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VA Financing and Appraisal Overview

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Title: VA Financing and Appraisal Overview


1
VA Financing and Appraisal Overview
  • Chapter 7

2
Introduction
  • VA loans were first offered in 1944 as a
    provision of the GI Bill of Rights. The purpose
    of the lending program was to provide veterans
    with a mortgage loan guaranteed by the federal
    government with no down payment.
  • VA-guaranteed loans are available through
    approved lenders for eligible veterans and are
    limited to properties that the veteran will
    occupy as the primary residence.
  • Many of the property eligibility requirements
    mirror the requirements for FHA financing or the
    secondary mortgage market.

3
Key Terms
  • Lender Appraisal Processing Program (LAPP) The
    purpose of this program is to speed up the time
    to loan closing by allowing VA-authorized lenders
    to receive appraisal reports directly from
    appraisers and process them without VA
    involvement.
  • MPR (Minimum Property Requirements) For
    properties qualifying for VA loan guarantee.
  • RLC (Regional Loan Center) For VA loan processing
    and other functions, such as adding an appraiser
    to the VA Fee Panel.
  • TAS (The Appraisal System) A central data system
    used by the VA.

4
The VA Loan
  • There is no maximum loan amount for a VA loan,
    but there is a maximum limit of guarantee to the
    lender.
  • The veteran must meet income and credit
    qualifications.
  • Usually, VA loans are subject to a funding fee
    this amount may be financed.

5
The VA Loan (cont.)
  • Usually concessions paid by the seller may not
    exceed 4.
  • Some services for a purchase transaction, such as
    a termite inspection, must be paid by the
    seller.
  • Eligible properties must meet VA minimum property
    requirements.

6
Properties Eligible for VA Financing
  • Existing Construction
  • Eligible for financing if either
  • Previously owner-occupied or had all on- and
    off-site improvements fully completed for one
    year or more.
  • New Construction
  • Newly completed properties are eligible if
    either
  • Covered by a one-year VA builders warranty,
  • Enrolled in a HUD-accepted ten-year insured
    protection plan, or
  • Built by a veteran, as the general contractor,
    for his/her own occupancy.
  • Proposed or Under Construction
  • Property is eligible for appraisal prior to or
    during construction, if
  • The appraisal is based on proposed construction
    exhibits, and
  • The property is inspected by the VA or HUD during
    construction.

7
Properties Eligible for VA Financing (cont.)
  • Manufactured Home Classified as Real Estate
  • For eligibility of a VA loan term of 30 years, a
    manufactured home must
  • Be classified and taxed as real property.
  • Be properly affixed to a permanent foundation.
  • Conform to VA MPRs, building codes, and zoning
    requirements.
  • Other Manufactured Homes
  • Modular homes are eligible if they are
  • Covered by a HUD structural engineering bulletin,
    or
  • Constructed to the standards of the state in
    which the factory is located and receive that
    states approval certification, and
  • Delivered to the building site in sections, but
    are not attached to a chassis supported by
    wheels.
  • Property to be Altered/Improved/Repaired
  • Appraisal eligibility occurs
  • Prior to being altered, improved, or repaired, or
  • After being altered, improved, or repaired

8
Properties Ineligible for VA Financing
  • Properties not Likely to Meet MPRs
  • Property in a badly deteriorated condition is
    ineligible for appraisal unless there is
    likelihood that it can be repaired to meet VA
    minimum property requirements prior to loan
    closing.
  • Location-Related Problem
  • Property is not eligible for appraisal if the
    improvements are located in
  • A special flood hazard area (SFHA) and
  • Is proposed/under/new construction with elevation
    of the lowest floor below the 100-year flood
    level,
  • Flood insurance is not available, or
  • Is in an area subject to regular flooding,
    whether or not it is in an SFHA.
  • A coastal barrier resources system area.
  • An airport Noise Zone 3, if proposed or under
    construction.
  • A transmission line easement involving
    high-pressure gas, liquid petroleum, or
    high-voltage electricity.
  • An area susceptible to geological or soil
    instability.

