The FHA and VA Appraiser: Thriving and Surviving

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The FHA and VA Appraiser Thriving and Surviving

Welcome toOrganization

• Appraisal Basics

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Instructor Name_at_email.edu
Your Instructor Today is
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Chapter 1 The FHA An Overview

• Objectives
• Define FHA and its programs
• Demonstrate an understanding of the FHAs history
  and its role in society
• Recognize lender risk based on the programs LTV
  ratio, and properties that qualify based on
  maximum/minimum loan amount

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Chapter 1 The FHA An Overview

• Terms to Remember
• FHA
• HUD
• Loan-to-Value Ratio
• Manufactured Home
• Mortgage

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Chapter 1 The FHA An Overview

• The Federal Housing Administration (FHA)
• Is a government agency
• Provides mortgage insurance on loans made by
  FHA-approved lenders
• Insures mortgages on single-family and
  multifamily homes, including manufactured homes
• Has insured mortgages on nearly 33 million
  properties since its inception in 1934

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Chapter 1 The FHA An Overview

• FHA Mortgage Insurance
• Provides lenders with protection in the event of
  default
• FHA will pay a claim to the lender if a default
  occurs
• Loans must meet certain requirements established
  by FHA to qualify for this insurance

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Chapter 1 The FHA An Overview

• Advantages of FHA Mortgage Insurance
• Easier to qualify
• Low down payment
• Lower interest rates
• Assistance helping buyers keep their home if they
  encounter hard times

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Chapter 1 The FHA An Overview

• FHA Funding
• FHA is the only government agency that operates
  entirely from its self-generated income
• Proceeds from mortgage insurance premiums are
  used to operate the program
• FHA provides significant economic stimulation to
  the country in the form of
• Home and community development
• Building suppliers
• Tax bases
• Schools
• Additional forms of revenue

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Chapter 1 The FHA An Overview

• Through the Decades A History of FHA
• 1934
• Congress created the Federal Housing
  Administration
• 1940s
• FHA helped finance military housing and homes for
  returning veterans and their families after the
  war
• 1950s, 1960s, and 1970s
• FHA helped spark the production of many privately
  owned apartments for elderly, disabled, and
  lower-income Americans. In the 1970s FHAs
  emergency financing kept cash-strapped properties
  afloat. In 1965, FHA became part of HUD

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Chapter 1 The FHA An Overview

• 1980s
• FHA steadied falling home prices and made it
  possible for buyers to get financing when
  recession prompted private mortgage insurers to
  pull out of oil-producing states
• 2000
• By 2001, our nation's homeownership rate had
  soared to an all-time high of 68 percent, and
  Americans are now, arguably, the best-housed
  people in the world

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Chapter 1 The FHA An Overview

• Eligibility Requirements for FHA Financing
• Have a valid social security number
• Have valid residency in the United States
• Be of legal age to sign on a mortgage in your
  state

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Chapter 1 The FHA An Overview

• Qualifying Requirements for FHA Financing
• Borrower must have sufficient income to qualify
  for the mortgage payment and other debts
• Lenders will verify income, assets, liabilities,
  and credit history in the process for all parties
  on the loan

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Chapter 1 The FHA An Overview

• FHA for Veterans
• Supplements the current VA homeownership Loan
  Guaranty programs through VA for
• Veterans with less-than-full eligibility for a
  VA-guaranteed loan
• Veterans who are co-borrowers with someone other
  than a spouse
• Veterans whose eligibility is tied up until a
  loan that was assumed is paid off or the veteran
  is released from all liability
• Veterans re-using their eligibility and whose new
  loan under VA may have a funding fee greater than
  FHAs mortgage insurance premium
• A qualified veteran is not required to make a
  down payment

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Chapter 1 The FHA An Overview

• FHA Maximum Mortgage Limits
• The National Housing Act provides that mortgage
  limits for any given area be set at 95 of the
  median house price in the area, as determined by
  HUD, except
• The FHA mortgage limit in any given area cannot
  exceed 87 of the Freddie Mac loan limits or be
  lower than 48 of the Freddie Mac loan limit for
  a residence of applicable size
• For a complete schedule of FHA mortgage limits
  for specific areas https//entp.hud.gov/idapp/htm
  l/hicostlook.cfm

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Chapter 1 The FHA An Overview

• SUMMARY
• The Federal Housing Administration (FHA) is a
  government agency that insures on loans made by
  approved lenders.
• FHA insures mortgages on single-family,
  multifamily and manufactured homes.
• Advantages of FHA loans are that the qualifying
  criteria for borrowers are not as strict, and the
  down payment requirements are less.
• FHA is the only government agency that operates
  entirely from its self-generated income, with no
  costs to the taxpayers.

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Chapter 1 The FHA An Overview

• SUMMARY
• 5. FHA mortgage programs do not have maximum
  income limits for qualifying, but borrower must
  qualify for the mortgage payment and other debts.
• 6. FHA offers programs for veterans and
  supplements the current VA homeownership Loan
  Guaranty programs through VA.
• 7. FHA has maximum loan amounts that cannot
  exceed 95 of the median house price in an area
  or 87 of the Freddie Mac loan limits, or be
  lower than 48 of the Freddie Mac loan limit for
  a residence of applicable size.

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Chapter 1 The FHA An Overview

• Discussion Point
• What issues regarding FHA lending have been
  raised throughout this chapter and which place
  great responsibility on the appraiser?

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Chapter 1 The FHA An Overview

• Discussion Point
• The issues raised in the chapter which place
  great responsibility on the appraiser should
  include
• The volume of loans insured by FHA
• 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

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Chapter 2 FHA Loan Types

• Objectives
• Differentiate between the various FHA loans
  available with respect to property type and
  requirements
• Understand the application of the FHA mortgage
  products to various properties and borrowers

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Chapter 2 FHA Loan Types

• Terms to Remember
• Fannie Mae
• Mortgagee
• Mortgagor
• Reverse Mortgage

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Chapter 2 FHA Loan Types

• FHA Loan Types
• 203(b) Mortgage Insurance Program
• 203(H) Mortgage Insurance Program for Disaster
  Victims
• 255 Home Equity Conversion Mortgage Program
  (HECM) Reverse Mortgages for Seniors
• 203(k) Rehab Program
• 220(d)(3)(A) Urban Renewal Mortgage Insurance
  Program

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Chapter 2 FHA Loan Types

• 203(b) Mortgage Insurance Program
• Assists with the purchase or
• refinance of a principal residence.

