The U.S. Department of Housing and Urban Development (HUD) has announced important updates for FHA appraisals through Mortgagee Letter 2025-18, effective June 27, 2025. These changes aim to bring FHA protocols closer to broader appraisal industry standards. Here’s a summary of the key updates that appraisers should note:
✅ What Has Been Removed or Updated
1. Economic Life / Section 223(e) Requirement
- HUD has removed the requirement for underwriters to use the appraiser’s opinion of remaining economic life (previously Handbook section II.A.3.a.ii(I)).
- This includes rescinding the additional appraisal requirements specifically for 223(e) mortgages, which historically applied to older, declining urban areas.
2. Unique Photograph Requirements
- The policy removes photo documentation requirements that went beyond typical industry standards (Handbook section II.D.4.a).
- While appraisers must still include core photos (subject front, rear, street scene, kitchen, bathrooms, etc.), HUD has reduced duplicative or overly detailed photo demands. This includes the removal of the photo requirement for crawl spaces and attics!
3. Remaining Economic Life Reporting
- Appraisers are no longer required to report remaining economic life under “Effective Age” (Handbook section II.D.4.c.iii(D)).
- This aligns FHA appraisals more closely with conventional assignments.
4. Redundant Comparable Sales and Listings
- The requirement for additional comps and active listings in changing markets has been removed (Handbook section II.D.4.c.iii(F)(3)).
- Appraisers still must analyze and support conclusions about market conditions, but no longer need to add extra listings beyond standard practice.
5. Other Clean-Ups
- Text in the Handbook related to outdated processes and redundant requirements has been deleted or renumbered to streamline guidance.
View the full Mortgagee Letter 2025-18.
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