Mortgagee Letter 2026-10

Date: June 23, 2026

To: All FHA-Approved Mortgagees All Direct Endorsement Underwriters All Eligible Submission Sources for Condominium Project Approvals All FHA Roster Appraisers All FHA-Approved 203(k) Consultants All FHA-Approved Title I Lenders All HUD-Certified Housing Counselors All HUD-Approved Nonprofit Organizations All Governmental Entity Participants All Real Estate Brokers All Closing Agents

Subject: Updates to FHA Quality Control Requirements for Appraisal Field Reviews

Purpose: This Mortgagee Letter (ML) updates FHA quality control (QC) requirements to allow greater flexibility and alternatives to appraisal field reviews.

Effective Date: The provisions of this ML are effective immediately.

All updates will be incorporated into a forthcoming update of the HUD Handbook 4000.1, FHA Single Family Housing Policy Handbook (Handbook 4000.1).

Affected Programs: The provisions of this ML apply to all FHA-insured mortgage programs.

Background: FHA has identified an opportunity to allow greater flexibility in its QC policy for Property and Appraisals by removing the requirement for Mortgagees to obtain appraisal field reviews on at least 10 percent of origination and underwriting QC reviews. The update makes field reviews an optional component of appraisal QC, maintaining FHA’s core appraisal compliance framework while giving Mortgagees the ability to tailor review methods based on case-specific risk.

FHA’s previous appraisal field review requirement resulted in significant costs for Mortgagees, which often outweighed the limited risk mitigation benefits considering the frequent use of third-party tools and appraisal desk reviews. By making field reviews optional, FHA is removing a potential barrier to Mortgagee participation in FHA programs, as well as an expense that may be passed indirectly to consumers.

In compliance with President Trump’s Executive Order, Promoting Access to Mortgage Credit, this change aligns FHA more closely with appraisal QC standards already adopted by the U.S. Department of Veterans Affairs and the mortgage industry generally.

Summary of Changes This ML:

• updates requirements in Property and Appraisals (V.A.3.c.ii(C)).

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.

FHA Single Family Housing Policy Handbook 4000.1

Quality Control, Oversight, and Compliance

The policy changes will be incorporated into Handbook 4000.1 as follows:

Property and Appraisals (V.A.3.c.ii(C))

(1) Standard

(a) Property and Appraisal Reviews

For all FHA-insured Mortgages selected by the Mortgagee for origination and underwriting QC review, the Mortgagee must evaluate all Property documentation and the appraisal report used to support the Property Value and eligibility for FHA insurance.

At a minimum, the Mortgagee must review all Property documentation and the appraisal report for completeness, technical accuracy, and overall quality in compliance with Property Acceptability Criteria for Forward Mortgages (II.A.3.a), Property Acceptability Criteria for Reverse Mortgages (II.B.4.a), and Appraiser and Property Requirements for Title II Forward and Reverse Mortgages (II.D).

The Mortgagee should use valuation tools, Automated Valuation Models (AVM), multiple listing service data, public records data, and any other appropriate methods to identify potential valuation errors or other compliance issues.

(b) Field Reviews

The Mortgagee may obtain appraisal field reviews if needed to adequately assess the appraisal report for compliance with all applicable requirements.

Field reviews must be performed by Appraisers listed on the FHA Appraiser Roster and must be reported on the applicable Residential Appraisal Field Review Report form or report.

(2) Exceptions [Text was deleted in this section.]

Mortgagees are not required to perform the property and appraisal QC review (V.A.3.c.ii(C)(1)(a)) for Streamline Refinances where the Mortgagee was not required to order a new appraisal for a Property financed with an FHA-insured Mortgage.

(3) Required Documentation

The Mortgagee must retain all results from the property and appraisal QC reviews required by this section, including any reports from valuation tools or appraisal field reviews. Results include all selection criteria, review documentation, Findings, and actions taken to mitigate Findings.