9
Properties Ineligible for VA Financing (cont.)
  • Condo not Approved
  • A condominium project must be acceptable to the
    VA before any unit in the project can be eligible
    for VA loan guaranty.
  • Ownership not Fee Simple
  • Property involving a less than fee simple
    ownership (e.g., leaseholds, cooperatives, ground
    rental arrangements) is not eligible for
    appraisal without prior VA approval of the
    specific legal arrangement or project.
    Submissions to the VA Central Office must
    include
  • Details of the ownership arrangement, and
  • Copies of leases or other instruments creating
    the estate, and
  • Recommendations of the VA Office of Jurisdiction.

10
Minimum Property Requirements (MPRs)
  • Entity
  • The property must be a single, readily marketable
    real estate entity.
  • Nonresidential Use
  • Any nonresidential use of the property must be
    subordinate to its residential use and character.
  • If any portion of a property is designed or used
    for nonresidential purposes, the use must not
  • Impair the residential character of the property,
    or
  • Exceed 25 percent of the total floor area.
  • Space Requirements
  • Each living unit must have the space necessary to
    assure suitable
  • Living
  • Sleeping
  • Cooking and dining accommodations
  • Sanitary facilities

11
Minimum Property Requirements (MPRs) (cont.)
  • Mechanical Systems
  • Mechanical systems must
  • Be safe to operate.
  • Be protected from destructive elements.
  • Have reasonable future utility, durability, and
    economy.
  • Have adequate capacity and quality.
  • Heating
  • Fee Appraisers must report any permanently
    installed, or to-be-installed, unvented fireplace
    or space heater that uses liquid or gaseous fuel.
  • Homes with wood-burning stoves as primary heating
    sources must have permanent conventional heating
    systems that maintain a temperature of at least
    50 degrees Fahrenheit in plumbing areas.
  • Solar systems for domestic water heating or space
    heating must
  • Meet standards in the HUD Handbook 4930.2, Solar
    Heating
  • Domestic Hot Water Heating Systems, and
  • Be backed up 100 percent with a conventional
    thermal energy subsystem.

12
Minimum Property Requirements (MPRs) (cont.)
  • Water Supply and Sanitary Facilities
  • Each unit must have the following
  • Domestic hot water
  • Continuing supply of safe and potable water for
    drinking and household use
  • Sanitary facilities and a safe method of sewage
    disposal
  • Roof Covering
  • The roof covering must
  • Prevent entrance of moisture
  • Provide reasonable future utility, durability,
    and economy of maintenance
  • Crawl Space
  • The crawl space must
  • Have adequate access
  • Be clear of all debris
  • Be properly vented
  • The floor joists must be above the highest level
    of the ground.
  • Dampness/ponding of water in the crawl space must
    be corrected.

13
Minimum Property Requirements (MPRs) (cont.)
  • Ventilation
  • Natural ventilation of structural spaces must be
    provided to reduce the effect of heat and
    moisture.
  • Electricity
  • Each unit must have electricity for lighting and
    for necessary equipment.
  • Hazards
  • The property must be free of hazards which may
  • Adversely affect the health and safety of the
    occupants.
  • Adversely affect the structural soundness of the
    dwelling or improvements.
  • Impair the customary use and enjoyment of the
    property by the occupants.
  • Drainage
  • The site must be graded so that it
  • Provides positive, rapid drainage away from the
    perimeter walls of the dwelling.
  • Prevents ponding of water on the site.

14
Minimum Property Requirements (MPRs) (cont.)
  • Defective Conditions
  • Conditions that impair the safety, sanitation,
    or structural soundness of the dwelling will
    cause the property to be unacceptable until the
    defects or conditions have been fixed.
  • Such conditions include but are not limited to
  • Defective construction
  • Poor workmanship
  • Evidence of continuing settlement
  • Excessive dampness
  • Leakage
  • Decay
  • Termites
  • Wood-Destroying Insects/Fungus/Dry Rot
  • Appraisers must look for and report evidence of
    wood-destroying insect infestation, fungus
    growth, and dry rot in addition to any VA
    requirements.

