Today s FHA and VA Chapter Answer Key

Transcription

1 Today s FHA and VA Chapter Answer Key Chapter 1 Discussion Point (page 5) What issues regarding FHA lending have been raised throughout this chapter? Which ones place great responsibility on the appraiser? 1) The volume of loans insured by FHA 2) The risk of loss to FHA for defaulted loans, specifically due, but not limited, to: More lenient eligibility requirements Higher loan to value ratio (lower down payment) The broad types of properties eligible Chapter 1 Quiz 1. FHA mortgage insurance provides a. an emergency account available for the homeowner to prevent loan default. b. homeowners with a claim in the event that a default occurs. c. protection against losses for homeowners in the event that there is a default on their mortgage loans. d. protection against losses for lenders in the event that homeowners default on their loans. The correct answer is d. FHA mortgage insurance provides lenders with protection against losses in the event that homeowners default on their mortgage loans. The lenders, then, bear less risk as the FHA will pay a claim to the lender if a default occurs.

2 2. FHA loans a. allow the down payment requirement to come from a family member, employer, or charitable organization as a gift. b. are more difficult to qualify for than a conventional loan if the buyer does not have a high credit score. c. have a 5% down payment requirement (depending on the applicant s credit rating) for a real estate purchase transaction. d. require a larger cash investment to close compared to conventional loans, but has more flexibility in calculating household income and payment ratios to qualify for the loan. The correct answer is a. While other loan programs do not allow this at least for the entire down payment, FHA loans for real estate purchase transactions allow that money to come from a family member, employer, or charitable organization as a gift. 3. FHA provides significant economic stimulation in the form of a. home and community development. b. Schools. c. tax bases. d. all of the above The correct answer is d. 4. To be eligible for FHA financing, one must: a. be at least 16 years old. b. have an income of more than four times the monthly mortgage payment. c. have a perfect credit history. d. have a valid residency in the United States. The correct answer is d. To be eligible for FHA financing, one must have a valid Social Security number, a valid residency in the United States, and be of legal age to sign a mortgage in the buyer s state.

3 5. The FHA program supplements the VA Homeownership Loan Guaranty programs for veterans a. who are co-borrowers with a spouse. b. who have full eligibility for a VA-guaranteed loan. c. who have successfully paid off or have been released from all liability of repaying a separate loan. d. whose new loan under the VA may have a funding fee greater than FHA s mortgage insurance premium. The correct answer is d. The FHA program supplements the VA Homeownership Loan Guaranty programs for veterans who are re-using their eligibility and whose new loan under the VA may have a funding fee greater than FHA s mortgage insurance premium, whose eligibility is tied up until a loan that was assumed is paid off or the veteran is released from all liability, veterans with less-than-full eligibility for a VA-guaranteed loan, or co-borrowers with someone other than a spouse. 6. Generally, for single-family housing, the maximum mortgage limits are for most areas and more than for certain highcost areas. a. 100,000 to 300,000; 500,000 b. 200,000 to 500,000; 600,000 c. 250,000 to 500,000; 700,000 d. 300,000 to 600,000; 800,000 The correct answer is c. Generally, for single-family housing, the maximum mortgage limits are $250,000 to $500,000 for most areas and more than $700,000 for certain high-cost areas. However, no FHA mortgage can be originated that is in excess of the county limits.

4 Chapter 2 Quiz 1. Which of the following is NOT a requirement to become eligible to perform FHA appraisals? a. become a Residential or General State-Certified appraiser b. not be listed on HUD s Credit Alert Interactive Voice Response System c. read and understand the FHA manual d. successfully complete the FHA roster examination The correct choice is D. At one time, an examination was required to be placed on the Appraiser Roster. This is no longer a requirement. 2. Once an appraiser has been listed on the roster, he must a. begin to conduct appraisals for FHA. b. fill out the Appraiser Roster Completion form. c. wait 30 days prior to conducting appraisals for FHA. d. wait 60 days prior to conducting appraisals for FHA. The correct choice is A. Once an appraiser has been listed on the roster, he may begin to conduct appraisals on FHA insured loans, as long as he understands roster appraisers must have in-depth knowledge of and remain up-to-date on policies and procedures for conducting FHA appraisals. 3. An appraiser who was once on the roster, but whose record is no longer found, will have a status. a. current b. suspended c. temporary d. terminated

5 The correct choice is D. An appraiser who was once on the roster, but whose record is no longer found will have a terminated status. To be reinstated, he must meet the minimum eligibility requirements. 4. Which of the following is true about the 203(b) Mortgage Insurance Program? a. Borrowers can finance the upfront mortgage insurance premium into the mortgage. b. Borrowers purchasing a one- to four-unit property may not be eligible for the program. c. FHA lenders must offer this program as lenders must offer all FHA loan programs. d. The 203(d)(3)(A) Urban Renewal Mortgage Insurance Program is no longer available. The correct choice is A. Borrowers can finance the upfront mortgage insurance premium into the mortgage for the 203(b) Mortgage Insurance Program, although they are responsible for paying an annual premium. 5. The 255 Home Equity Conversion Mortgage Program a. can be used by senior homeowners age 55 and older. b. determines the amount of the mortgage based on the age of the oldest borrower, current interest rates, and the appraised value of the property or FHA insurance limit (whichever is more). c. requires the borrower to participate in a consumer information session with an HECM counselor. d. requires income and credit qualifications for the borrower. The correct choice is C. Borrowers must participate in a consumer information session with an approved HECM counselor.