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Chapter 2 FHA Loan Types

• 203(H) Mortgage Insurance Program for Disaster
  Victims
• Helps victims in federally designated disaster
  areas get mortgages to become, or re-establish
  themselves as, homeowners. Used for rebuilding or
  purchasing another home.

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Chapter 2 FHA Loan Types

• 255 Home Equity Conversion Mortgage Mortgages for
  Seniors
• Can be used by senior homeowners, age 62 and
  older, to convert the equity in their home into
  monthly income streams and/or a line of credit to
  be repaid when they no longer occupy the home.

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Chapter 2 FHA Loan Types

• 203(k) Rehab Program
• This is the primary program for rehabilitation
  and repair of single-family properties in either
  a refinance or purchase transaction.

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Chapter 2 FHA Loan Types

• 220(d)(3)(A) Urban Renewal Mortgage Insurance
  Program
• Insures lenders against losses on mortgage loans
  used to rehabilitate one- to eleven-family
  dwellings or build new ones in redevelopment
  areas.

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Chapter 2 FHA Loan Types

• Summary
• A variety of FHA loans are available - all FHA
  lenders might not offer all FHA loan programs.
• The 203(b) Mortgage Insurance Program assists
  with the purchase or refinance of a principal
  residence.
• The 203(H) Mortgage Insurance Program for
  Disaster Victims is utilized when the federal
  government helps victims in designated disaster
  areas.
• A 255 Home Equity Conversion Mortgage Program is
  used by a senior homeowner to convert the equity
  in a home into monthly income streams and/or a
  line of credit.

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Chapter 2 FHA Loan Types

• Summary
• 5. When using an FHA 203(k) loan, the borrower
  can get just one mortgage loan to finance both
  the purchase (or refinance) and rehabilitation.
• 6. The FHA 220(d)(3)(A) Urban Renewal Program is
  used to insure loans used to rehabilitate one- to
  eleven-family dwellings or build new ones in
  specific redevelopment areas.

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Chapter 2 FHA Loan Types

• True or False
• 1. The FHA 203(k) program requires that 1- to
  4-unit dwellings must be completed for 1-year.
• True

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Chapter 2 FHA Loan Types

• True or False
• 2. The FHA 220 program does not allow for the
  purchase of properties that have already been
  rehabilitated by a local public agency.
• True

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Chapter 2 FHA Loan Types

• True or False
• 3. Properties qualifying for the 255 Home Equity
  Conversion Mortgage can be investment property or
  owner occupied.
• False

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Chapter 2 FHA Loan Types

• True or False
• 4. The FHA 203(b) loan program allows financing
  for the purchase of up to a 4-unit property.
• True

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Chapter 2 FHA Loan Types

• True or False
• 5. A feature of the 203(h) Mortgage Insurance
  Program for Disaster victims is that there is no
  down payment required.
• True

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Chapter 3 Becoming and Remaining an FHA Appraiser

• Objectives
• Understand the eligibility requirements to become
  an FHA-approved appraiser.
• Correctly complete the FHA appraiser application
  and examination.
• Complete the procedure for placement on FHAs
  roster, recognize reasons for removal, and
  understand how to remain current.

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Chapter 3 Becoming and Remaining an FHA Appraiser

• Terms to Remember
• FHA Appraiser
• FHA Appraiser Roster
• Mortgagee Letter

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Chapter 3 Becoming and Remaining an FHA Appraiser

• Becoming an FHA Appraiser
• Be a state-licensed or state-certified appraiser
  with credentials based on the minimum
  licensing/certification criteria issued by the
  Appraiser Qualifications Board (AQB) of the
  Appraisal Foundation.
• Not be listed on the General Service
  Administration (GSA) Excluded Parties List System
  (EPLS), HUDs Limited Denial of Participation
  List (LDP), or HUDs Credit Alert Interactive
  Voice Response System (CAIVRS).

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Chapter 3 Becoming and Remaining an FHA Appraiser

• Effective February 8, 2008, the 10-question
  examination requirement as part of the FHA
  application for fee or roster designation was
  eliminated. On May 5, 2008 FHA launched an online
  appraiser application process that has replaced
  the use of paper applications.
• The application can be accessed at
• www.hud.gov/groups/appraisers.cfm

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Chapter 3 Becoming and Remaining an FHA Appraiser

• The FHA Appraiser Roster
• The Roster of Appraisers is maintained by HUD and
  lists those appraisers who have satisfied the
  requirements to become certified to perform FHA
  appraisals. Lenders underwriting FHA loans may
  only accept appraisals from appraisers who are on
  this roster.
• Appraisers on the FHA Roster are responsible for
  submitting a copy of their renewed state
  appraisal license or certification to HUD at the
  Office of Single-family Housing. Failure to
  submit the information in a timely manner may
  impact eligibility to receive assignments.

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Chapter 3 Becoming and Remaining an FHA Appraiser

• Procedure to Obtain Placement on the FHA
  Appraiser Roster
• Generate and print the Application for Fee or
  Roster Personnel Designation, form HUD-92563. The
  form is automatically filled with the information
  entered on the Appraiser Roster Application page.
  No other information is required on the form.
• Sign the Application for Fee or Roster Personnel
  Designation, form HUD-92563. Then, scan all pages
  of the application into one Portable Document
  Format (PDF) file.
• Scan each state license and/or certification into
  a PDF file.
• Attach and upload the PDF files containing the
  scanned application and license(s)/certification(s
  ).

