own, that scope of work may not be adequate to produce credible assignment results as required by USPAP."
Once again, the Appraiser has been placed squarely between two 300-pound gorillas and is expected to do the right thing!
So how do we reconcile these two directives? First, it is important to recognize the issues. While it appears that HUD meant well, the suggestion in the mortgagee letter indicating that the appropriate "scope of work" for an appraisal assignment (any appraisal assignment) could be limited only to "Identification of the Client" is absurd. The appropriate "scope of work" decision in the new assignment must be based on the "assignment elements" of that assignment, even if they are similar to the "assignment elements" in the previous appraisal assignment. Recognition of these assignment elements (see below) is required for proper "Problem Identification" and an appropriate "Scope of Work" decision.
So even if all "assignment elements" were nearly identical (with the exception of the Client name), the appropriate "scope of work" for the new assignment, must include all of the steps completed for the prior assignment, including Inspections, Data Collection and Analysis, Application of the Approaches to Value, Reconciliation and Final Opinion of Value, Reporting of the Conclusions, etc. In some cases, the appraiser may be able to utilize work that has already been completed for the prior assignment. Also, a different scope of work may be appropriate for the new assignment and, if so, the appraiser must identify and perform the appropriate "scope of work" for the new assignment regardless of the client's instructions to do something less or to do something else.
In conclusion, while there is nothing in USPAP that requires all of the prior steps to be duplicated, it should be recognized that the "scope of work" for the new assignment includes all of those steps and the appraiser should never make the statement that the scope of work was limited to a "client name change" which might be considered to be
"re-addressing" the prior appraisal.
Note: Effective January 1, 2010, the appraiser would be required to disclose (prior to accepting the assignment and again in the report certification) that a previous appraisal assignment was completed. Click here for more info on this disclosure...
USPAP Assignment Elements
Required for Problem Identification & Determination of the Scope of Work
client and any other intended users;
intended use of the appraiser's opinions and conclusions;
type and definition of value;
effective date of the appraiser's opinions and conclusions;
subject of the assignment and its relevant characteristics; and
assignment conditions
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