6 6. When the borrower acts as the general contractor in the 203(k) Rehab Program, he must a. have lender approval and complete construction within six months of loan closing or sooner. b. have lender approval and complete construction within twelve months of loan closing or sooner. c. have lender approval, produce construction authorization certificate, and complete construction within six months of loan closing or sooner. d. have lender approval, sign a self-help agreement, and complete construction within six months of loan closing or sooner. The correct choice is D. Borrowers must have lender approval, sign a self-help agreement, and complete construction within six months of loan closing or sooner. 7. The 203(k) Rehab Program list of eligible improvements for the property includes a. construction of a detached garage. b. construction of an interior whirlpool bathtub. c. interior decorating. d. new interior painting. The correct choice is B. The eligible improvements include reconditioning or replacement of plumbing (including connecting to public water and/or sewer system), heating, air-conditioning, and electrical systems. Installation of new plumbing fixtures is acceptable, including interior whirlpool bathtubs. 8. Required rehabilitation construction improvements in the 203(k) Rehab Program includes a. caulking or sealing all openings, cracks, or joints in the building envelope. b. heating systems, burners, and air-conditioning systems may be any size as long as properly approved. c. installing every room with a minimum of one approved, listed, and labeled smoke detector. d. insulating all openings in exterior and interior walls where the cavity has been exposed.

7 The correct choice is A. Under Rehabilitation of Existing Structure, caulking or sealing all openings, cracks, or joints in the building envelope to reduce air infiltration is required. 9. Which of the statements about recently acquired properties involving a 203(k) insured loan is true? a. A copy of the sales contract and the HUD-1 Settlement Statement must be submitted to verify the accepted bid price. b. All mortgage calculations will be done differently than a purchase transaction. c. Evidence of interim financing is required. d. Homebuyers who purchase a property with cash cannot refinance the property using a 203(k) insured loan within six months of purchase. The correct choice is A. A copy of the sales contract and the HUD-1 Settlement Statement must be submitted to verify the accepted bid price ( as is value) of the property and the closing date. 10. The Energy Efficient Mortgages Program a. can be used to finance energy improvements up to 20 percent of the appraised value. b. is offered by Fannie Mae (Federal National Mortgage Association). c. is only for one unit; existing homes, but can be used for other residences. d. requires work to be completed within 360 days of loan closing. The correct choice is C. The Energy Efficient Mortgage Program is only for one unit, existing homes, but can be used for principal residences, second homes, and investment properties.

8 Chapter 3 Quiz 1. According to FHA, which condition requires an automatic repair? a. defective paint on a home built before 1978 b. heaving sidewalks c. leaky faucets d. poor workmanship The correct answer is a. Defective pain surfaces in homes constructed prior to 1978 require automatic repair. Heaving sidewalks, leaky faucets, and poor workmanship no longer require automatic inspections for existing properties, however, the appraiser should use his best judgment as to whether or not any of these would be a threat to safety, structural soundness, or security for the FHA loan. 2. An appraisal on a dwelling that is under construction and more than 90% complete with only minor finish work remaining is performed a. as is. b. subject to the appraiser s review of plans specifications. c. subject to completion. d. subject to repairs or alterations. The correct answer is d. When only minor finish work remains, the FHA Appraisal is made subject to repairs or alterations. Appraisals with subject to completion would contain construction under 90% complete and as is appraisals would contain no remaining construction. 3. If soil contamination appears to be present, the property a. is appraised subject to repairs. b. might require further analysis and testing. c. must have the condition removed. d. would not qualify for FHA financing. The correct answer is b. If any indication of soil contamination is observed, further testing and analysis is required to determine if the condition could be removed, repaired, or if FHA financing would not accept the condition.

9 4. An all-weather roadway is a. one on which all vehicles can pass in all types of weather. b. one on which an emergency vehicle can pass in all types of weather. c. a solid surface public road. d. a solid surface road. The correct answer is b. FHA defines an all-weather surface as a road surface over which emergency vehicles can pass in all types of weather. Each property must have vehicular or pedestrian access, but only emergency vehicles must be able to pass in every type of weather condition. 5. To check a plumbing system, the appraiser must a. check for leaks around fixtures. b. flush toilets. c. turn on a representative number of faucets. d. All of the above are correct. The correct answer is d. The appraiser must check for leaks around fixtures, flush toilets, and turn on a representative number of faucets to appropriately check the plumbing system of a property. 6. In an FHA appraisal, the appraiser s certification states that a. the appraiser has relied on the sales comparison approach. b. the appraiser has verified comparable sales with an interested party. c. the lender may not distribute the appraisal report. d. only the lender, FHA, and/or HUD may rely on the report. The correct answer is a. The appraiser s certification must state that the appraiser has developed their opinion of the market value of the real property based on the sales comparison approach to value. They also must have adequate comparable market data to develop a reliable sales comparison approach for this appraisal assignment.