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Chapter 3 Becoming and Remaining an FHA Appraiser

• FHA Roster Appraisers seeking retention or
  renewal on the FHA Appraiser Roster
• On receipt of state license or certification
  renewal, appraisers should verify that FHA
  reflects updated license/certification
  information online at HUDs Web site
• If certification/license renewal number or
  expiration date are
• correct online at HUDs Web site, it is not
  necessary to submit a photocopy of the valid
  state appraiser's license/certification renewal
  information to HUD
• If certification/license renewal number or
  expiration date differs online at HUDs Web site,
  appraiser must submit a photocopy of the current
  license or certification with credentials based
  on the minimum criteria issued by the AQB to HUD
  via fax or regular mail

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Chapter 3 Becoming and Remaining an FHA Appraiser

• Updating FHA Appraiser Contact Information
• FHA Roster Appraisers are responsible for
  ensuring that the contact information contained
  in the FHA Appraiser Roster is accurate and up to
  date
• The Appraiser Roster screen on FHA Connection
  allows an FHA Roster Appraiser to update or
  correct contact information, which includes
• - Business name
• - Address
• - Telephone numbers
• - Facsimile
• - E-mail address

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Chapter 3 Becoming and Remaining an FHA Appraiser

• Some Possible Reasons for Removal from the
  Roster
• Significant deficiencies in appraisal, including
  non-compliance with Civil Rights requirements
  regarding appraisals
• Losing standing as a state-certified or
  state-licensed appraiser due to disciplinary
  action in any state in which the appraiser is
  certified or licensed
• Prosecution for committing, attempting to commit,
  or conspiring to commit fraud, misrepresentation,
  or any other offense that may reflect on the
  appraisers character or integrity

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Chapter 3 Becoming and Remaining an FHA Appraiser

• Failure to perform appraisal functions in
  accordance with instructions and standards issued
  by HUD
• Failure to comply with any agreement made between
  the appraiser and HUD, or with any certification
  made by the appraiser
• Being issued a final debarment, suspension, or
  limited denial of participation
• Failure to maintain eligibility requirements for
  placement on the appraiser roster
• Failure to comply with HUD-imposed education
  requirements or failure to comply with such other
  education requirements

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Chapter 3 Becoming and Remaining an FHA Appraiser

• If an appraisers license in one state has
  expired, the appraiser will automatically be
  removed from the FHA Roster for that state, but
  will remain on the Roster for other states for
  which the appraiser carries a current license.

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Chapter 3 Becoming and Remaining an FHA Appraiser

• Summary
• To be an FHA Appraiser an appraiser must be a
  state-licensed/certified appraiser and not be
  listed on the federal appraiser warning system.
• Removal from the FHA Roster could be caused by
  appraisal deficiencies, jurisdictional
  disciplinary actions, commission of criminal
  conduct, and failure to perform to HUD standards.
• Once issued, an FHA appraiser must remain active
  on the FHA roster and is responsible for updating
  contact information and license/certification
  renewal status.

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Chapter 3 Becoming and Remaining an FHA Appraiser

• True or False
• A first-time applicant for the FHA Appraiser
  Roster is not required to submit proof of
  state appraisal licensure or certification.
• False

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Chapter 3 Becoming and Remaining an FHA Appraiser

• True or False
• The certification contained in the FHA Appraiser
  Roster application acknowledges that the FHA
  roster appraiser is not an agent or employee
• of HUD/FHA.
• True

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Chapter 3 Becoming and Remaining an FHA Appraiser

• True or False
• An individual submitting false information in an
  FHA Appraiser Roster application could be
  subject to fines of up to 25,000 and
  imprisonment for up to 5 years.
• True

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Chapter 3 Becoming and Remaining an FHA Appraiser

• True or False
• Once the application for the FHA Appraiser
  Roster is completed by the appraiser applicant,
  the application and supporting documentation are
  mailed to the HUD office in the applicants
  jurisdiction.
• False

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Chapter 3 Becoming and Remaining an FHA Appraiser

• True or False
• FHA roster appraisers are responsible for
  monitoring the Appraisal Subcommittees website
  for accuracy of their licensing status and
  information.
• True

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Chapter 4 FHA General Requirements

• Objectives
• Identify how recent changes to FHA protocol have
  affected the appraisal procedure.
• Recognize general FHA appraisal requirements and
  guidelines.

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Chapter 4 FHA General Requirements

• Terms to Remember
• Mortgagee Letter
• Intended Use
• Intended User
• Scope of Work

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Chapter 4FHA General Requirements

• Overview of Recent Changes to FHA Valuation
  Protocol
• FHA announced release of Revised Appendix D
  Valuation Protocol of Handbook 4150.2, CHG-1,
  which gives guidance regarding FHAs repair and
  inspection requirements for existing properties
  and how to use the Fannie Mae appraisal reporting
  forms
• FHA Roster Appraisers are expected to be familiar
  with the content of the full document
• The complete 139-page document is available
  online at
• www.hudclips.org/sub_nonhud/cgi/pdfforms/41502xd.d
  oc

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Chapter 4 FHA General Requirements

• Changes to Reporting Forms
• Beginning January 1, 2006, FHA adopted use of
  four of Fannie Maes revised appraisal reporting
  forms. Those forms are
• 1. Uniform Residential Appraisal Report (Fannie
  Mae Form 1004) for all 1-unit single-family
  dwellings
• 2. Manufactured Home Appraisal Report (Fannie Mae
  Form 1004C) for all manufactured homes.
• 3. Individual Condominium Unit Appraisal Report
  (Fannie Mae Form1073) for all individual
  condominium units.
• 4. Small Residential Income Property Appraisal
  Report (Fannie Mae Form 1025) for all 2- to
  4-unit single-family dwellings
• The former VC (Valuation Conditions) addendum and
  
• Notice to Homebuyer are no longer required.