15
Minimum Property Requirements (MPRs) (cont.)
  • Lead-Based Paint
  • Constitutes an immediate hazard to be corrected,
    unless testing shows lead is not present in the
    paint above law-permitting levels.
  • Appraisers must
  • Assume that a defective paint condition on any
    interior or exterior surface of properties built
    prior to 1978 involves lead-based paint.
  • Clearly identify the location of such conditions.
  • Recommend correction.
  • Any defective paint condition identified must
    receive adequate treatment to prevent the
    ingestion of contaminated paint. Either
  • The surface treatment must be washed, scraped, or
    wire brushed and repainted, or
  • The paint must be removed or the surface covered
    with a suitable material if the paint film
    integrity cannot be maintained.

16
Minimum Property Requirements (MPRs) (cont.)
  • Party Walls
  • A building constructed to a property line must
    be separated from the adjoining building by
    a wall extending the full height of the building
    from the foundation to the roof ridge.
  • Gas and Petroleum Pipelines
  • No part of any residential structure may be
    located within a high-pressure gas or liquid
    petroleum pipeline easement
  • Any detached improvements will not receive
    value for VA purposes.
  • If a proposed residential structure will be
    located outside the pipeline easement, but
    within an area that extends 220 yards on either
    side of the centerline, the VA notice of value
    will be conditioned. A statement from an
    authorized official of the pipeline company must
    certify compliance for
  • High-Pressure Gas Pipelines
  • Liquid Petroleum Pipelines

17
Minimum Property Requirements (MPRs) (cont.)
  • High-Voltage Electric Transmission Lines
  • No part of any residential structure may be
    located within a high-voltage electric
    transmission line easement.
  • Any detached improvements, even partially in a
    transmission line easement, will not receive
    value for VA purposes.
  • Access for Exterior Wall Maintenance
  • There must be space between buildings to permit
    maintenance of the exterior walls.

18
MPR Variations and Exemptions
  • Variations
  • The VA may agree to modify the MPRs
  • Where justified by certain conditions common to a
    particular geographic area or occurring on the
    site.
  • Where such conditions make compliance impractical
    or impossible.
  • Exemptions
  • An MPR for existing construction can be waived by
    the VA field office if
  • A veteran is under contract to purchase the
    property.
  • The veteran and lender request the exemption in
    writing.
  • The property is habitable from the standpoint of
    safety, structural soundness, and sanitation.
  • The VA is satisfied that the nonconformity has
    been fully taken into account by way of
    depreciation in the VA valuation.

19
Becoming a VA Appraiser
  • Each VA office will appoint and maintain a panel
    of Fee Appraisers and a panel of Fee Compliance
    Inspectors to conduct appraisals and inspections
    for VA Loan Guaranty programs.
  • The same individual may be appointed to both fee
    panels, if qualified.
  • Each fee panel will contain enough members to
    provide for all appraisal and inspection
    requests speedily.
  • A qualified list of appraisers and compliance
    inspectors must be maintained through such
    recruitment sources as state appraisal license
    and/or certification rosters, etc.
  • Qualified VA staff may perform appraisals and
    inspections for VA loan guaranty purposes in the
    absence of qualified fee personnel.

20
Appraiser Pre-requisite Requirements
  • State licensure or certification.
  • Five years experience in appraising residential
    properties.
  • Submit two letters from appraisers attesting to
    the applicants qualifications.
  • There may be no conflict of interest between the
    applicants employment and performance as a Fee
    Appraiser with the VA.
  • Employees of HUD, Fannie Mae, Freddie Mac, or the
    Postal Service are ineligible.
  • Local and state government employees may be
    designated but care must be taken so that there
    will not be a conflict of interest or the
    appearance of a conflict of interest.
  • By completing the application to become a VA fee
    appraiser (VA Form 26-6681) applicants are
    authorizing VA to obtain a credit report. (In
    item 19 of the VA Form 26-6681, preceding the
    list of Geographic Area(s) of Practice), enter
    By signing below I agree that VA may obtain a
    copy of my credit report.

