Special offer

What's with the Kinder, Gentler FHA Loan? (Part 2)

By
Services for Real Estate Pros with Escrowcoord.com

I promised I would give you updates on my FHA transaction I'm working on. The buyer's loan approval was due yesterday (6/3), however-FHA did an appraisal review and they are having a second appraiser go out today. The loan officer did say that they are putting a "rush" on the second appraiser's report to get it pushed through the approval process and the buyer's should get loan approval by Monday 6/9. OK, that seems reasonable. But I am VERY nervous about the second appraisal! The sales price the buyer's and sellers negotiated were well within comps. So what gives?! Is this regular operating procedure? Why doesn't FHA trust the first appraiser (which is their own appraiser)?

If you have any thoughts on FHA loans, please let me know! Meanwhile, stay tuned for upcoming episodes on "As the FHA World Turns."

Comments (12)

Kevin McGourty
Realty ONE Group - Phoenix, AZ

Thanks for the update.

Jun 04, 2008 04:16 AM
Carl Pruitt
FHA Loan Advice - Buford, GA
http://FHALoanAdvice.com

Just one small relatively unimportant correction. ;)

FHA doesn't underwrite the file. They only insure the loan after it closes provided their guidelines were met in underwriting. So it would be the lender who did an appraisal review and requested the second appraisal and not FHA. The review is normally triggered by the results of an online appraisal scoring and valuation system which would be the same system that particular lender would use to trigger an appraisal review on a conventional loan as well. There are many comps which are great for use on a CMA that lenders just aren't allowed to accept on the official appraisal due to secondary market considerations.

However, there is one circumstance in which FHA would require another appraisal and that would be to satisfy the anti-flipping rule if the house had changed title within the past within the past 91-180 days and the value increased by more than 100% then 2 appraisals are required. The borrower cannot be charged for a second appraisal on an FHA loan.

Good luck with your deal!

Thanks!

Carl Pruitt

http://fhaloanadvice.com

Jun 04, 2008 03:10 PM
Diana Turnbloom
Escrowcoord.com - Martinez, CA
The Leading Expert in TC Services & Education

Carl, Thanks so much for that feedback! You make a great point about the fact that FHA only insures the loan. The property hasn't changed title in the last 91-180 days, so I guess the second appraisal is a bank request. I was thinking about the deal this morning while I was watering my yard. The home is custom built in a rather non-conforming neighborhood. So I guess I can see why a second appraisal might be warranted.

Yesterday I received an FHA/VA Amendatory Clause and Certification for the seller's to sign. On it is a box to check for FHA Direct Endorsement/VA Automatic Underwriting. In this situation, would FHA then be underwriting and approving the loan directly? Appreciate your expertise!

Jun 05, 2008 03:56 AM
Diana Turnbloom
Escrowcoord.com - Martinez, CA
The Leading Expert in TC Services & Education

Mornin' Kevin! How's the marketing biz?

Jun 05, 2008 03:57 AM
Anonymous
Kevin

Good morning in your part of the world (CA), Diana. MovingHelp is moving. (Sorry - pun is too easy.) Actually, we are seeing some opportunities developing as a result of joining several associations. Members allow members to market to them so it is helping to get the word out. The great thing is there is a big need for our services, but unfortunately, not a lot of people know about us. I would like to join a Real Estate association.  Any recommendations? How is your biz?

Jun 05, 2008 04:03 AM
#5
Carl Pruitt
FHA Loan Advice - Buford, GA
http://FHALoanAdvice.com

Diana,

The Amendatory Clause is one of those documents that those of us experienced in FHA usually just get signed along with the contract. The standard FHA contract most agents use already has the amendatory language in it, but some underwriters want to see it on a separate form so that it is easier to find when the loan is in quality control later.

FHA Direct Endorsement is actually the term used to describe the normal situation now where the lender's underwriter is making the decision. We refer to the underwriters authorized to clear FHA files as "DE Underwriters". As is usual with the government, the term does sound like it should mean the opposite!

Thanks!

Carl

Jun 05, 2008 04:31 AM
Diana Turnbloom
Escrowcoord.com - Martinez, CA
The Leading Expert in TC Services & Education

Carl your a doll for clarifying this for me! Thanks!

Jun 11, 2008 06:05 AM
Diana Turnbloom
Escrowcoord.com - Martinez, CA
The Leading Expert in TC Services & Education

Hey, Just wanted to let everyone know that this transaction closed without a HITCH! I am an FHA convert. We have already recommended a couple of our buyers get FHA approved. I'd like to shake the hand of whoever revamped the process for agents and buyers!

Aug 07, 2008 03:29 AM
Anonymous
Don

Carl Can you tell me what the FHA/VA Amendatory Clause says in plian english.  I am a seller and was just given the form to sign but am not sure what it really is saying.

 

thanks, Don

Sep 05, 2008 06:01 AM
#9
Carl Pruitt
FHA Loan Advice - Buford, GA
http://FHALoanAdvice.com

Don,

The Amendatory Clause basically just says that your home must appraise for at least the sales price or the buyer is not obligated to follow through with the sale and won't lose their earnest money. However, the buyer can go through with it if they still want to, but their financing will still be based off the appraised value and they would have to pay the rest in cash.

There is also usually a certification included on the same form stating that there are no other agreements between you and the buyer that aren't included in the sales contract. (For instance, the seller refunding money after the closing or taking back a second mortgage that isn't disclosed to the underwriter)

 

Sep 05, 2008 06:12 AM
Anonymous
Don

Thanks,  There is a certification of the Borrower, seller,agent.  There is also an FHA Direct Endorsement/VA Automatic Underwriting clause.  It basically states that the seller may have to pay an underwriting fee to the lender.  Is this something I have to be concerned with?

 

thanks, Don

Sep 05, 2008 06:24 AM
#11
Carl Pruitt
FHA Loan Advice - Buford, GA
http://FHALoanAdvice.com

Don,

Sounds like they are using an old (very old actually) version of the form. Still, it doesn't require you to pay anything other than the closing costs you have agreed to pay per the contract. It just lets you know that an underwriting fee may be part of those closing costs which you pay only when the loan and purchase are consummated.

 

Sep 05, 2008 07:03 AM