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Chapter 4 FHA General Requirements

• Changes to Reporting Conditions
• Repair Conditions
• FHA has shifted from its historical emphasis on
  the repair of minor property deficiencies. Now,
  only repairs for property conditions that rise
  above the level of cosmetic defects, minor
  defects, or normal wear and tear are required.

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Chapter 4 FHA General Requirements

• Repair Conditions
• FHA now permits an as is appraisal for
  existing properties that serve as security for
  FHA-insured mortgages when minor property
  deficiencies, which generally result from
  deferred maintenance and normal wear and tear, do
  not affect the safety of the occupants or the
  security and soundness of the property.

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Chapter 4 FHA General Requirements

• Repair Conditions
• According to the FHA Handbook, FHA no longer
  requires repairs for these minor cosmetic
  deficiencies to bring a property into compliance
  with FHA minimum property requirements.
  Specifically
• All-weather road surfaces
• Debris and trash in crawl spaces
• Poor workmanship
• Handrail(s)
• Bare floors, badly soiled carpeting, and plaster
  and sheetrock

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Chapter 4 FHA General Requirements

• The following items no longer require automatic
  inspections for existing properties
• Wood-destroying insects/organisms
• Well
• Septic
• Flat and/or unobservable roof

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Chapter 4 FHA General Requirements

• Conditions that will continue to require
  automatic inspections
• Standing water against the foundation and/or
  excessively damp basements
• Hazardous materials on the site or within the
  improvements
• Faulty or defective mechanical systems
  (electrical, plumbing, or heating)
• Evidence of possible structural failure (for
  example, settlement or a bulging foundation wall)

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Chapter 4 FHA General Requirements

• Conditions that require automatic repair for
  existing properties
• Inadequate access/egress from bedrooms to
  exterior of home
• Leaking or worn out roofs (if there are three or
  more layers of shingles on a leaking or worn out
  roof, all existing shingles must be removed
  before re-roofing)
• Evidence of structural problems (such as
  foundation damage caused by excessive settlement)
  
• Defective paint surfaces in homes constructed
  prior to 1978
• Defective exterior paint surfaces in homes
  constructed after 1978, where the finish is
  otherwise protected

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Chapter 4 FHA General Requirements

• The FHA Appraisal can be
• As Is
• Subject to Completion per Plans and
  Specifications
• Subject to Repairs or Alterations
• Subject to a Required Inspection

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Chapter 4 FHA General Requirements

• Required repairs will be limited to necessary
  requirements to
• Protect the health and safety of the occupants
  (safety)
• Protect the security of the property (security)
• Correct physical deficiencies or conditions
  affecting structural integrity (soundness)

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Chapter 4 FHA General Requirements

• The appraiser must have full access to all
  property improvements.
• If unable to visually evaluate the improvements
  in their entirety, contact the lender and
  reschedule a time when a complete visual
  inspection can be performed.

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Chapter 4 FHA General Requirements

• Key General Site and Location Requirements
• Unacceptable Locations
• Site Hazards and Nuisances
• Soil Contamination
• Grading and Drainage
• Individual Water and Sewage Systems
• Private Road Access and Maintenance

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Chapter 4 FHA General Requirements

• Key General Requirements for the Dwelling and
  Improvements
• Roofing
• Mechanical Systems
• - Electrical
• - Plumbing
• Other Health and Safety Deficiencies
• Lead-based Paint Hazards

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Chapter 4 FHA General Requirements

• Key General Assignment Requirements
• The appraiser must, at a minimum
• Perform a complete visual inspection of the
  interior and exterior
• Inspect the neighborhood
• Inspect each of the comparable sales from, at
  least, the street
• Research, verify, and analyze data from reliable
  public and/or private sources
• Report the analysis, opinions, and conclusions in
  this appraisal report.

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Chapter 4 FHA General Requirements

• Key General Assignment Requirements
• Intended Use The intended use of the appraisal
  report is for the lender/client to evaluate the
  property that is the subject of this appraisal
  for a mortgage finance transaction
• Intended User The intended user of this
  appraisal report is the lender/client and
  HUD/FHA.

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Chapter 4 FHA General Requirements

• Statement of Assumptions and Limiting Conditions
• Mirrors the language of all residential
  properties reported on the URAR 1004 reporting
  form.

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Chapter 4 FHA General Requirements

• Appraisers Signature
• For FHA appraisals the only signature permitted
  is that of the lender-selected FHA Roster
  Appraiser. Supervisory signatures are not
  permitted.

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Chapter 4 FHA General Requirements

• Other Key Reporting Requirements
• Sketch should include gross living area above
  grade, including all exterior dimensions of the
  house. Include patios, porches, garages,
  breezeways, and other offsets. State covered or
  uncovered to indicate a roof or no roof (such
  as over a patio).

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Chapter 4 FHA General Requirements

• Other Key Reporting Requirements
• Subject photos should include
• - Front and rear at opposite angles to show all
  sides of the dwelling
• - Any improvements with contributory value that
  are not captured in either the front or rear
  photo
• - Street scene photo to include a portion of
  the subject site
• If the subject property is proposed construction
  and the improvement has not started, the
  appraiser should take a photograph that shows the
  grade of the vacant lot

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Chapter 4FHA General Requirements

• Comparable Photographs
• Use of MLS photos to exhibit comparable
  condition at the time of sale is acceptable
  however, the appraiser must include his or her
  photos, as well, to evidence compliance with the
  requirement to inspect each comparable from the
  street.

73
Chapter 4 FHA General Requirements

• Summary
• FHA has adopted the use of four of Fannie Maes
  reporting forms.
• The appraiser may appraise a home under
  construction, that is 90 or more complete,
  without plans and specifications.
• FHA only requires repairs for property conditions
  that rise above the level of cosmetic defects,
  minor defects, or normal wear and tear.
• The appraiser must, at a minimum, perform a
  complete visual inspection of the interior and
  exterior of the subject property, inspect the
  neighborhood, inspect the comparable sales from
  the street, research, verify, and analyze data
  from reliable public and/or private sources, and
  report his or her analysis, opinions, and
  conclusions in the appraisal report.