21
Appraiser Pre-requisite Requirements (cont.)
  • Field stations will perform a search through the
    Credit Alert Interactive Voice Response System to
    determine if the applicant has any outstanding
    delinquent debts to the Federal Government.
  • If the applicant owes the Federal Government a
    delinquent debt, there must be evidence of
    payment in full of the debt, or evidence of an
    acceptable repayment plan.
  • Written tests are not required. Field stations
    shall require a demonstration appraisal on a
    Freddie Mac Form 70 or Fannie Mae Form 1004
    (Uniform Residential Appraisal Report). Prior to
    the demonstration appraisal, applicants will be
    furnished instructional or procedural material
    necessary to complete the appraisal.
  • An individual may be designated to more than one
    fee roster geographic area provided he
    demonstrates the required experience or
    qualifications.
  • A fee panel vacancy must exist in the area in
    which the applicant wishes to work.

22
Communication Requirements for the VA Appraiser
  • Fee Appraisers must have Internet/e-mail access.
  • VA Fee Appraisers must have Internet access that
    is compatible with the VAs Portal and
    Internet-based appraisal assignment and central
    data system, called TAS (The Appraisal System).
  • Fee Appraisers must have access to an e-mail
    address.
  • Lenders are using e-mail as the primary means of
    conveying the electronic Request for
    Determination of Reasonable Value form.
    E-Appraisal will notify the appraiser by e-mail
    when the appraisal assignment is made.
  • A fax machine, or access to a fax machine, is
    mandatory. Since e-mailing of the Request for
    Determination of Reasonable Value remains
    optional for lenders, some of them choose to fax
    the signed form to the assigned Fee Appraiser to
    save mailing time. Any Fee Appraiser found to be
    without a functioning fax number will be
    contacted by the VA and asked to remedy the
    problem. If the VA is unable to contact the
    appraiser, no further appraisal assignments will
    be made until fax communication has been
    restored.

23
Communication Requirements for the VA Appraiser
(cont.)
  • A telephone answering machine, voice mail system,
    or someone to answer the telephone during working
    hours (800 a.m.400 p.m.) Monday through
    Friday, is mandatory. If no one is available to
    answer the appraisers telephone or to check
    e-mail during unavailable periods, the appraiser
    is required to have a recorded telephone message
    and an e-mail response to inform callers of the
    date of expected return.
  • Fee Appraisers must respond to inquiries from VA
    staff, lenders, or real estate agents no later
    than the following business day. Failure to
    respond by the end of the next business day will
    result in immediate withholding of new
    assignments until the appraiser has responded.
  • Fee Appraisers must notify their VA Office of
    Jurisdiction at least seven business days in
    advance of being absent for vacation so that
    assignments will be stopped. It is the
    responsibility of the appraiser to e-mail the VA
    Fee-Personnel Vacation Request Form.
  • Immediate notification is required when the Fee
    Appraiser needs assignments to be stopped for
    illness or emergencies.

24
Typical Derogatory Audit Findings of Appraisals
  • Failure to document time delays
  • Access on liquidation reports
  • Access issues caused by seller on new loans
  • Failure to address off-site items with proper
    adjustments or proper narrative discussing the
    impact of value such as
  • Subject backing up to railroad tracks, highways,
    or high-traffic roads
  • Subject adjacent to commercial, industrial, or
    special-purpose properties
  • Comparable properties having a similar issue as
    the subject concerning off-site items
  • Failure to use the approved VA forms
  • Failure to provide narrative defending use of
    less-than-desirable comparable properties, or
    dated sales

25
Typical Derogatory Audit Findings of Appraisals
(cont.)
  • Failure to adjust or adjust by an excessive
    amount with no supporting narrative for items
    such as
  • Brick or partial brick to frame or vinyl-sided
    homes
  • Large square feet
  • Garages
  • Baths
  • Basement areas and basement areas that are
    finished
  • Full or partial porches vs. stoop or covered
    stoop
  • Failure to acknowledge sizable differences in
    site sizes or location
  • Failing to call for MPR repairs because buyers
    want an as is sale or because the sale is a
    refinance
  • Calling for non-MPR repairs that are minor and
    should be looked at as a maintenance, condition
    issue only