10 7. Front and rear photos of the subject should show a. accessory structures. b. the grade of the site. c. opposite sides of the structure. d. surrounding properties. The correct answer is c. Subject photographs of front and rear opposite angles of the property should show all sides of the dwelling. Only if the subject property is proposed construction and the improvement has not started, should the appraiser take photos of the grade of the vacant lot. 8. To check the electrical system of a property, the appraiser is required to a. examine the inside of the electrical service panel, with the cover off. b. test all outlets with an electrical testing device. c. test a random number of switches and receptacles. d. turn on all electrical fixtures and appliances at once. The correct answer is c. The appraiser is not required to insert any tool, probe, or testing device inside the panels or to dismantle any electrical device. Appraisers are required to operate and test a representative number of lighting fixtures, switches, and receptacles inside the dwelling and note deficiencies. 9. To qualify for FHA financing, the subject property, in most cases, must a. have a closet in every bedroom. b. have handrails on all stairs. c. not have conditions that would threaten the safety and well-being of the occupants. d. All of the above are correct. The correct answer is c. To qualify for FHA financing, the subject property must not have conditions that would threaten the safety and well-being of the occupants. If properties do have unsafe conditions, the appraiser will require repairs to protect the health and safety of the occupants.

11 10. The subject floor plan sketch must include a. accessory structures. b. below-grade finishes. c. garages. d. interior walls. The correct answer is c. The subject building sketch must show the gross living area above grade, including all exterior dimensions of the house (also including patios, porches, garages, breezeways, and other offsets). 11. A reconsideration of value may include a. information on listings, sales and pending sales, but limited to properties in the MLS. b. information on listings, sales and pending sales, which are available to the appraiser in the normal course of business as of the effective date of the appraisal. c. information on listings, sales, and sales which are pending at the time of the request for the reconsideration of value. d. the original CMA the agent used to price the house for sale. The correct answer is b; The reconsideration of value cannot include information which was not available to the appraiser as of the effective date of the appraisal. The appraiser is not limited to data in the MLS. The original CMA may or may not contain relevant market data.

12 Chapter 4 Discussion Point (page Discuss the FHA protocol for the following circumstances: The kitchen of the subject dwelling has not had any updates in the past 15 years Protocol: The kitchen has not had an updates: In accordance with UAD (Uniform Appraisal Dataset), the appraiser is required to note if the kitchen or baths have been remodeled or updated within the past 15 years. Here is what Fannie Mae says in their guidelines: The appraiser must indicate Yes or No if there has been any material work done to the kitchen(s) or bathroom(s) in the prior 15 years. If No, the text No updates in the prior 15 years must be provided. If Yes, additional information for kitchens and bathrooms must be provided. Kitchen(s) and Bathroom(s) Level of Work Completed and Timeframes The appraiser must identify any work completed in the kitchen(s) and bathroom(s) along with the timeframes in which the work was completed. The appraiser must select one of the values from the lists below for both the kitchen(s) and the bathroom(s). Level of Work Completed: not updated updated remodeled Definitions for the Level of Work Completed are provided in Exhibit 2: Requirements Definitions of Not Updated, Updated, and Remodeled. Timeframes: less than one year ago one to five years ago six to ten years ago eleven to fifteen years ago timeframe unknown Timeframes represent the time period in which the majority of the improvements were completed. A special assessment for street lighting that is billed on a monthly basis Protocol: A special assessment for street lighting. Because this is a lienable item, and adds to the borrower s costs, it must be reported, and the appraiser must consider and comment on any affect this has on value. A seller in a sales transaction who is someone other than the owner of record Protocol: If the seller is not the owner of public record, the appraiser must explain.

13 Checking central air-conditioning for a property in cold-climate winter months Protocol: Do not operate the systems if doing so may damage equipment or when outside temperatures will not allow the system to operate. A property with both vinyl siding and brick exterior materials Protocol: If there is a combination of materials, show the predominant portion first and rate the observed condition. Description of windows Protocol: Enter window type: Double hung, single hung, casement, sliders, etc., and identify the window frame material: Wood, aluminum, steel, vinyl, etc. Rate the condition observed. Describe the storm sash material or state if windows are double glazed, or a combination of the two. Rate the condition observed; if none, so state. Describe the style of any screens (full, half, none) and rate the condition observed. A crawl space Protocol: Access to the space should be clear. Examine the crawl space for inadequate access (minimum entry of the head and shoulders). Check the distance from the bottom of floor joists to the ground. Space should be adequate for maintenance and repair. A minimum distance of 18 inches from the ground to the bottom of the joists is highly recommended but not mandated. Check for insulation and ventilation or for any structural problems. The support beams should be intact and of structural soundness. Dirt basement floor Protocol: For a dirt basement floor, determine whether such a property is typical for the area and is readily marketable. If it is typical for the area and readily marketable, it is not required that a concrete basement floor be installed. Mechanical equipment, however, must be located on a concrete pad.

