FHA Documentation & Legal Requirements 3 — Questions and Answers
Question 1: Which HUD handbook currently serves as the primary policy reference governing FHA Single Family appraisal requirements?
- HUD Handbook 4150.2
- HUD Handbook 4000.1 (Single Family Housing Policy Handbook) (Correct answer)
- HUD Handbook 4905.1
- HUD Circular 2013-01
Correct answer: HUD Handbook 4000.1 (Single Family Housing Policy Handbook)
HUD Handbook 4000.1, the Single Family Housing Policy Handbook, is the consolidated primary reference for all FHA Single Family appraisal requirements.
Question 2: Under FHA guidelines, what is the appraiser's documentation obligation when a property is located in a FEMA-designated Special Flood Hazard Area (SFHA)?
- Note the flood zone designation and confirm flood insurance is available or required (Correct answer)
- Decline the assignment and notify the lender
- Provide a cost estimate for flood mitigation measures
- Require the borrower to obtain an elevation certificate before the appraisal is completed
Correct answer: Note the flood zone designation and confirm flood insurance is available or required
The appraiser must note the SFHA designation in the report and confirm that flood insurance is available or required, though obtaining the certificate is the lender's responsibility.
Question 3: What is the FHA definition of 'as-is' value versus 'subject to' value, and when must each be used?
- 'As-is' is used for new construction; 'subject to' is used for existing homes
- 'As-is' reflects current condition; 'subject to' reflects value after required repairs or completion of construction (Correct answer)
- 'As-is' applies to properties without deficiencies; 'subject to' applies only to REO properties
- 'As-is' is used when no repairs are needed; 'subject to' is not recognized by FHA
Correct answer: 'As-is' reflects current condition; 'subject to' reflects value after required repairs or completion of construction
'As-is' value reflects the property in its current condition, while 'subject to' value reflects the property after required repairs or construction completion.
Question 4: When must an FHA appraiser prepare a Field Review (Form HUD-92564-HS) addendum?
- For every FHA appraisal exceeding $500,000
- When the lender or HUD requests a review of a previously completed FHA appraisal (Correct answer)
- When the appraiser finds deficiencies in the original appraisal performed by another appraiser
- Whenever comparable sales are more than six months old
Correct answer: When the lender or HUD requests a review of a previously completed FHA appraisal
A Field Review is prepared when the lender or HUD specifically requests a review of a previously completed FHA appraisal to assess its accuracy and compliance.
Question 5: For FHA purposes, how must the appraiser document access to a property that relies on a private road or easement?
- Simply note 'private road access' in the site section without further documentation
- Confirm and document that a legally enforceable easement or road maintenance agreement exists (Correct answer)
- Require the borrower to pave the road before completing the appraisal
- Treat private road access as an automatic MPR deficiency requiring repair
Correct answer: Confirm and document that a legally enforceable easement or road maintenance agreement exists
FHA requires the appraiser to confirm and document that a legally enforceable easement or road maintenance agreement exists to ensure adequate access.
Question 6: An FHA appraisal is completed, and the borrower subsequently makes renovations to the property. Who is responsible for ordering a new or updated appraisal if the improvements need to be considered?
- The original appraiser, who must provide a free update
- The borrower, who can self-report improvements to HUD
- The lender, who must order an updated appraisal or recertification through FHA Connection (Correct answer)
- The Mortgagee Review Board
Correct answer: The lender, who must order an updated appraisal or recertification through FHA Connection
The lender is responsible for ordering an updated appraisal or recertification of value through FHA Connection when post-appraisal improvements need to be considered.
Question 7: Which statement best describes the FHA requirement for reporting gross living area (GLA) in an appraisal?
- GLA must include all finished areas including the basement regardless of grade level
- GLA includes only above-grade finished areas measured using ANSI Z765 standards or equivalent methodology (Correct answer)
- GLA is calculated differently for each property type and has no standard measurement method
- GLA must match the tax assessor's records exactly or the report is non-compliant
Correct answer: GLA includes only above-grade finished areas measured using ANSI Z765 standards or equivalent methodology
FHA requires GLA to include only above-grade finished areas, measured consistently using ANSI Z765 or an equivalent methodology disclosed in the report.
FHA Documentation & Legal Requirements 3
Which HUD handbook currently serves as the primary policy reference governing FHA Single Family appraisal requirements?