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.