14 Chapter 4 Quiz 1. The appraiser must clearly define the boundaries of the subject s neighborhood by noting a. the latitudinal and longitudinal global positioning points. b. the latitudinal and longitudinal global positioning points with reference to a map. c. physical characteristics including natural boundaries. d. reference to a map, which is acceptable as the sole example of boundaries. The correct answer is c. Appraisers must clearly define the boundaries of the subject s neighborhood by noting physical characteristics, including streets and natural boundaries. Reference in this section to a map or other addendum as the only example of the neighborhood boundaries is unacceptable. 2. If an appraiser is appraising a property with a beautiful view of mountains and pastures, he should abbreviate the view factor to a. A;MtnP. b. B;M;P. c. B;Mtn;Pstl. d. N;Mtn;Pt. The correct answer is c. Appraisers must provide an overall rating (N Neutral, B Beneficial, A Adverse), with the following abbreviated view factors (Pstl Pastoral View, Mtn Mountain View). There are no unsightly or limited sight factors resulting in a beneficial rating along with the recognition of the mountain and pastoral view. 3. Under the URAR Report Form Section 4: Site, an appraiser should mark Public for Utilities if the utilities are a. governmentally regulated and supplied. b. operated by government ordinance or community systems. c. operated by a private company. d. sponsored by community systems. The correct answer is a. Public utilities mean governmentally supplied and regulated. Public does not include any community systems sponsored, owned, or operated by the developer, or a private company not subject to government regulation or financial assistance.

15 4. If a property is classified as Zone V, it is a. a coastal area, requiring flood insurance as a FEMA Flood Zone. b. does not require flood insurance. c. not considered a FEMA Flood Zone. d. a special flood hazard area requiring flood insurance as a FEMA Flood Zone. The correct answer is a. Zone V is classified as a coastal area and a special flood hazard area; only properties within special flood hazard areas require flood insurance. 5. Accessory dwelling units a. are usually greater in size, location, and appearance compared to the primary unit. b. can be incorporated within or detached from the single-family structure. c. do not include mother-in-law apartments. d. may have separate utility services. The correct answer is b. Accessory dwelling units may or may not be incorporated within, or detached from, a single-family structure. Accessory apartments must be connected to the dwelling unit s utilities. Accessory dwelling units are subordinate to the primary unit and the most common type of accessory dwelling unit is the mother-in-law apartment. 6. When appraising a three and one-half story home, the appraiser should indicate the number of stories as a. ~3. b. 3. c d. three and one-half story. The correct answer is c. The appraiser must indicate the number of stories, numerically to two decimal places, for the subject property. Appraisers must not use any designators or descriptors, such as one story or one story and a half.

16 7. While reporting on the roof surface, the appraiser should a. decline to report on roof surface conditions if the exterior is unobservable. b. determine himself whether a roofing inspection is required. c. look for telltale signs on the interior of roof problems if the exterior is unobservable. d. observe the roof from eye-level to properly assess the condition. The correct answer is c. Appraisers must look for telltale signs on the interior of roof problems, such as damage or water stain to the ceiling area of a room. Viewing the roof from ground level is sufficient analysis to determine if the integrity of the roof is sufficient. The underwriter will determine whether a roofing inspection is required. 8. A driveway is considered a two-car driveway if a. either car can be moved without disturbing the other. b. there is a turnaround area attached to the driveway. c. there is a two-car garage linked to the driveway. d. two cars can be parked on the driveway simultaneously. The correct answer is a. A driveway can be labeled a two-car driveway only if either car can be moved without disturbing the other. If two cars can be parked in the driveway but a car must be disturbed to remove the other vehicle, this is considered a single-lane driveway. 9. If a home was built before, this may indicate a lead paint hazard, requiring correction to all defective paint in or on structures and/or property improvements. a b c d The correct answer is a. If the home was built before 1978, this may indicate a lead paint hazard.

17 10. A dwelling features minor physical deterioration and wear and tear to the carpeting and flooring, has a few cosmetic repairs, and although the heating system requires minimal repair, it has otherwise been maintained and is functioning. This property would be rated as in the Condition Rating. a. C1 b. C2 c. C4 d. C6 The correct answer is c. To obtain a C4 rating, the dwelling s improvements feature some minor deferred maintenance and physical deterioration due to normal wear and tear. The dwelling has been adequately maintained and requires only minimal repairs to building components/mechanical systems and cosmetic repairs. The dwelling is functional and maintained. 11. Census tract numbers a. are the numbers assigned to mortgage case files. b. are preceded by state and county codes. c. have five digits and may have a two-digit decimal suffix. d. should include leading zeros when included on maps and printed reports. The correct answer is b. Census tract numbers designate census tracts by the U.S. Census Bureau. They have four digits and should not include leading zeros when displaying numbers on maps and printed reports.