74
Chapter 4FHA General Requirements

• Summary
• 5. For FHA appraisals, the only signature
  permitted is that of the lender-selected FHA
  Appraiser. Supervisory signatures are not
  permitted.
• 6. Intended user of an FHA appraisal report is
  the lender/client and HUD/FHA.
• 7. If the appraiser is unable to visually
  evaluate the improvements in their entirety, the
  lender is to be contacted and the appraiser is to
  reschedule a time when a complete visual
  inspection can be performed.

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Chapter 4 FHA General Requirements

• 1. FHA considers which condition to require an
  automatic repair?
• a. Poor workmanship
• b. Defective paint on a home built before 1978
• c. Heaving sidewalks
• d. Leaky faucets

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Chapter 4 FHA General Requirements

• 2. An appraisal on a dwelling that is under
  construction and more than 90 complete with only
  minor finish work remaining, is performed
• As is
• Subject to completion
• Subject to repairs or alterations
• Subject to the appraisers review of plans and
  specifications

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Chapter 4 FHA General Requirements

• 3. If soil contamination appears to be present,
  the property
• Would not qualify for FHA financing
• Might require further analysis and testing
• Must have the condition removed
• Is appraised subject to repairs

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Chapter 4 FHA General Requirements

• 4. An all-weather roadway is
• One on which an emergency vehicle can pass in all
  types of weather
• A solid-surface road
• A solid-surface public road
• One on which all vehicles can pass in all types
  of weather

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Chapter 4 FHA General Requirements

• 5. To check a plumbing system, the appraiser
  must
• Flush toilets
• Turn on a representative number of faucets
• Check for leaks around fixtures
• All of the above

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Chapter 4 FHA General Requirements

• 6. The appraisers certification in an FHA
  appraisal states
• That only the lender/FHA/HUD may rely on the
  report
• That he or she has relied on the sales comparison
  approach
• That he or she has verified comparable sales with
  an interested party
• That the lender may not distribute the appraisal
  report

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Chapter 4 FHA General Requirements

• 7. Front and rear photos of the subject should
  show
• The grade of the site
• Accessory structures
• Surrounding properties
• Opposite sides of the structure

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Chapter 4 FHA General Requirements

• 8. To check the electrical system of a property,
  the appraiser is required to
• Examine the inside of the electrical service
  panel with the cover off
• Test all outlets with an electrical testing
  device
• Test a random number of switches and receptacles
• Turn on all electrical fixtures and appliances at
  once

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Chapter 4 FHA General Requirements

• 9. In most cases, to qualify for FHA financing,
  the subject property
• Must not have conditions that would threaten the
  safety and well-being of the occupants
• Must have a closet in every bedroom
• Must have handrails on all stairs
• All of the above

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Chapter 4 FHA General Requirements

• 10. The subject floor plan sketch must include
• Below grade finishes
• Interior walls
• Garages
• Accessory structures

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Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Objectives
• Recognize the data that is expected to be
  collected for an FHA appraisal.
• Observe FHA protocol in reporting data.

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Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Terms to Remember
• FHA Case Number
• Accessory Unit
• Accessory Dwelling Unit
• Census Tract Number

87
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Section 1 Subject
• Key Points
• The FHA appraisal may not be transmitted to the
  lender without a case number
• Enter the nearest intersection if a house number
  is not available

88
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Section 1 Subject
• Key Points
• If the property is vacant, the appraiser should
  note in the Improvements section whether the
  utilities were on or off at the time of the
  appraisal and condition the appraisal on a
  satisfactory re-inspection

89
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Section 2 Contract
• Key Points
• FHA requires that the appraiser be provided with
  a complete copy of the ratified sales contract,
  including all addenda, for the subject property
• If unable to obtain this information, the
  appraiser is to state what efforts were made to
  obtain it

90
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Section 2 Contract
• Key Points
• The Date of Contract is the date when all
  parties have agreed to the terms of, and signed,
  the contract
• The property may not be eligible for FHA
  financing if it involves flipping (resale in less
  than 90 days)

91
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Section 3 Neighborhood
• Key Points
• Comparing houses that have been sold and resold
  in recent years is an effective way to determine
  market trends
• To determine the equilibrium status of supply and
  demand in the neighborhood, compare the number of
  houses sold to the number of houses listed for
  sale in a recent time period

92
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Section 3Neighborhood
• Key Points
• In addition to FHAs requirement to state
  marketing time, USPAP requires the development
  and reporting of exposure time in market value
  assignments
• The high and low for both price and age should
  exclude the extreme

93
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Section 4 Site
• Key Points
• If the shape of the site is irregular, show the
  boundary dimensions (85' x 150' x 195' x 250'),
  or attach a property survey, site plan, or plat
  or legal description with the comment see
  attached. Do not list site area on the
  dimensions line.

94
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Section 4 Site
• Key Points
• Identify a view with a significant positive or
  negative influence on the value
• Photographs are recommended for any negative or
  positive view influences affecting value or
  marketability

95
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Section 4 Site
• Key Points
• Public utilities do not include any community
  systems sponsored, owned, or operated by the
  developer or a private company not subject to
  government regulation or financial assistance
• The appraiser shall indicate whether a public
  water or sewage disposal system is available to
  the site

96
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Section 5 Improvements
• Key Points
• Properties that are either proposed or under
  construction require plans and specifications for
  the appraiser to review
• If the property is less than one year old,
  include both the month and year completed
• Note any significant difference between the
  actual and effective ages and explain in the
  condition of property comments section

97
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Section 5 Improvements
• Key Points
• The attic must be entered, at a minimum, by head
  and shoulders to observe the attic area for
  insulation, deficient materials, leaks, or
  readily observable evidence of significant water
  damage, structural problems, previous fire
  damage, FRT sheathing, exposed and frayed wiring,
  and adequate ventilation by vent, fan, or window

98
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Section 5 Improvements
• Key Points
• Turn on the heating and/or air conditioning
  system to test functionality, weather permitting,
  and that no unusual noises are heard, no odors or
  smoke are emitted indicating a defective unit,
  etc. However, do not operate the system if doing
  so may damage equipment or when outside
  temperatures will not allow system to operate.

