The FHA Appraisal. The short version

Transcription

1 The FHA Appraisal The short version

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3 Health Safety HUD Requirements to Security Remember: (FHA defines this as the three Ss.) S s

4 History of HUD and FHA Originally designed to encourage home ownership that was safe and adequate.

5 History of HUD and FHA Congress Created the Federal Housing Administration (FHA) in 1934: Two million construction workers had lost their jobs. (U.S. Population: over 126 million) Loan terms were difficult for homebuyers to meet. Mortgages were limited to 50% of the property s market value; 5 year term; balloon payment. Less than 40% homeownership.

6 History of HUD and FHA Established prior to National Building Codes.

7 What FHA Does FHA provides mortgage insurance to FHA approved Lenders. FHA insures loans for: Single Family Homes Multi-family Homes 1 to 4 units with one unit owner occupied. Manufactured Homes

8 What FHA Does FHA does not make the loan, but insures the lender against a loss. FHA insurance allows more flexibility in calculating household income and ratios. The FHA insurance premium is paid by the borrower in the monthly payment and will drop off after 5 years, or when LTV is 78%. (Whichever is longer.)

9 What FHA Does In the present market, FHA loans are used more as a financing tool instead of emphasizing safe, sound, and secure housing. The rule of thumb is roughly 97.65% LTV. The ratios are typically 29% PITI and MIP. With 41% total debt to income. Replaces the sub-prime loans.

10 Roster Application Process: FHA Roster requirements: Appraiser must meet Appraisal Foundation Requirements. No additional test is required. FHA assumes that if you passed the State Exam you are qualified to appraise under FHA criteria.

11 Roster Application Process FHA Differences: Certified Only No Supervisory Appraisers Not listed on any Government Do Not Use list: GSA s Excluded Parties List, HUD s Limited Denial of Participation (LDP) list HUD s Credit Alert Interactive Voice Response System (CAIVRS)

12 Roster Application Process Apply on-line at: h / /

13 The FHA Appraisal Request: FHA requires a Case Number on all reports. The appraiser is not to submit an Appraisal Report without the Case Number. The Appraiser can request a copy of the CAVIRS if they suspect the lender is appraiser shopping. The Appraiser and Case Number are attached to the property for four months.

14 The FHA Appraisal Report: The FHA Appraisal Report is the same as a conventional and uses the FNMA The report must follow Fannie Mae guidelines. (The 1004MC is required.) No additional forms are required.

15 The FHA Appraisal Report: The Underwriter reviews the appraisal report using the same guidelines for conventional with the following exception: The FHA appraisal report must report any Health and Safety issues observed in the subject property that may harm the borrower. The Underwriter can waive any requirement. (But seldom does.)

16 The FHA Appraisal Report: Specific Differences in the Report: The sketch must include diagrams and labeling of all attached amenities such as covered porch/patio, breezeways, carports, detached buildings, etc. Photos must include all four sides of the residence and any interior amenities that add value. FNMA now requires bath/kitchen photos and FHA is expected to follow.

17 8.0' 25.0' Stairs Up Stairs Down Basement Wine Cellar 20.0' Bath Pool House 20.0' Inground Pool Covered Patio Interior walls are not to scale. Exterior dimensions are approximate. Public Records indicate living area is 1,739 sqft. On-site measurements do not support public records. 36 Fee et 68.0' 5.0' Bath Bedroom Living Room Dining Room Family Room 21.0' 30.0' Bath Bedroom HVAC Bedroom Storage 8.0' 4.0' 5.0' Kitchen Nook 22.0' 2 Car Garage 25.0' 34.0' 3.0' 30.0' Covered Porch 21.0'

18 Inspecting the Subject Property: Take greater care in inspecting the exterior.

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26 Inspecting the Subject Property: Check the attic and crawlspace if access does not damage the property.

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28 Inspecting the Subject Property: Check the service box for correct Check the service box for correct amperage.

29 Fuse Box

30 Circuit Breaker Panel

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33 Inspecting the Subject Property: Do a random testing of fixtures; such as stove, heat/air, lights, plumbing.

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36 The Best FHA Inspections.. Have no conditions

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39 Mortgagee g Letter The straw that t broke the camel s back.

40 Mortgagee Letter March 23, 2009 Appraisal Reporting Requirements in Declining Market: The appraiser is expected to include at least two sales that are as similar as possible to the subject and which settled within 90 days of the effective date of the appraisal in order to show recent market activity.

41 Mortgagee Letter Appraisal Reporting Requirements in Declining Market: Include a minimum i of two active listings i or pending sales on the appraisal grid of the applicable appraisal reporting form in comparable 4-6 position or higher (in addition to the three settled sales). Insure that active listings and pending sales are market tested and have reasonable market exposure to avoid the use of over priced properties as comparables. Reasonable market exposure is reflected by typical marketing times for the neighborhood. The comparable listings should be truly comparable and the appraiser should bracket the listings using both dwelling size and sales price whenever possible. Adjust active listings to reflect list to sale price ratios for the market. Adjust pending sales to reflect the contract purchase price whenever possible or adjust pending sales to reflect list to sale price ratios.

42 Mortgagee Letter Appraisal Reporting Requirements in Declining Market: Include the original list price, any revised list prices, and total days on the market (DOM). Provide an explanation for DOM that do not approximate time frames reported in the Neighborhood section of the appraisal reporting form or that do not coincide with the DOM noted in the Market Conditions Addendum. Reconcile the adjusted values of active listings or pending sales with the adjusted values of the settled sales provided. If the adjusted values of the settled comparables are higher than the adjusted values of the active listings or pending sales, the appraiser must determine if a market condition adjustment is appropriate. The final value conclusion should not be based solely on the comparable listing or pending sales data. Include an absorption rate analysis, which h is critical to developing and supporting market trend conclusions, as mandated by the Market Conditions Addendum. For example, assuming 36 sales during a six month period, the absorption rate is 6 sales per month (36/6).

43 Mortgagee Letter Appraisal Reporting Requirements in Declining Market: The appraiser must verify data via local parties to the transaction: agents, buyers, sellers, lenders, etc. (if the sale cannot be verified by a party then public records or other impartial data source that can be replicated may be used). A Multiple Listing Service (MLS) by itself is not considered a verification source. Unacceptable data sources include local and national media and other sources considered not readily verifiable. Appraisal results should be able to be replicated. Known or reported incentives or sales concessions must be noted in the financing section of the grid for any active or pending comparable used.

44 In Summary.. Get approved by FHA. The information is on their website. Study HUD Appraisal Guide and Mortgagee Letters. Find a mentor that performs FHA appraisals and seek their advice. Use prudence during your inspection.