Hello,

Need some help from any of you FHA/HUD compliance experts out there.  I just had a deal die that I think should be an easy fix, but the lender is telling me I am out of compliance and they have to kill it.  Here is the situation:  I submitted a purchase deal where the ratified contract was within 90 days of the seller buying the property.  I know there are lenders out there that do not have a flip rule now, but I am not yet approved with them.  So the UW tells me to quickly cancel escrow and reopen based on today's date and we will be outside the 90 day flip.  In the mean time the Appraisal was already ordered since I paid for it and was received the same day my first submission was declined.  The appraiser said not to worry because the appraisal stays with the property for 6months.  So I get the approval and all my PTD conditions in and I get phone call stating my deal is dead because my appraisal effective date is one day prior to the date of my new purchase contract.  I am out of compliance because there is no way the appraiser could have completed the appraisal without fully reviewing the ratified contract.  So they turn it down because they cannot order a new appraisal.  I have my processor check FHA connection and no appraisal has been logged in yet.  Can someone explain to me why my lender cannot move forward with using the current appraisal when I can get a cancellation letter explaining why they cancelled the first escrow and decided to reaccept a new offer?  Also if it is not yet logged in to FHA connection, can't we theoretically order a new one?  I am shaking my head on this one. 

Thanks,

Chris

Chris, you submitted a purchase deal where the ratified contract was within 90 days of the seller buying the property, which is eligible for FHA financing as long as certain criteria is met. Based on your post, i'm gathering that the transaction does not meet FHA temporary property flipping exemption criteria or the lender has overlays don't allow it.  So the reason that the lender cannot move forward with the current appraisal is because the appaiser reviewed the original contract, and the date of the contract is shown at the top of page 1 on the appraisal. Logging the appraisal only verifies the information contained in the appraisal report, Asking the lender to order a new appraisal because you want to circumvent FHA or lender guidelines is called mortgage fraud. The case number has been issued and is associated with this property and will be valid for 120 day (if memory serves me correctly).

If the transaction meets the property flipping waiver requirements outlined in 24 CFR 203.37a(b)(2), find a lender that follows those guidelines and have the appraisal transferred.

Lea,

This is the explanation I am looking for.  Thank you.  The UW and my Sales Rep did not explain clearly enough for me to undestand why the the effective date of the appraisal was such a big issue.  Now I understand that it's not that the appraiser can't update the appraisal with current contract information and date, he can't remove what was already reviewed from the original contract.  Wow, what a way to kill a deal at a lender.  Here I was thinking paying for the appraisal and getting it done faster would save me time, but if I waited a few more days I wouldn't have had a problem.  You are correct that this particular lender has some strict overlays with property flips within 90 days.  Again, thank you.