18 Chapter 5 Quiz 1. Under the section Adjusted Sale Price of Comparables, generally, adjustments should NOT exceed for line items, for net adjustments, and for gross adjustments. a. 5%, 10%, 20% b. 10%, 10%, 15% c. 10%, 15%, 25% d. 15%, 20%, 25% The correct answer is c. To determine the adjusted sale price of comparables, the appraiser must total all of the adjustments and add them to, or subtract them from, the sale price of each comparable. 2. The Approach is NOT required for FHA appraisals completed on the Uniform Residential Appraisal Report, Fannie Mae Form 1004 in the case of a single-family residential property. a. Cost Data b. Income c. Indicated Value d. Summary of Sales Comparison The correct answer is b. With a single-family residential property, the Income Approach is generally not recognized as a basis for buying by the market. 3. Under Reconciliation, the box Subject to Repairs or Alterations should be marked when the appraisal involves existing housing or new construction more than 90% complete, requiring repairs or alterations to complete a. buyer preference items for new homes. b. the certified property rehabilitation checklist. c. interior cosmetic repairs/improvements. d. landscaping repairs/improvements. The correct answer is a. The box should be marked to require repairs or alterations to buyer preference items for new homes. Answers b, c, and d are incorrect. The certified property rehabilitation checklist does not exist and landscaping or cosmetic repairs do not require reconciliation required repair.

19 4. An appraiser may use a single source for the Verification Source section only when a. the quality of sales data is confirmed by settled transactions. b. a single source is never acceptable. c. the source is located on the FHA Approved Source Verification list. d. the source is MLS. The correct answer is a. A single source may be used for the Verification Source section only when the quality of data is such that sales data are confirmed and verified by settled transactions. Information provided should permit the reader of the report to locate the data from the sources cited. MLS by itself is not considered a reliable verification source. 5. When an appraiser s site area is 1,120 square feet, the size must be reported as a..112 ac. b ac. c sf. d sf. The correct answer is d. For sites/parcels that have an area of less than one acre, the size must be reported in square feet. The unit of measure must be indicated as sf for square feet. Only sites/parcels that have an area of one acre or greater must have the size reported in acreage with decimal places. 6. If an appraiser is reporting the actual age of a subject property with an age of 30 years and 10 months, it should be entered as in the Actual Age section. a b. ~30.83 c. 31 d. ~31 The correct answer is c. The actual age should be entered in numeric to three digits, whole numbers only. Only estimations of actual ages should include tildes (~).

20 7. The Cost Approach a. is always required for FHA appraisals. b. is mandatory for all multi-family dwellings over one year old. c. is meaningful if the subject property is over 25 years old. d. is required for manufactured housing or at the client s request. The correct answer is d. The Cost Approach is required if the property is unique, has specialized improvements, is manufactured housing, or the client requests the approach. The Cost Approach is meaningful if the subject property is a new construction (less than one year old). 8. Under Functional Utility, appraisers should enter,, or as a total of the items rated in the Improvement Analysis compared to the subject. Any differences should use the Approach to explain any differences. a. inadequate, adequate, satisfactory; Adjusted Sale Price b. inferior, average, superior; Summary of Sales Comparison c. poor, fair, first-rate; Base Market Value d. unacceptable, acceptable, excellent; Sales or Financing Concessions The correct answer is b. Appraisers should enter inferior, average, or superior as a total of the items rated in the Improvement Analysis compared to the subject. Any differences should use the Summary of Sales Comparison Approach to explain any differences. 9. When entering the appropriate architectural design (style), appraisers may use the type descriptor a. Brick. b. Conventional. c. Farmhouse. d. 2-Story with Porch. The correct answer is c. Valid type descriptors include Georgian, or Farmhouse. Appraisers may not use descriptors such as Brick, 2 stories, or Conventional.

21 10. If an appraiser is appraising a property that includes one small bedroom, one master bedroom, 1 full bath, and one half bath, he would input for # of Bedrooms and for # of Baths under the Above Grade Room Count. a. 1.1; 1.1 b. 1.5; 1.5 c. 2; 1.5 d. 2; 1.1 The correct answer is d. The format for reporting the information requires the bedroom count to be numeric to two digits, whole numbers only. The bathrooms should be numeric to two decimal places and full baths should be separate from half bath count with a period. 11. The method to report the proximity of the comparable sale to the subject property is a. numeric whole number + miles. b. numeric whole number + miles + directional. c. numeric whole number to two decimal places + miles. d. numeric whole number to two decimal places + miles + directional. The correct answer is d. The appraiser must enter the proximity of the comparable sales to the subject property, expressed as a distance in miles, numeric to two decimal places with cardinal directions.