99
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Section 5 Improvements
• Key Points
• Turn on the hot water to ensure that the water
  heater is operating appropriately
• View the roof from ground level to determine if
  the integrity of the roof is sufficient
• A single-lane driveway is considered to be a
  one-car driveway. It would be considered a
  two-car driveway if either car can be moved
  without disturbing the other.

100
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Section 5 Improvements
• Key Points
• A dining area built as an L-shape off the kitchen
  may or may not be considered a room depending on
  the size.
• Hypothetically insert a wall to separate the two
  areas that have been built as one. If the
  residents can use the resulting two rooms with
  the same or more utility without increased
  inconvenience, count the room as two. If the
  hypothetical wall would result in a lack of
  utility and increased inconvenience, count the
  room as one.

101
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Summary
• The URAR report form is used for a one-unit
  property for FHA.
• The FHA case number together with borrower and/or
  property information is supplied by the
  lender/client. The FHA case number must be
  included in the report.
• If the property is vacant, the appraiser should
  note whether the utilities were on or off.
• In the case of a sales transaction, FHA requires
  that the appraiser be provided with a copy of the
  sales contract.

102
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Summary
• 5. When buyer concessions are being paid by the
  seller in the transaction, the appraiser is to
  report the dollar amount and describe the items
  to be paid. If the sale involves personal
  property it should be identified and excluded
  from the valuation.
• 6. The appraiser must clearly define the
  neighborhood boundaries by north, south, east,
  and west boundary points
• 7. The subject property must be personally
  observed by the appraiser, with any adverse
  conditions noted in the report.
• 8. An area built as an L-shape may or may not be
  considered a room, depending on the size.

103
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Workgroup Activity
• FHA protocol
• A property without a house number or street
  address
• Enter the nearest intersection if a house number
  is not available

104
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Workgroup Activity
• FHA protocol
• A special assessment for street lighting that
  will last for the next 10 years
• Report the dollar amount of special assessments
  for the subject property and provide a brief
  explanation for the assessment. If the assessment
  is larger than typical, the appraiser should
  probably discuss whether the assessment might
  affect marketability of the property.

105
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Workgroup Activity
• FHA protocol
• The seller in a sales transaction is someone
  other than the owner of record
• If the seller is not the owner of public record
  the appraiser must explain.

106
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Workgroup Activity
• FHA protocol
• Checking the central air conditioning of a
  property in cold-climate winter months
• Do not operate the system if doing so may damage
  equipment or when outside temperatures will not
  allow system to operate.

107
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Workgroup Activity
• FHA protocol
• A property has both vinyl siding and brick
  exterior materials
• If a combination of materials, show the
  predominant portion first and rate the observed
  condition.

108
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Workgroup Activity
• FHA protocol
• Description of windows
• - 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 storm sash material or state if
  windows are double glazed, etc., or a combination
  of the two. Rate the condition observed. If none,
  so state.
• - Describe style of any screens (full, half,
  none) and rate the condition observed.

109
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Workgroup Activity
• FHA protocol
• A crawl space
• - 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 bottom of floor
  joists to ground. Space should be adequate for
  maintenance and repair. A minimum distance of 18
  inches from ground to bottom of 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.

110
Chapter 5 FHA Protocol for Reporting
Data/One-unit Dwelling

• Workgroup Activity
• FHA protocol
• Dirt basement floor
• Determine whether such a property is typical for
  the area and is readily marketable. If so, it is
  not required that a concrete basement floor be
  installed. Mechanical equipment, however, must be
  located on a concrete pad.

111
Chapter 6 One-unit Valuation Methods for FHA

• Objectives
• Accurately complete the valuation data sections
  of the URAR form.
• Correctly develop valuation methods according to
  FHA protocol.
• Form a credible opinion of value observing FHA
  guidelines.

112
Chapter 6 One-unit Valuation Methods for FHA

• Terms to Remember
• Comparable Data Pool
• Data Source
• Verification Source

113
Chapter 6 One-unit Valuation Methods for FHA

• Section 6 Sales Comparison Analysis
• Key Points
• Report the number of comparable properties
  currently offered for sale, as of the effective
  date of the appraisal, and the number of
  comparable sales in the subject neighborhood,
  within 12 months of the effective date of the
  appraisal.

114
Chapter 6 One-unit Valuation Methods for FHA

• Section 6 Sales Comparison Analysis
• Key Points
• Enter proximity to comparables in straight-line
  distance and direction. For example, "1.5 miles
  NE" or 3 blocks south
• MLS by itself is not considered a verification
  source. Contacting someone with first-hand
  knowledge of the transaction (agent, broker,
  buyer, seller, etc.,) is preferred method
• Do not use as market data, comps that are not
  verified and adjusted to reflect the terms and
  conditions of sale

115
Chapter 6 One-unit Valuation Methods for FHA

• Section 6 Sales Comparison Analysis
• Key Points
• Make adjustments only if the dissimilarity has a
  noticeable effect on the value
• Report the type and amount of sales concession
  for each comparable sale. If none, so state.

116
Chapter 6 One-unit Valuation Methods for FHA

• Section 6 Sales Comparison Analysis
• Key Points
• State month and year of settlement. Showing
  contract date and settled date is also
  acceptable.
• Time adjustments must be supported by the market
  and consistent with the neighborhood market
  conditions noted. If this is the case, show both
  the contract date and settled date, as any time
  adjustment should be calculated using the
  contract date rather than the settled date.
  Explanation is required for any time adjustments.

