AWACSMortgage compliance intelligence from Flightline

FHA · Mortgagee Letter ML 2025-18 · Published

Rescission of Outdated and Costly FHA Appraisal Protocols

FHA has rescinded several appraisal requirements for Title II forward mortgages and HECMs, effective immediately. The eliminated rules include underwriter review of remaining economic life, extra appraisal photographs exceeding industry standards, appraiser reporting of remaining economic life, and mandatory extra comparables in changing markets.

Review recommendedIn effect nowChecks passed· adjusted automaticallyRead the letter ↗ (opens in a new tab)

Loan impact

From the letter text · needs review

Applies to: FHA-insured Single Family Title II forward mortgage and Home Equity Conversion Mortgage (HECM) programs.

Addressed to
All FHA-Approved Mortgagees
Investor
FHAFrom the publisher, not quoted from the text
Programs
FHAFrom the publisher, not quoted from the text
Affected areas
Report format; Valuation; EligibilityGuide Section II.A.3.a.ii(I)
Affected documents
Appraisal Report
Applicability confidence
Needs review: some rows could not be matched to a quote from the source
Supporting quotes from the letter
  • affected areas“This Mortgagee Letter (ML) eliminates outdated and costly FHA appraisal requirements.”
  • guide sections“The Handbook 4000.1 sections impacted by this ML are provided in Attachment 1, with changes tracked in redline to help users clearly identify the policy requirements being revised or removed from the Handbook.”
  • affected documents“The Appraiser must provide support for conclusions regarding housing trends and overall market conditions as reported in the “Neighborhood” section of the appraisal report form.”

What changed

From the letter text · Sections II.A.3.a.ii(I), II.D.4.a, II.D.4.c.iii(D), II.D.4.c.iii(F)(3), II.D.8
RequirementPreviouslyNow
Underwriter review of remaining economic lifeRemovedSection II.A.3.a.ii(I)Previously: The Mortgagee must confirm that the term of the Mortgage is less than or equal to the remaining economic life of the Property.Requirements for the underwriter to use the Appraiser's opinion of remaining economic life are removed.
Appraisal photograph requirements exceeding industry standardsRemovedSection II.D.4.aPreviously: Appraisers were required to provide additional photographs including front and rear at opposite angles, grade/drainage depictions, basement/attic/crawl space, common areas for 2-4 units, angled comparable photos, and condo amenities.Photograph requirements that exceed industry standards are removed from Photograph, Exhibits, and Map Requirements.
Appraiser reporting of remaining economic lifeRemovedSection II.D.4.c.iii(D)Previously: The Appraiser must state the remaining economic life as a single number or as a range for all property types, including condominiums.The remaining economic life reporting requirement in Effective Age is removed.
Additional comparable sales and listings in changing marketsRemovedSection II.D.4.c.iii(F)(3)Previously: In changing markets with Increasing Market or Decreasing Market property value trends, the Appraiser must include an absorption rate analysis, at least two comparable sales that closed within 90 Days prior to the effective date of the appraisal, and a minimum of two active listings or pending sales on the SCA Grid (in addition to at least three settled sales).The redundant requirement for additional comparable sales and listings in changing markets is removed.
Additional appraisal requirements for Section 223(e) mortgagesRemovedSection II.D.8Previously: The Appraiser must provide a remaining physical life in addition to the remaining economic life if the Mortgagee orders an appraisal for a Property to be insured under the 223(e) program.Additional appraisal requirements for Section 223(e) mortgages are removed.

What to do

AWACS interpretation · not source language

What to review: Review the immediate rescission of appraisal requirements regarding remaining economic life, non-standard photographs, changing-market comparables, and Section 223(e) protocols to streamline appraisal and underwriting review processes.

QC implications

  • Quality control may update appraisal review checklists to ensure reports are no longer cited for missing remaining economic life, non-standard photographs, or additional changing-market comparables.

Source and record

Version 1 · archived

Checks

  • Source verified: Passed

    The document ID, link and publication date match the official source.

  • Quotes match the source: Passed, adjusted automatically

    Every quoted passage appears word for word in the official document.

    • A detail the source does not support was removed or adjusted

  • Requirements backed by the source: Passed, adjusted automatically

    Anything marked required is backed by the requirement language and dates in the source.

    • A detail the source does not support was removed or adjusted

  • In scope: Passed

    The document is about residential mortgage lending.

  • Format and labels: Passed

    The record follows the AWACS format and uses its standard labels.