22 Chapter 6 Quiz 1. The HUD Data Plate could be found in any of these areas EXCEPT the a. electric service panel. b. kitchen. c. outside rear section of the unit. d. utility room. The correct answer is c. The HUD Data Plate can be placed adjacent to the electric service panel, the utility room, or within a cabinet in the kitchen. The HUD Data Plate would not be found on the outside rear section of the unit. 2. If a small residential income property has both a conventional dwelling and a manufactured home on the site, the appraiser would need to complete the a. 1004C form only. b form only. c form and the 1004C form. d form and portions of the 1004C form. The correct answer is d. The 1025 form is designed to report an appraisal of a two- to four-unit property. This form is not designed to report an appraisal of a manufactured home, therefore, the appraiser is required to complete the HUD Data Plate and Improvements sections (only portions) of the Manufactured Home Appraisal Report Form 1004C. 3. In selecting comparables for a condominium unit, the appraiser has found no sales of two-bedroom townhouse units within the past 12 months similar to the subject. The appraiser should a. consider all such properties in the subject project as comparable. b. select larger three-bedroom townhouse comparables in the subject development. c. select one-story, two-bedroom comparables in the subject development. d. select superior two-bedroom townhouse units in the subject development. The correct answer is a. If there was difficulty in locating comparable properties, then for purposes of the sections Sales Comparison and Income Approach, all such properties in the subject s neighborhood are to be treated as comparable and counted.

23 4. To be eligible for FHA financing, the manufactured home must have a HUD Certification Label affixed to a. the foremost axle. b. the foremost cross-member of the frame. c. an interior location, such as the electrical panel or a kitchen cabinet. d. the taillight end side of each transportable section. The correct answer is d. To be eligible or FHA financing, the manufactured home must have a HUD Certification Label affixed to the taillight end of each transportable section. If the appraiser is unable to locate the HUD Certification Label, the lender must be notified. 5. What would NOT be an acceptable method of describing the style of a manufactured home? a. Cape Cod b. Iron Trojan model c. one-floor d. Ranch The correct answer is b. Descriptions of the manufactured home s style should be styled in historical or contemporary fashion. The builder s model name should not be used. Generic descriptions should also be avoided. 6. The cost approach is required for a manufactured home only if it is a. less than one year old, but being re-conveyed. b. more than one year old but has never been considered as real property. c. new construction conveyed from the manufacturer. d. none of the above The correct answer is c. The appraiser is required to complete the cost approach only if the manufactured home is new construction (initial sale from manufacturer). If the manufactured home is new construction less than one year old, but being re-conveyed, or more than one year old, the cost approach is not required.

24 7. For a two- to four-unit property, which would NOT be required to satisfy reporting protocol? a. number of dishwashers b. number of refrigerators c. number of television cable connections d. number of washer/dryers The correct answer is c. Reporting protocol or a two- to four-unit property requires a recorded number of refrigerators, ranges/ovens, dishwashers, disposals, microwaves, and washers/dryers. The number of television cable connections is not included in this requirement. 8. A two-unit dwelling in which one unit has a mother-in-law suite (accessory unit) would be a. considered only a two-unit dwelling. b. considered two units, with the suite having contributory value. c. considered three units. d. ineligible for FHA financing. The correct answer is d. A two-unit dwelling in which one unit has a mother-in-law suite (or any accessory unit) would be ineligible for FHA financing. 9. Which statement best describes the cost approach in a condominium unit appraisal? a. The appraiser could calculate the cost of the entire building and divide by the number of units. b. It is applicable if less than one year old. c. It is not applicable. d. It is not required if more than one year old. The correct answer is c. The cost approach is not applicable in the appraisal of a single condominium unit. Instead, the appraiser should report the sales comparison approach or the income approach for a condominium unit.

25 10. The income approach uses the formula a. Sale Price (added to utilities) x Gross Monthly Rent = Gross Rent Multiplier. b. Sale Price (added to utilities) Gross Monthly Rent = Gross Rent Multiplier. c. Sale Price x Gross Monthly Rent = Gross Rent Multiplier. d. Sale Price Gross Monthly Rent = Gross Rent Multiplier. The correct answer is d. The formula used in the income approach is Sale Price Gross Monthly Rent = Gross Rent Multiplier. The gross monthly rent should be multiplied by the gross rent multiplier to arrive at the indicated value by the income approach.

26 Chapter 7 Quiz 1. In most cases, a VA loan requires a. a funding fee; this amount may be financed. b. a funding fee; this amount may not be financed. c. mortgage insurance; this amount may be financed. d. mortgage insurance; this amount may not be financed. The correct answer is a. In most cases, VA loans are subject to a funding fee, rather than mortgage insurance; this amount may be financed. 2. Existing construction is eligible for VA financing if a. on-site and off-site improvements are 50% complete with a projected completion date in the next twelve months. b. on-site and off-site improvements have been fully complete for six months. c. on-site and off-site improvements have been fully complete for twelve months. d. Only new construction is eligible for VA financing. The correct answer is c. Properties with existing construction are eligible for VA financing if the property was previously owner-occupied, or had all on-site and off-site improvements fully completed for one year or more. 3. If a property requires improvements located in an area subject to regular flooding, but is not in a special flood hazard area, it is a. eligible for financing. b. eligible for financing as long as the problem has been adequately addressed in the engineering design. c. eligible for financing, pending investigation of potential flood damage. d. not eligible for financing. The correct answer is d. A property requiring improvements located in an area subject to regular flooding, it is not eligible for financing. If there is regular flooding, the property is ineligible for financing even if it is not qualified as a special flood hazard area.

