Can an FHA appraisal be transferred to another lender?

The appraisal follows the case number, not the lender

Every FHA loan gets an FHA case number when it starts. The appraisal is attached to that case number. Conventional loans have no FHA case number, so a switch there depends on whether the new lender will accept a report another lender ordered.

So if you find a better rate halfway through, or your loan officer moves to a new company and you want to follow, you do not have to buy a new FHA appraisal just because the logo on the paperwork changed. The new lender asks for the case to be transferred, and the appraisal rides along.

LoanLogics, a mortgage quality control firm, lists the usual reasons these requests happen: a borrower found better pricing, or a loan officer left and the clients followed. Both are normal. Neither one is a crime, although the original lender may act like you stole its stapler.

How an FHA case transfer works, step by step

1. You choose the new lender and give them permission to request the transfer.
2. The new lender requests a case reassignment from the original lender.
3. The original lender sends the appraisal. Per LoanLogics, the lender, not the appraiser, is responsible for providing the report to the new lender.
4. The new lender reviews the report. It has to underwrite the appraisal just as it would one it ordered.
5. Underwriting moves forward on the existing case, with the existing appraisal.

One detail that saves a lot of confusion: LoanLogics notes that the client name on the appraisal does not need to show the new lender's name. Nobody needs to call the appraiser and ask for the report to be readdressed. Please do not call the appraiser and ask for the report to be readdressed.

Five business days, and no holding the case hostage

Under HUD Handbook 4000.1, which applies to loans that got a case number on or after September 14, 2015, HUD's goal is for lenders to process case reassignment requests within five business days of receipt. LoanLogics says FHA expects lenders to accommodate the borrower's wishes promptly and not hold the case number or the appraisal hostage.

When the original lender will not cooperate, HUD has a fix. LoanLogics says HUD staff can cancel the existing case number so the new lender can get a new one. The new lender and borrower can email answers@hud.gov with a letter describing their transfer attempts, using a subject line that includes "Case Transfer" and the case number.

LoanLogics also notes that if HUD sees a pattern of a lender refusing to cooperate, that lender may be targeted for an on-site review by HUD's Quality Assurance Division. Grudges are expensive.

When the new lender orders a new appraisal

The transfer is not a free pass. If the new lender finds deficiencies in the appraisal, it has to document them and then order a new appraisal, according to LoanLogics.

A deficiency means a real problem in the report. Examples would be a wrong bedroom count, comparable sales that do not support the conclusion, or missing FHA property observations. "We would have liked a higher number" is not a deficiency. A lender that wants a do-over because it prefers a different value is shopping for an appraisal, and that is not how the rule works.

If you are the borrower and the new lender says it needs a new appraisal, it is fair to ask what the deficiency is. You are entitled to understand why you might be paying twice. A clear answer like "the report missed the detached garage" is reasonable. A vague answer is worth a follow-up question.

Also watch the clock. NerdWallet notes an FHA appraisal is good for 180 days from its effective date. A transfer that drags on can run into that limit, and then the question is no longer whose appraisal it is but whether it is still usable.

What to do if you're switching lenders mid-loan

• Get your FHA case number from your current lender or your loan estimate paperwork. The new lender will ask for it.
• Tell the new lender up front that an appraisal is already done, and ask it to request the case transfer right away.
• Put your request in writing to the original lender too, with the date.
• Count business days. If five pass without movement, ask the new lender about escalating to HUD.
• Check the appraisal's effective date so you know how much of the 180 days is left.
• Ask about fees. LoanLogics notes the appraiser may keep the fee already paid, so ask both lenders how any appraisal charges will be handled.

What I see in the field

From the appraiser's side, a case transfer should be boring. My report describes the property and the market as of the effective date. Who funds the loan does not change what the comparable sales say.

That is how it should be. The appraisal is evidence about a house, not a gift card for one lender. When a transfer turns into a fight, it is almost always about business between lenders, and the borrower is stuck in the middle holding a moving truck reservation.

If you are a loan officer receiving a transferred FHA file, read the report like you ordered it. If it is solid, use it. If it has real problems, document them and order a new one. Either way, the decision should come from the report, not from the relationship.