26
Typical Derogatory Audit Findings of Appraisals
(cont.)
  • Repairs not specifically listed 1, 2, 3, etc.,
    with cost estimates for each
  • Listing small repairs only because they are on
    the purchase agreement
  • Inadequate or illegible maps of location of
    subject or comparable properties
  • Photos of comparables switched
  • Incorrect photos of the comparable properties
  • Photos are of very poor quality that cannot be
    viewed

27
VA Appraisal RequirementsUSPAP
  • Every VA appraisal must meet the Uniform
    Standards of Professional Appraisal Practice
    (USPAP) reporting options of an Appraisal Report
    or Restricted Appraisal Report. VA approval is
    required prior to performing a restricted
    appraisal.
  • The USPAP Jurisdictional Exception Rule grants
    Federal agencies the ability to follow their own
    requirements when there is a conflict between
    USPAP and Federal agency requirements.
  • In addition, every VA appraisal must be
  • Performed within VA timeliness requirements.
  • Uploaded into E-Appraisal by the appraiser as a
    Portable Document Format (PDF) file.

28
VA Appraisal RequirementsUAD Compliance
  • The VA has adopted and requires UAD reporting
    compliance for all VA appraisals effective
    January 1, 2012. In addition to the URAR and the
    Individual Condominium Unit Appraisal Report
    adopted by FHA and discussed in prior chapters,
    VA has also adopted the Exterior-Only Inspection
    Individual Condominium Appraisal Report (Form
    1075/466) and the Exterior-Only Inspection
    Residential Appraisal Report (Form 2055).
  • Points of Clarification on VA Appraisals and the
    UAD
  • VA Fee Appraisers will continue to complete VA
    appraisal reports in accordance with the
    requirements of the VA Lenders Handbook (VA
    Pamphlet 26-7, Revised). Fee Appraisers are
    reminded that completion of the data fields of
    the appraisal report does not relieve them of the
    duty to provide explanations in the addendum to
    provide clarity and justification.
  • Appraisal reports should be quality-reviewed for
    compliance with VA requirements.
  • While the UAD may allow for the use of unsettled
    sales in the sales comparison grid, VA requires
    that only settled sales be used.

29
VA Appraisal Requirements (cont.)UAD Compliance
  • Points of Clarification on VA Appraisals and the
    UAD
  • UAD requires appraisers to give specific
    information about prior remodeling
  • 15 years the VA expects Fee Appraisers to
    recognize and describe remodeling and to make
    appropriate adjustments. Fee Appraisers should
    report UAD information concerning the remodeling
    if it is available in the normal course of
    business within VA timeliness statutes for
    completion of the appraisal.
  • Changes to VA Policies and Procedures in Relation
    to Adoption of the UAD
  • The requirement that only Department of Veterans
    Affairs be entered in the Lender/Client field of
    the appraisal form is rescinded. The lenders
    name will be entered with Department of Veterans
    Affairs, as the client of the field.
  • The requirement that Intended User Any VA
    Approved Lender be entered in the Address field
    for the lender is rescinded. The address of the
    lender will now be entered in this field.
  • The requirement that Any Qualified Veteran be
    entered in the Borrower field is rescinded. The
    Veteran purchasers name will be the borrower in
    this field.

30
1004MC Market Conditions Addendum
  • Effective March 27, 2009, all VA appraisals must
    include the Fannie Mae Market Conditions
    Addendum, Form 1004MC. For appraisals performed
    on or after August 1, 2009, appraisers may charge
    a fee of 50 for completing the form.

31
Approaches to ValueSales Comparison Approach
  • The VA relies exclusively on the sales comparison
    approach to value, except in circumstances
    involving inadequate comparable sales or
    extremely unique properties. VA value estimates
    should never exceed the indicated value of the
    sales comparison approach.
  • Key points to keep in mind
  • The appraiser must select the three best closed
    comparable sales available and properly adjust
    the sale price of each for market recognized
    differences between it and the subject property.
  • The appraiser must explain reliance on sales that
    are not comparable to the subject.
  • Sales listings, contract offers, and unsettled
    sales must not be used as comparables.
  • Comparable sales should preferably exhibit a
    narrow price range. Appraisers must explain a
    wide range in the sale prices of comparables
    before or after adjustment.