Paperwork Reduction Act The information collection requirements contained in this document have been approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3520) and assigned OMB control numbers 2502-0005; 2502-0059; 2502-0117; 2502-0189; 2502-0302; 2502-0306; 2502-0322; 2502-0328; 2502-0358; 2502-0404; 2502-0414; 2502-0429; 2502-0494; 2502-0496; 2502-0524; 2502-0525; 2502-0527; 2502-0538; 2502-0540; 2502-0556; 2502-0561; 2502-0566; 2502-0570; 2502-0583; 2502-0584; 2502-0589; 2502-0600; 2502-0610; and 2502-0611. In accordance with the PRA, HUD may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB control number.

Feedback or Questions HUD welcomes feedback from interested parties and will consider feedback in determining the need for future updates. Any feedback or questions regarding this ML may be directed to the FHA Resource Center at 1-800-CALLFHA (1-800-225-5342), answers@hud.gov, or www.hud.gov/answers. The FHA Resource Center is prepared to accept calls from persons who are deaf or hard of hearing, as well as individuals with speech or communication disabilities. Information on how to make an accessible phone call is available at https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.

Attachment 1

Handbook 4000.1 Pages Impacted by this Mortgagee Letter

The Handbook 4000.1 sections impacted by this Mortgagee Letter (ML) are provided in this attachment, with changes tracked in redline to help users clearly identify the policy requirements being revised or removed from the Handbook.

V. QUALITY CONTROL, OVERSIGHT, AND COMPLIANCE A. Quality Control of Lenders and Mortgagees 3. Loan Level Quality Control Program Requirements

(b) Required Documentation The Mortgagee must retain evidence of the written, electronic, or telephone verification, and document the due diligence.

(2) Discrepancies (a) Standard The Mortgagee must evaluate all discrepancies to ensure that the original documents (except blanket verification releases) were completed before being signed, were as represented, were not handled by Interested Parties, and that all corrections were proper and initialed. All conflicting information in the original documentation must be resolved with the underwriter. Discrepancies in documentation discovered during pre-closing reviews must be resolved prior to closing.

(i) Exception for Mortgagees and Third-Party Originators The Mortgagee and TPO are permitted to handle reverifications, provided the Mortgagee or TPO is not the seller, real estate agent, builder, or developer.

(b) Required Documentation The Mortgagee must document any discrepancies and retain copies of information used to resolve such discrepancies.

(C) Property and Appraisals

(1) Standard (a) Property and Appraisal Reviews For all FHA-insured Mortgages selected by the Mortgagee for origination and underwriting QC review, the Mortgagee must evaluate all Property documentation and the appraisal report used to support the Property Value and eligibility for FHA insurance.

At a minimum, the Mortgagee must review all Property documentation and the appraisal report for completeness, technical accuracy, and overall quality in compliance with Property Acceptability Criteria for Forward Mortgages, Property Acceptability Criteria for Reverse Mortgages, and Appraiser and Property Requirements for Title II Forward and Reverse Mortgages.

The Mortgagee should use valuation tools, Automated Valuation Models (AVM), multiple listing service data, public records data, and any other appropriate methods to identify potential valuation errors or other compliance issues.

(b) Field Reviews The Mortgagee may obtain appraisal field reviews if needed to adequately assess the appraisal report for compliance with all applicable requirements.

Field reviews must be performed by Appraisers listed on the FHA Appraiser Roster and must be reported on the applicable Residential Appraisal Field Review Report form or report.

(2) Exceptions [Text was deleted in this section.] Mortgagees are not required to perform the property and appraisal QC review, including any appraisal field review, for Streamline Refinances where the Mortgagee was not required to order a new appraisal for a Property financed with an FHA-insured Mortgage.

Appraisal field reviews are not required for pre-closing property and appraisal QC reviews.

(3) Required Documentation The Mortgagee must retain all results from the property and appraisal QC reviews required by this section, including any reports from valuation tools or appraisal field reviews. Results include all selection criteria, review documentation, Findings, and actions taken to mitigate Findings.