27 4. An MPR for existing construction can be waived by the VA field office if: a. the property is approved from the standpoint of safety and structural soundness, requiring only sanitary improvements for habitability. b. the veteran and lender request the purchase verbally. c. the veteran is under contract to purchase the property. d. the veteran requests the exemption in writing. The correct answer is c. If the veteran is under contract to purchase the property, MPR can be waived by the VA field office. Written requests for exemption must be sent in by both the lender and veteran for the MPR to be waived. Safety, structural soundness, and sanitary requirements must also be met for the MPR to be waived. 5. employees may be designated as VA appraisers. a. Fannie Mae/Freddie Mac b. HUD c. Postal Service d. State The correct answer is d. Employees of HUD, Fannie Mae, Freddie Mac, or the Postal Service are ineligible to become VA appraisers. State and local government employees may be designated but care must be taken that assignments will not result in a conflict of interest or the appearance of a conflict of interest. 6. To become a licensed VA appraiser, pre-requisite requirements for applicants include a. the applicant s written acknowledgement of assistance received while completing the demonstration report. b. a demonstration appraisal that has not been appraised by members of the current panel. c. evidence of a repayment plan and a promissory note for Federal delinquent debt balances. d. a written exam. The correct answer is c. If the applicant owes the Federal Government a delinquent debt, there must be at the least evidence of an acceptable repayment plan and confirmation that the applicant executed a promissory note for the entire debt balance. A written exam is not required and demonstration appraisals should have been recently appraised by members of the current panel with no assistance given to the applicant for the report.

28 7. Communication requirements for the VA appraiser include a. immediate notification for illness or emergencies when assignments must be postponed. b. immediate (same day) response to all inquiries (phone/fax/ ) from VA staff, lenders, or real estate agents, and all program participants. c. a month s advance notice in advance of being absent for vacations so that assignments can be rescheduled or moved to another appraiser. d. someone available to answer the phone or an answering machine to record messages seven days a week. The correct answer is a. Immediate notification is required when the Fee Appraiser needs assignments to be stopped or illness or emergencies. Seven days notice is required prior to vacation days. Someone or an answering machine must record messages Monday through Friday during working hours and response to inquiries must be completed within the following business day. 8. The purpose of a VA loan is to offer mortgage loans guaranteed by the federal government with a. no down payment to all veterans, regardless of circumstance. b. no down payment to eligible veterans. c. a small down payment to current U.S. military and their families. d. a small down payment to eligible veterans. The correct answer is b. VA-guaranteed loans with no down payment are available through approved lenders for eligible veterans and are limited to properties that the veteran will occupy as the primary residence. 9. When using the Sales Comparison Approach for a VA appraisal, a. multiple data sources are required. b. multiple data sources are required with verification. c. a single data source is sufficient with verification from closed transactions. d. a single data source is sufficient without verification from closed transactions. The correct answer is c. A single data source is adequate if it provides quality sales data verified by closed transactions.

29 10. A VA appraiser is appraising a property located in a rural area with the closest comparable sales property located 15.9 miles away from the subject property. The Sales Comparison Approach states that the a. appraiser must attempt to find comparable property sales in other areas. b. appraiser must submit an extended comparison approval form. c. appraiser will be unable to complete and must omit the property sales comparison section. d. property is still applicable to be used for comparable sales. The correct answer is d. In some rural areas, comparable sales may be 5, 10, 20 miles away from the subject property and still be within the subject s immediate market area. 11. A VA Fee Appraiser assistant may a. assist in drafting the appraisal report. b. make the final value estimate. c. select and analyze the comparables. d. view the exterior of each comparable. The correct answer is a. The Fee Appraiser assigned by the VA must personally view the exterior of each comparable, select and analyze the comparables, make the final value estimate, and sign the appraisal report as the appraiser. An appraiser must name the individual who assisted in the process and the specific tasks performed in the reconciliation section of the report. 12. An example of a substantive negative work quality finding includes a. failing to provide required information on the URAR. b. failing to require necessary MPR repairs. c. minor USPAP violations. d. misreporting of distances between subject and comparables. The correct answer is b. Failing to require necessary MPR repairs that may result in damage to the veteran is considered a substantive negative work quality finding.

30 Chapter 8 Quiz 1. You are assigned a new home as an appraisal assignment for an FHA loan. The builder has gone out of business. The home has a CO (Certificate of Occupancy).Which is correct? a. Because there is a CO, FHA allows you to treat this as existing construction. b. The borrower will need to obtain a private home warranty in order to obtain an FHA loan. c. The home is ineligible for FHA financing, because the builder has gone out of business. d. None of the above The correct answer is a. If the construction is completed and the lender has a Certificate of Occupancy or its equivalent, the home may be treated as existing construction for purposes of FHA documentation. 2. You are preparing an FHA appraisal on new construction, and the property is NOT located on Tribal Lands, nor in Hawaii. Which is correct? a. No Cost Approach is required. b. The use of the 1007 Marshall and Swift form is optional. c. You must utilize the 1007 Marshall and Swift form for the Cost Approach. d. Your regular reporting format should be sufficient to explain how you developed your Cost Approach. The correct answer is d. The 1007 form is not required, except in special circumstances (like in instances of property located on tribal lands or in Hawaii).

