The National Association of Realtors continues a lobbying push for the an 18 month moratorium on the Home Valuation Code of Conduct , arguing that they produce deal-killing appraisals and  encourge the use of appraisers unfamiliar with local conditions. Adopted to curtail corrupt appraisal practices,  it has caused quite a bit of problems as well.

Under the HVCC, neither a mortgage broker nor a real estate agent may selects an appraiser,  A lender may select the appraiser, but the person who does the selecting can have nothing to do with the loan production staff.  Many have opted to enlist a third party Appraisal Management Company (AMC).  An AMC  receives a request from a lender and then assigns an appraiser from its  approved list of appraisers. Too often the appraiser does not live in the area of the subject property; he or she may not  be a member of the local MLS and does not have access to relevant comparable information.  If all real estate is local, how does it make sense to use an appraiser who does not have specific local-market knowledge?

The Federal Housing Administration (FHA) announced it  will not implement the HVCC for its mortgage insurance programs.  Although they are currently reviewing its appraisal policies and may adopt changes that take HVCC into account.

The US Department of Housing and Urban Development (HUD) released a new Mortgagee Letter 2009-19 last week, detailing new changes in the condominium approval process.  While the new guidelines abandon the one-year waiting period before considering loan applications on condo units, they have added new restrictions. The big thing to remember when looking at condos is that either the unit itself or the entire building has to be FHA approved

• Units in condo hotels, time shares, houseboat developments, and projects where there are multiple dwellings inside single condominium units are all prohibited
• FHA won’t insure units in condominiums where more than 25% of the total space is allotted to commercial uses, it will reject applications from any property that it deems not “to be primarily residential” in character.
• No loans if more than 10% of the units are owned by investors.
• FHA won’t approve loans where less than 50 % of the total units already have been sold, or where less than 50 % of the units are owner-occupied
• If more than 30% of the unit owners in a project took out FHA-backed loans, the agency doesn’t want to do any more business in that condominium.
• FHA won’t insure units in buildings located within a thousand feet of a major highway, three thousand feet of a dump, landfill or EPA Superfund site.

This Week’s Real Estate Insight

Buyers looking at Condos might not be aware that the unit they are looking at is not available  for FHA financing,  if you are considering FHA financing on a Condominium, check  out https://entp.hud.gov/idapp/html/condlook.cfm to see if the unit is even eligible before  you get your hopes up on a particular unit.