FHA announces new appraisal requirements this week. Borrowers will have to have two appraisals if they meet the following criteria’s:
The loan amount, excluding the upfront mortgage insurance premium, will exceed $417,000, and
The LTV excluding upfront MIP, equals or exceeds 95%, and
The property is determined as being in a declining market.
How is a declining market determined?
- By the appraiser: The appraisal report requires the appraiser to indicate if the property is located in a declining area in both the neighborhood section of the appropriate appraisal form as well as in the housing trend section, and/or determine if there is an “over-supply” of properties. The certifications contained in the appraisal reporting forms are supplemental standards to the Uniform Standards of Professional Appraisal Practice (USPAP) and Certification # 14 specifically requires an appraiser to consider and report on all conditions that impact value. Appraisers must provide specific support for any conclusions noted in the Housing Trend section of the appraisal report and research local price trends, relying upon such services as local Multiple Listing Services or others as described below.
- By the lender: The lender may determine through services such the S&P/Case-Schiller Index, Office of Federal Housing Enterprise Oversight (OFHEO) Index or National Association of Realtors (NAR) statistics, or through an automated underwriting system, e.g., Fannie Mae’s Desktop Underwriter or Freddie Mac’s Loan Prospector, that the property is located in a declining market area.
Most of L.A and Ventura County are in a declining market. FHA is going to take the lower of the two appraisals.
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