31 3. Which of the following statements is correct regarding wells and septic systems for FHA appraisals? a. The appraiser must note and report the availability of public water and sewer to the property. b. If the property is vacant, a septic inspection is mandatory. c. Well water must always be tested; the appraiser must sketch the site, showing the distances between the well, the septic system, and the lot lines. d. Well water tests are at the discretion of the lender; the appraiser must sketch the site, showing the distances between the well, the septic system, and the lot lines. The correct answer is a. The appraiser is required to report on the availability of connection to public and/or community water/sewer systems. However, the lender is responsible for the determination of the feasibility for requiring connection. 4. Both the buyer and the real estate agent are unhappy with the results of your FHA appraisal. A reconsideration of value is sent to you by the lender, upon instructions from the underwriter. Which of the following is correct? a. If this reconsideration of value does not result in you changing your appraised value, the lender/underwriter may file another reconsideration of value. b. The information can include properties that have either closed or gone pending since the effective date of your appraisal. c. You must analyze the information given to you, determine if it was available to you at the time of your appraisal, in the normal course of business, and determine if this information would cause you to reconsider your value. d. You must change your value based on this information. The correct answer is c. The FHA Roster appraiser is required to consider the data provided by the lender. The consideration may or may not result in an amended report.

32 5. You inspect a property built before 1978, and observe the following items. Which of these will require repair(s) under FHA guidelines? a. defective paint on the exterior of the attic windows b. a staircase with 13 steps and no handrail c. an unused, in-ground swimming pool, with dirty water and leaves collected in the bottom d. all of the above The correct answer is a. Missing handrails or trip hazards are property conditions that no longer require automatic repair for existing properties, but should be reported by the appraiser. Appendix D in Handbook states, For any home built prior to 1978, check for evidence of defective paint surfaces For all FHA insured properties, correction is required to all defective paint surfaces in or on structures. 6. Which statement is correct about items which used to require automatic repair, but no longer do, such as missing handrails or trip hazards? a. Any steps without a handrail, no matter how few, still require an automatic repair. b. The appraiser should report missing handrails and trip hazards; lender discretion and prudent underwriting will determine whether or not a repair is advisable. c. The appraiser should report missing handrails and trip hazards; the decision to have them repaired is solely the appraiser s decision. d. If the appraiser does not think the handrails require repairs, he/she need not report them. The correct answer is b. Although missing handrails and trip hazards are no longer required automatic repairs, the appraiser must always be mindful of health and safety issues and report what is readily observable.

33 7. Which of the following is correct about inspections and certifications? a. All final inspections and certifications must be performed by the appraiser, and reported on the Compliance Inspection Report (CIR). b. Home inspectors must perform all Compliance Inspections and use the CIR form. c. If the case is processed under the guidance of ML (Lender to Certify), the final inspection may be completed by anyone the lender selects. d. If the final inspection is performed by someone other than the appraiser, he/she must still use the Compliance Inspection Report. The correct answer is c. The final inspection may be completed by anyone the lender selects for those cases processed under the guidance of ML to certify; otherwise, the final inspection must be done by an FHA fee inspector. 8. If there is defective paint in a house built before 1978, which of the following individuals may complete the renovation, repair, and repainting without being certified in lead-safe practices? a. appraiser or home inspector only b. contractor only c. homeowner only d. property owner or landlord only The correct answer is c. Homeowners performing renovation, repair, or painting work on their own home are exempt from the rule, but are encouraged to learn to perform lead-safe work practices. Property owners/landlords/contractors that perform the repair must be certified and must follow specific work practices to prevent lead contamination.

34 9. Appraiser Joe inspects a property, which is a bi-level home. The lower level consists of two spaces: A garage plus an area that was once a beauty shop, whicht has been reconfigured into a living space for the owner s mother. Based on the prior use, the lower level has separate electric and water meters. The zoning is residential, and allows in-law units and other second units which are grandfathered in. The owner tells you her mother pays her rent. Which is correct? a. The appraiser should write up the unit as a family room with a kitchenette, and make no mention of the mother, the unit, or the utilities. b. Because the mother pays rent, this is not an ADU, and does not qualify for a FHA mortgage. c. Because the utilities are separate, this is not an ADU, and the appraiser should stop and complete Form 1025, with a rent schedule. d. This fits the description of an Accessory Dwelling Unit; the appraiser should report what is there, and appraise the property as a single-family home with an ADU. The correct answer is d. FHA does not take the position that an appraiser should conclude that the presence of two electric meters necessarily constitutes a two dwelling unit structure and not an ADU. The fact that an ADU is rented or generates income should not categorically result in a determination that the property contains two dwelling units. 10. Which loan allows the borrower to opt out of repair of defective paint in homes built before 1978, as long as the borrower stipulates that no children under seven will reside in the home? a. EEM mortgage b. EHLP mortgage c. FHA 203K d. HECM The correct answer is d. Regarding the appraisal reporting requirements for pre-1978 homes that are security for a HECM, the borrower can certify to the fact that no children under the age of seven reside in the home and the correction of defective paint will not be required.