117
Chapter 6 One-unit Valuation Methods for FHA

• Section 6 Sales Comparison Analysis
• Key Points
• Location adjustments may be warranted for
  factors that influence sales price, such as a
  busy street versus a quiet street rather than
  using the name of the community or subdivision.

118
Chapter 6 One-unit Valuation Methods for FHA

• Section 6 Sales Comparison Analysis
• Key Points
• Enter the site size in square feet or acreage
• If necessary, consider the possibility of excess
  or surplus land
• Describe the view from the site, i.e., similar
  homes, commercial area, water view, scenic view,
  etc. Average or Good, etc., are only to be
  used as adjuncts, i.e., Residential/Average,
  Water view/Good.

119
Chapter 6 One-unit Valuation Methods for FHA

• Section 6 Sales Comparison Analysis
• Key Points
• Enter the style according to a description used
  by local custom. Be consistent.
• Enter only the actual age of the subject and each
  comparable sale.
• Floor plan (interior walls) of the subject is
  required when functional obsolescence is
  attributable to layout or poor floor plan.

120
Chapter 6 One-unit Valuation Methods for FHA

• Section 6 Sales Comparison Analysis
• Key Points
• Generally, adjustments should not exceed 10 for
  line items, 15 for net adjustments, and 25 for
  gross adjustments. If any adjustments exceed
  guidelines, an explanation must be provided for
  not using more similar comparable sales.

121
Chapter 6 One-unit Valuation Methods for FHA

• Section 6 Sales Comparison Analysis
• Key Points
• Report prior sales or transfers of the comparable
  sales for the year prior to the date of sale of
  the comparable sale
• For comparable data, enter the date the data was
  published or updated by the source

122
Chapter 6 One-unit Valuation Methods for FHA

• Section 7 Reconciliation
• Key Points
• The appraiser should note whether the appraisal
  is considered as is or subject to repairs,
  alterations, or required inspection conditions.
• More than one box may be marked, depending on the
  assignment and property conditions.

123
Chapter 6 One-unit Valuation Methods for FHA

• Section 9 Cost Approach
• Key Points
• If the subject property is new construction (less
  than one year old), or the cost approach is
  recognized in the market as a basis for pricing,
  the appraiser may complete the cost Approach
  however, it is not required for an FHA appraisal.
  
• State the remaining economic life as a single
  number or as a range. This line must be completed
  for every FHA appraisal .

124
Chapter 6 One-unit Valuation Methods for FHA

• Section 10 Income Approach
• Key Points
• The income approach is not required for FHA
  appraisals completed on the Uniform Residential
  Appraisal Report, Fannie Mae Form 1004.

125
Chapter 6 One-unit Valuation Methods for FHA

• Summary
• For Date of Sale in the sales comparison
  approach, the month and year of closing is
  stated. Showing the contract date and settled
  date is also acceptable when a time adjustment is
  warranted for changes in market condition changes
  between the two events.
• In the sales comparison approach, the appraiser
  is required to report the number of comparable
  properties currently offered for sale, as of the
  effective date of the appraisal, and the number
  of comparable sales in the subject neighborhood,
  within 12 months of the effective date of the
  appraisal.

126
Chapter 6 One-unit Valuation Methods for FHA

• Summary
• 3. Adjustments in the sales comparison approach
  should not exceed 10 for line items, 15 for net
  adjustments, and 25 for gross adjustments. If
  any adjustments exceed guidelines, an explanation
  must be provided
• 4. Cost approach is meaningful if subject
  property is new construction (less than one year
  old), or if cost approach is recognized in the
  market as a basis for pricing. In such cases, the
  appraiser may complete the cost approach
  however, it is not required for an FHA appraisal
• 5. In a single-family residential property, the
  income approach is generally not recognized as a
  basis for buying by the market. Thus, the income
  approach is not required for FHA appraisals
  completed on the URAR

127
Chapter 6 One-unit Valuation Methods for FHA

• True or False
• 1. MLS, by itself, would be considered a
  verification source of data.
• False

128
Chapter 6 One-unit Valuation Methods for FHA

• True or False
• 2. For location, using terms such as corner
  lot or through street would be acceptable.
• True

129
Chapter 6 One-unit Valuation Methods for FHA

• True or False
• 3. Gross adjustments, per FHA guidelines, can
  never exceed 25.
• False

130
Chapter 6 One-unit Valuation Methods for FHA

• True or False
• 4. Comparable sales should always be researched
  for a prior transaction one year prior to the
  date of the comparable sale.
• True

131
Chapter 6 One-unit Valuation Methods for FHA

• True or False
• 5. More than one box may be marked in the
  reconciliation (as is, subject to inspection,
  etc.,) section depending on the assignment and
  property conditions.
• True

132
Chapter 6 One-unit Valuation Methods for FHA

• True or False
• 6. The income approach would be required by FHA
  if the property were a single-family investment
  property.
• False

133
Chapter 6 One-unit Valuation Methods for FHA

• True or False
• 7. When reporting the cost approach, the
  appraiser is to describe the method for
  determining physical depreciation.
• True

134
Chapter 6 One-unit Valuation Methods for FHA

• True or False
• 8. If the cost approach is developed, the
  appraiser must provide an explanation if the
  remaining economic life is less than 30 years.
• True

135
Chapter 7 FHA Appraisal for Other Property Types

• Objectives
• Understand FHA expectations in the development
  and reporting of manufactured dwellings,
  condominiums, and 2- to 4-unit housing.
• Recognize the protocol that differs from the
  standards for performing an FHA appraisal of a
  one-unit property.

