Appraising Refinances

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Chapter 1
Appraisal & Property Requirements
Page 1-04

Appraising Refinances - Definitions of both Refinances and Streamline Refinances can be found in HUD Handbook 4155.1 REV-4 CHG 1, Chapter 1, Section 4.

Refinance - A standard requires a complete appraisal with repair conditions, while a streamline refinance may be insured with or without an appraisal. The Valuation Condition (VC) form and the Homebuyer Summary apply to refinances from conventional financing and on cash-out FHA to FHA refinances. Lenders must ensure that the appraiser is fully informed on the type of appraisal that is being ordered. Appraisers may routinely wish to complete both the VC form and the Homebuyer Summary.

Streamline Refinance - Streamline refinances are designed to lower the monthly principal and interest payments on a CURRENT FHA-insured mortgage and must involve no cash back to the borrower except for minor adjustments at closing not to exceed $250. Streamline refinances can be insured with or without an appraisal. Streamline refinances with an appraisal, the (VC) form is required, the Homebuyer Summary is not required. FHA does not require repairs (except for lead based paint repairs) on streamline refinances with appraisals, however the lender may require completion of repairs as a condition of the appraisal.

Additionally, FHA does not require an appraisal on streamline refinances, however, if the lender is required by law or banking regulations (e.g., FIRREA) or its investors to obtain an appraisal on a mortgage that will be processed as if no appraisal was made, the appraisal fee may be paid by the borrower out-of-pocket (i.e., not financed).

Ref. Handbook 4155.1, Rev. 4 Chapter 1, and Mortgagee Letter 96-10.