32
Approaches to Value (cont.)Sales Comparison
Approach
  • A single data source is adequate if it provides
    quality sales data verified by closed
    transactions. Sales data provided by a party to
    the financing of the subject property must be
    verified.
  • Comparable sales should be recent, typically
    within six to twelve months. Sales over six
    months old may be considered outdated. The
    appraiser must explain the use of sales over
    twelve months old.
  • Comparable sales should be located as close to
    the subject as practical, with the proximity to
    the subject described. To locate properties in
    cities, blocks should be used in rural areas,
    miles.
  • The appraiser must adequately explain any
    reliance on sales located further from the
    subject than similar comparable sales readily
    available in the subject neighborhood, or outside
    of the subjects market area. In some rural
    areas, comparable sales may be 5, 10, or 20 miles
    away from the subject property and still within
    the subjects immediate market area.

33
Approaches to Value (cont.)Sales Comparison
Approach
  • To be in a condition acceptable to the VA,
    properties must meet the VAs Minimum Property
    Requirements (MPR). Since MPR repairs identified
    in the appraisal report must be completed as a
    report condition, value adjustments to the
    comparables are to be made as if the repairs are
    accomplished.
  • Generally, good comparables require minimal
    adjustment for individual feature differences and
    a minimal total net adjustment. The appraiser
    must explain large adjustments.
  • Adjustments based on some factor other than
    market reaction, such as builder costs for
    materials, etc., are not generally acceptable.

34
Approaches to Value Income Approach
  • Development of an income approach for a single
    family property is not required. If the appraisal
    involves an income-producing property (more than
    one living unit), the appraiser will use the
    Small Residential Income Property Appraisal
    Report, Freddie Mac Form 72 or Fannie Mae Form
    1025, which requires value estimates developed
    through both the income approach and the sales
    comparison approach in the final reconciliation.
  • For VA purposes, a veteran may purchase a
    dwelling of up to four living units, so long as
    he occupies one of the units. In valuing such
    properties, consideration must be given to the
    income-producing potential of the remaining
    unit(s), whether or not the veteran actually
    plans to rent them out.

35
Approaches to ValueCost Approach
  • The appraiser is not required to provide the cost
    approach to value on any VA appraisal (proposed,
    new, or existing construction). Since the
    residential real estate market does not base
    transaction decisions on a propertys
    reproduction or replacement cost, the cost
    approach to value may be used only to support the
    sales comparison approach in the final
    reconciliation.
  • This may be warranted in rare situations where
    the comparable sales alone do not provide an
    adequate indication of value.
  • For Example
  • The cost approach may be useful in supporting the
    sales comparison approach in an appraisal of a
    new manufactured home in a rural area that has
    only recent sales of stick- built homes and much
    older manufactured homes.

36
Use of Assistants
  • VA Fee Appraisers must comply with the VAs
    policy concerning assistants. An appraiser who
    has relied on significant professional assistance
    in the appraisal must name the individual and the
    specific tasks performed in the reconciliation
    section of the report.
  • The Fee Appraiser assigned by the VA must
    personally
  • View the interior and exterior of the subject
    property and the exterior of each comparable.
  • Select and analyze the comparables.
  • Make the final value estimate.
  • Sign the appraisal report as the appraiser.
  • The VA Fee Appraiser may not delegate any of
    these four important functions to an assistant,
    even though that person may be licensed or
    certified. The individual who signs the URAR as
    the appraiser must be the VA fee panel member who
    was assigned on the rotational basis by the VA.

37
VA Appraisal Fees and Payment IssuesFee Schedule
  • Maximum fees for VA appraisals and inspections
    are established by each VA Regional Loan Center
    for its area of jurisdiction. Current VA
    appraisal fees are listed with each VA Regional
    Loan Center. Regional Loan Centers (RCL) include
    VA loan processing and other functions, such as
    adding an appraiser to the VA Fee Panel.