136
Chapter 7 FHA Appraisal for Other Property Types

• Terms to Remember
• Manufactured Home
• HUD Data Plate (Manufacturers Data Plate)
• N.A.D.A. Guide

137
Chapter 7 FHA Appraisal for Other Property Types

• Manufactured Homes
• Key Points
• FHA uses the Manufactured Home Appraisal Report
  Form 1004C
• A manufactured home is designed and constructed
  to the Federal Manufactured Home Construction and
  Safety Standards as evidenced by an affixed
  certification label
• Manufactured homes may also be referred to as
  mobile homes, sectionals, multi-sectionals,
  doublewides, triple-wides, or singlewides
• Modular housing is built to local/state codes and
  is not considered to be manufactured housing

138
Chapter 7 FHA Appraisal for Other Property Types

• Manufactured Homes
• Key Points
• To be eligible for FHA insurance, a manufactured
  home is
• Built on or after June 15, 1976
• At least 400 square feet in gross living area
• Built and remaining on a permanent chassis
• Designed to be used as a dwelling with a
  permanent foundation, which is designed and
  constructed to HUD/FHA criteria
• Showing a HUD Certification Label/Seal affixed to
  the homes exterior

139
Chapter 7 FHA Appraisal for Other Property Types

• Manufactured Homes
• Key Points
• Manufactured homes must be taxed as real estate
  to be eligible for Title II FHA insurance
• If the manufactured home is new construction,
  does the contract price include all delivery,
  installation, and setup costs?
• Appraiser must analyze the manufacturers invoice
  or state why the analysis was not performed
• If the invoice is not available, the appraiser is
  to note the unavailability

140
Chapter 7 FHA Appraisal for Other Property Types

• Manufactured Homes
• Key Points
• To be eligible for FHA insurance, the finished
  grade level beneath a manufactured home must be
  at or above the 100-year flood plain
• To be eligible for FHA-insured financing, the
  manufactured home must have a HUD Certification
  Label affixed to the taillight end of each
  transportable section

141
Chapter 7 FHA Appraisal for Other Property Types

• Manufactured Homes
• Key Points
• Appraiser must indicate if the original
  manufactured home (as delivered and installed) to
  the site has been altered or has additions
• If appraiser suspects that an addition or
  modification to the home poses a risk to the
  structural integrity of the home, the appraiser
  is to notify the lender

142
Chapter 7 FHA Appraisal for Other Property Types

• Manufactured Homes
• Key Points
• If the manufactured home is less than one year
  old, include both the month and year completed in
  the report
• If it is more than one year old, insert the year
  built in the report

143
Chapter 7 FHA Appraisal for Other Property Types

• Manufactured Homes
• Key Points
• If available, indicate the name of the person or
  company that installed the manufactured home, the
  date of installation, and the model year of the
  manufactured home. If information not readily
  available, the appraiser is to note such.

144
Chapter 7 FHA Appraisal for Other Property Types

• Manufactured Homes
• Key Points
• The appraiser must inspect the underside of the
  manufactured home and determine if the towing
  hitch running gear (wheels and axels) has been
  removed. If not removed, or unable to determine
  due to lack of access, the manufactured home is
  not eligible for FHA-insured financing and the
  lender must be notified

145
Chapter 7 FHA Appraisal for Other Property Types

• Manufactured Homes
• Key Points
• The appraiser is only required to complete the
  cost approach if the manufactured home is the
  initial sale from manufacturer
• If manufactured home is more than one year old
  and retailers invoice stating the retail
  purchase price of the home is available, a copy
  of the invoice should be appended to the
  appraisal report
• If manufactured home is new construction less
  than one year old but title has been re-conveyed
  after the initial sale or if the home is more
  than a year old, the cost approach is not
  required by FHA

146
Chapter 7 FHA Appraisal for Other Property Types

• Manufactured Homes
• Key Points
• The income approach is not required for FHA
  appraisals completed on the Manufactured Home
  Appraisal Report, Fannie Mae Form 1004C

147
Chapter 7 FHA Appraisal for Other Property Types

• Individual Condominium Unit
• Key Points
• FHA uses the Individual Condominium Unit
  Appraisal Report Form 1073
• The appraiser must accurately report the
  conditions observed including the overall
  condition of the project and quality of
  construction

148
Chapter 7 FHA Appraisal for Other Property Types

• Individual Condominium Unit
• Key Points
• The appraiser will indicate whether a single
  entity owns more that 10 of the total units in
  the project
• If yes, provide the name of the entity and the
  number of units owned. It is possible to have
  multiple entities in this category

149
Chapter 7 FHA Appraisal for Other Property Types

• Individual Condominium Unit
• Key Points
• Explain the results of analysis of the
  condominium project budget or why the analysis
  was not performed
• The analysis includes adequacy of fees and
  reserves to meet operating expenses, which may
  include legal and accounting, utilities, trash
  removal, snow removal, repairs and maintenance,
  recreational area maintenance and upkeep,
  gardening and yard maintenance, taxes, insurance,
  facility rentals, etc.

150
Chapter 7 FHA Appraisal for Other Property Types

• Individual Condominium Unit
• Key Points
• If there was difficulty locating comparable
  properties, i.e., the subject is a high-rise
  and it is the only sale within the project in the
  past 12 months, and one or more of the comparable
  properties was a mid-rise or garden style,
  then all such properties in the subjects
  neighborhood are to be treated as comparable and
  counted

151
Chapter 7 FHA Appraisal for Other Property Types

• Small Residential Income Properties
• Key Points
• FHA uses the Small Residential Income Property
  Appraisal Report Form 1025
• If the subject property is the sole, or one of
  only several, 2- to 4-unit single-family homes in
  the neighborhood, indicate this scarcity under
  market conditions, identify the most predominant
  housing type in the neighborhood, and address
  trends in value for that identified type

152
Chapter 7 FHA Appraisal for Other Property Types

• Small Residential Income Properties
• Key Points
• For marketing time, state the typical length of
  time a property similar to the subject property
  would have to stay on the market before being
  sold at a price near its market value
• A 2- to 4-unit dwelling with an accessory unit is
  ineligible for FHA financing

153
Chapter 7 FHA Appraisal for Other Property Types

• Small Residential Income Properties
• Key Points
• The gross living area is obtained by drawing an
  imaginary line on the outside perimeter walls of
  each unit
• The gross building area is the total finished
  area (including common areashallways, interior
  stairways, etc.,) of the