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• The loan amount exceeds $417,000, and
• the LTV, excluding up-front MIP, equals or exceeds 95%, and
• the property is determined as being in a declining market.

2. A declining market is defined by the appraiser and the lender:

• The appraiser is required 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 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.

3. The second appraisal guidelines are:

• An FHA appraiser selected by the lender underwriting the loan must complete the second appraisal.
• A second case number is not ordered.
• The fee for the appraisal may be passed onto the borrower as any other closing cost.
• Reminder a second appraisal is only for loan amounts that exceed $417,000

4. If the second appraisal is 5% lower than the original appraisal, the maximum loan amount is based upon the lower of the two appraised values.

5. Lenders must include the second appraisal in the insurance binder when sent to FHA.

6. In line with the other agency moves to tighten appraisals up across the country FHA states:

• A lender may not choose an appraiser that has any interest, direct or indirect, in the property being appraised.
• A lender may not choose an appraiser that is employed by an appraisal company that owns, is owned by, is affiliated with or has any financial interest in the builder or seller of the property.
• Instances of undue pressure or influence on an appraiser reported to FHA will result in appropriate disciplinary actions against the lender involved.

7. If the loan amount (without UFMIP) will exceed $417,000, a cash-out refinance is limited to an 85% LTV.

Please let me know if you have any questions. Thanks everyone.

Scott Batt, VA Loan Specialist