We audited HUD's controls over the FHA appraiser roster in response to a single-family loan origination audit that had raised concerns about FHA appraisers and appraisals. We reviewed HUD's appraiser roster (roster) to determine whether HUD's controls over the roster were adequate to ensure that only qualified/eligible appraisers were placed on the roster and whether the oversight and maintenance of the roster were sufficient to ensure that only currently eligible appraisers remained on the roster. HUD had significant weaknesses in its internal controls used to maintain the roster. These weaknesses caused the roster to contain unreliable data which included the listing of 3,480 appraisers with expired licenses and 119 appraisers that had been state sanctioned. Additionally, 28 of the appraisers listed with expired licenses and eight of the sanctioned appraisers conducted appraisals.

Specifically, HUD

Did not conduct roster quality control reviews in accordance with its written roster quality control plan;

Did not perform regular monitoring of the roster to ensure data reliability;

Instructed and/or approved its contractor to use logic statements when developing the software program that updates the roster, which were not in accordance with HUD regulations and did not always work properly; and

Did not retain initial application packages for all active appraisers listed on its roster as required by HUD's record disposition schedule.
We recommend that HUD implement stronger internal controls to ensure that only eligible appraisers are placed on its roster and that oversight and maintenance of the roster are sufficient to ensure that only eligible appraisers remain on the roster.