Mortgagee (Lender) Requirements for Selecting an FHA Appraiser

The new FHA handbook took effect in September 2015 — most of it, anyway. The Single Family Housing Policy Handbook, as it is officially known, explains the requirements for mortgagees (lenders) when selecting an FHA appraiser to perform a property appraisal. Here’s an overview of those requirements.

The Appraiser’s Independence

The Mortgagee / mortgage lender must not do anything that would compromise the home appraiser’s independence. Specifically, this means the appraiser cannot be “selected, retained, managed, or compensated” by a mortgage broker or any member of the mortgage company’s staff who has a compensation structure that includes a “commission basis tied to the successful completion of a Mortgage or who is not independent of the Mortgagee’s mortgage production staff or processes.”

The quoted portions above were taken straight from the handbook, where it discusses FHA appraiser requirements and mortgagee restrictions.

Mortgagee Restrictions for Hiring an Appraiser (When FHA Loan Is Used)

The handbook also provides a list of prohibited actions:

  • The mortgagee must not pay the home appraiser an amount that is “not commensurate in the market area” of the home that’s being purchased with an FHA loan.
  • The mortgagee must not withhold, or even make a threat to withhold, full and timely payment for the the home appraisal report.
  • The mortgagee must not, in any way, prohibit the property appraiser from recording the fee he or she received for work performed during the appraisal.
  • The mortgagee must not make the appraisal fee payment conditional based on a “preliminary value estimate” requested ahead of time. In other words, the mortgage lender should not create a situation where they only pay the appraiser’s fee if the home is valued at a certain amount.
  • The mortgagee should not give the home appraiser, the appraisal company, or any person who is related to him/her any kind of stock or other financial or non-financial benefits.
  • The mortgagee must not “order, obtain, use, or pay for a second or subsequent appraisal or Automated Valuation Model (AVM)” to support a mortgage financing transaction unless:
    • it is reasonable to believe that the first appraisal was flawed or “tainted” for some reason, and such belief if clearly documented within the file; or
    • the subsequent appraisal or AVM was done in accordance with written, pre-established and legitimate “pre- or post-Disbursement appraisal review or quality control process or underwriting guidelines” and the mortgagee’s policy is to select the most reliable appraisal, rather than the one with the highest home value.
  • The mortgagee must not withhold, or even threaten to withhold, future business dealings from the appraiser in order to influence the report or arrive at a predetermined or desired value.
  • Similar to the previous point, the mortgagee should not promise “future business, promotions or increased compensation” as a way of influencing the report and/or the appraised value.
    FHA mortgagees should not request that a home appraiser “provide an estimated, predetermined or desired property value within a report prior to the completion of the appraisal report.
  • The lender should not provide a “target amount” for the appraisal, or provide an estimated, anticipated, or desired property value. In other words, the appraiser should be allowed to work independently without undue influence from the mortgagee ordering the appraisal.
  • In short, the mortgagee must not take any action that would impairs the appraiser’s “independence, objectivity, or impartiality.”

Where to Learn More

This is a just quick overview of mortgage lender (mortgagee) requirements and restrictions when hiring a home appraiser for an FHA loan. The information above was adapted from HUD Handbook 4000.1, also known as the Single Family Housing Policy Handbook. To learn more about these restrictions and prohibitions, please refer to official handbook or send your questions to

Disclaimer: This is not an official government website. We are an independent publisher and not affiliated with HUD or FHA in any way. While we make every effort to keep this website up to date, there is a chance that the information above will become less accurate over time due to policy changes. For the most recent information available, visit