38
Desk and Field Reviews of Appraisal Reports
  • Every appraisal report will be desk reviewed by a
    Lender Appraisal Processing Program (LAPP) Staff
    Appraiser Reviewer (SAR), by a VA Staff
    Appraiser, or both, to verify that the
  • Report was submitted in a timely manner.
  • Fee Appraisers conclusions of value are
    consistent, sound, supportable, and logical.
  • Report was prepared in accordance with acceptable
    appraisal techniques and standards (USPAP), as
    well as specific VA instructions.
  • The Lender Appraisal Processing Program (LAPP) is
    a program that speeds up the time to loan closing
    by allowing VA-authorized lenders to receive
    appraisal reports directly from appraisers and
    process them without VA involvement.

39
Quality Control and Standards
  • All appraisal reports are reviewed for both work
    quality and timeliness. Non-acceptable quality
    or timeliness findings in any appraisal will be
    classified as negative work quality or
    timeliness findings. All negative work quality
    findings are further categorized according to
    their significance into substantive or
    non-substantive findings.
  • A substantive negative work quality finding will
    be assessed where the VA has determined that the
    Fee Appraiser made a serious error of fact or
    methodology that materially impacted the
    appraised value or condition of the property.
    Examples include, but are not limited to
  • Fraudulent reporting (misrepresentation of a
    material fact)
  • Appraising the wrong property
  • Failing to require necessary MPR repairs that may
    result in damage to the veteran
  • Repeating or not correcting non-substantive
    errors after VA notification
  • Continued disregard for VA instructions or
    requirements after they have been called to the
    appraisers attention
  • Serious USPAP violations

40
Quality Control and Standards (cont.)
  • A non-substantive finding is generally one in
    which the VA has determined that the Fee
    Appraiser made a relatively minor error of fact
    or methodology that did not impact the final
    value or the reported condition of the property.
    Examples include, but are not limited to
  • Failing to provide required information on the
    URAR
  • Misreporting of distances between subject and
    comparables
  • Inconsistency within the URAR
  • Failing to adequately describe reasoning in
    support of adjustments
  • Using time adjustments not supported or
    documented by pending sales or listings
  • Making insupportable or wrong-way adjustments
  • Minor USPAP violations
  • Documented negative timeliness or quality
    findings can form the basis for administrative
    action by the VA. An appraiser who exhibits
    chronically deficient customer service will also
    be subject to administrative action.

41
Summary
  • 1. VA loans were first offered in 1944 as a
    provision of the GI Bill of Rights. The purpose
    of the lending program was to provide veterans
    with a mortgage loan guaranteed by the federal
    government with no down payment required.
  • 2. Several property types qualify for VA
    financing however, the veteran must occupy at
    least part of any property that is either mixed
    in use or of more than one unit.
  • 3. To qualify to become a VA Fee Appraiser, the
    appraiser must be licensed or certified by the
    appraisers state and have at least five years of
    residential appraisal experience.
  • 4. No examination is required to become a VA Fee
    Appraiser however, the applicant must have three
    reference letters, two of which must be from
    other appraisers.

42
Summary (cont.)
  • 5. The VA has specific appraisal development and
    reporting requirements that may require invoking
    the Jurisdictional Exception Rule of USPAP.
  • 6. The exclusive method of determining value in
    VA appraisal assignments is the sales comparison
    approach, except in unique circumstances. The
    appraiser is not required to develop or report
    the cost approach to value in any VA appraisal
    unless the method is useful for supporting the
    results of the sales comparison approach.
  • 7. The Fee Appraiser assigned by the VA must
    personally view the interior and exterior of the
    subject property and the exterior of each
    comparable select and analyze the comparables
    make the final value estimate and sign the
    appraisal report as the appraiser. Assistants are
    not permitted to perform these functions.

43
Summary (cont.)
  • 8. All appraisal reports are reviewed for both
    work quality and timeliness. Non-acceptable
    quality or timeliness findings in any appraisal
    will be classified as negative work quality
    findings or negative timeliness findings. All
    negative work quality findings are further
    categorized according to their significance into
    substantive or non-substantive findings.
  • 9. Maximum fees for VA appraisals and inspections
    are established by each VA Regional Loan Center
    for its area of jurisdiction.

