On March 19, 2025, the Federal Housing Administration (FHA) issued Mortgagee Letter (ML) 2025-08 titled “Rescinding Multiple Appraisal Policy Related Mortgagee Letters.” As the title suggests, FHA rescinded three mortgagee letters relating to Appraisal Fair Housing Compliance and Appraisal Review and Reconsideration. While this is a major change in how appraisals will be handled under FHA guidelines, these policy shifts reflect the FHA’s ongoing efforts to streamline policies and reduce regulatory and financial burden.
Two of the three rescinded mortgagee letters (ML 2024-07 and ML 2024-16) were issued just last year and related to the implementation of new Appraisal Review and Reconsideration of Value (ROV) guidelines established by the FHA. Specifically, ML 2024-07 enhanced FHA’s policy on standards for appraisal reviews, and provided specific requirements related to borrower-initiated ROV requests. Notably, FHA emphasized that a mortgagee’s appraisal review process must include protocols for addressing potential appraisal bias or appraisal discrimination, including by allowing borrowers to request a ROV, request a general correction, explanation, or substantiation, or obtain a second appraisal. In light of operational challenges with implementing ML 2024-07, ML 2024-16 extended the implementation date for the new appraisal review and ROV guidelines from September 2, 2024, to October 31, 2024.
ML 2021-27, titled “Appraisal Fair Housing Compliance and Updated General Appraiser Requirements,” is the third rescinded mortgagee letter. According to FHA, ML 2021-27 clarified existing FHA requirements for appraisers and mortgagees relating to compliance with fair housing laws. In rescinding ML 2021-27, FHA notes that subsequent amendments to the Uniform Standards of Professional Appraisal Practice (USPAP) resolved the concerns that 2021-27 was intended to address.
Overall, the FHA’s decision to rescind these three appraisal related mortgagee letters reflects its broader goal of reducing regulatory and financial burdens within the mortgage process. Lenders, appraisers, and mortgagees should stay informed and adapt their policies to align with the evolving landscape.
The policy changes established in ML 2025-08 will be incorporated into the FHA Single Family Housing Policy Handbook (Handbook 4000.1). The provisions of this ML are effective immediately.