OK- The guy did his perm-financing in October last year (2011) and the bank he used directed him into an ARM. He now wants out of that ARM and into a fixed rate... Isn't there a Fannie Mae rule that would prohibit him from using a new appraisal inside a certain time frame? Can he use the time he was on title at the start of the construction loan for seasoning purposes for Fannie?
Fannie Mae guidelines allow a borrower to use a limited cash-out (rate/term) refinance to pay off a loan used to purchase or aquire a property. The LTV is determined by the current appraised value.
When refinancing a construction loan that is in the borrower's name, the LTV is determined by the appraised value if the borrower has been on title to the lot for more than 12 months. If the borrower has been on title for less than 12 months the LTV is determined using the lesser of the appraised value or the aquisition cost (construction cost + cost of lot.)
In this case, since the refinance is to payoff a loan used to aquire the property, it appears that the transaction is a limited cash-out refinance and the LTV will be based on the current appraised value.
Of course be aware that each lender or investor may have overlays to the Fannie Mae guidelines.