44
Chapter 7 Quiz
  • 1. In most cases, a VA loan requires
  • a funding fee this amount may be financed.
  • a funding fee this amount may not be financed.
  • mortgage insurance this amount may be financed.
  • mortgage insurance this amount may not be
    financed.

45
Chapter 7 Quiz
  • 2. Existing construction is eligible for VA
    financing if
  • on-site and off-site improvements are 50
    complete with a projected completion date in the
    next twelve months.
  • on-site and off-site improvements have been fully
    complete for six months.
  • on-site and off-site improvements have been fully
    complete for twelve months.
  • Only new construction is eligible for VA
    financing.

46
Chapter 7 Quiz
  • 3. In selecting comparables for a condominium If
    a property requires improvements located in an
    area subject to regular flooding, but is not in a
    special flood hazard area, it is
  • eligible for appraisal.
  • eligible for appraisal as long as the problem has
    been adequately addressed in the engineering
    design.
  • eligible for appraisal, pending investigation of
    potential flood damage.
  • not eligible for appraisal.

47
Chapter 7 Quiz
  • 4. An MPR for existing construction can be waived
    by the VA field office if
  • the property is approved from the standpoint of
    safety and structural soundness, requiring only
    sanitary improvements for habitability.
  • the veteran and lender request the purchase
    verbally.
  • the veteran is under contract to purchase the
    property.
  • the veteran requests the exemption in writing.

48
Chapter 7 Quiz
  • 5. ________________ employees may be designated
    as VA appraisers.
  • Fannie Mae/Freddie Mac
  • HUD
  • Postal Service
  • State
  •  

49
Chapter 7 Quiz
  • 6. To become a licensed VA appraiser,
    pre-requisite requirements for applicants include
  • the applicants written acknowledgement of
    assistance received while completing the
    demonstration report.
  • a demonstration appraisal that has not been
    appraised by members of the current panel.
  • evidence of a repayment plan and a promissory
    note for Federal delinquent debt balances.
  • a written exam.

50
Chapter 7 Quiz
  • 7. Communication requirements for the VA
    appraiser include
  • immediate notification for illness or emergencies
    when assignments must be postponed.
  • immediate (same day) response to all inquiries
    (phone/fax/e-mail) from VA staff, lenders, or
    real estate agents, and all program participants.
  • a months advance notice in advance of being
    absent for vacations so that assignments can be
    rescheduled or moved to another appraiser.
  • someone available to answer the phone or an
    answering machine to record messages seven days a
    week.

51
Chapter 7 Quiz
  • 8. The purpose of a VA loan is to offer mortgage
    loans guaranteed by the federal government with
  • no down payment to all veterans, regardless of
    circumstance.
  • no down payment to eligible veterans.
  • a small down payment to current U.S. military and
    their families.
  • a small down payment to eligible veterans.

52
Chapter 7 Quiz
  • 9. When using the Sales Comparison Approach for a
    VA appraisal,
  • multiple data sources are required.
  • multiple data sources are required with
    verification.
  • a single data source is sufficient with
    verification from closed transactions.
  • a single data source is sufficient without
    verification from closed transactions.

53
Chapter 7 Quiz
  • 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
  • appraiser must attempt to find comparable
    property sales in other areas.
  • appraiser must submit an extended comparison
    approval form.
  • appraiser will be unable to complete and must
    omit the property sales comparison section.
  • property is still applicable to be used for
    comparable sales.

54
Chapter 7 Quiz
  • 11. A VA Fee Appraiser assistant may
  • assist in drafting the appraisal report.
  • make the final value estimate.
  • select and analyze the comparables.
  • view the exterior of each comparable.

55
Chapter 7 Quiz
  • 12. An example of a substantive negative work
    quality finding includes
  • failing to provide required information on the
    URAR.
  • failing to require necessary MPR repairs.
  • minor USPAP violations.
  • misreporting of distances between subject and
    comparables.
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