The Federal Housing Administration announced it will no longer allow lenders to use appraisals of model homes in a subdivision or condominium project to value units under construction.
“As economic instability continues to impact many segments of the economy and the housing market in particular,” FHA Commissioner David H. Stevens wrote in a letter to lenders last week, “it is in the best interest of the [FHA] Insurance Fund … to require an appraisal be performed on each individual unit within a larger housing project to determine the maximum mortgage amount” for that unit.
According to the Mortgagee Letter, lenders historically used master appraisal reports to cut costs and loan processing times and to make sure similar units were being consistently valued. Master appraisal reports used to be good for a year, and in some cases two years. But in 2009 the FHA cut the validity period to four months. That “largely removed the advantages of using MARs,” Stevens wrote in the Mortgagee Letter.
The are effective as of January 12, 2011.
To view a copy of the Mortgagee Letter, see here.