Under Fannie Mae's Selling Guide, DU finds a prior appraisal of the subject property in Collateral Underwriter data, but CU issued an Overvaluation Flag on it. What is the effect on value acceptance for the new loan casefile?
Correct Answer
D) That prior appraisal will not be used, and value acceptance will not be offered
Fannie Mae generally needs a prior appraisal in CU data for value acceptance, but a prior appraisal that drew a CU Overvaluation Flag, or could not be scored, will not be used, and value acceptance will not be offered on the new casefile. A lower new estimate does not rescue it, SFC 801 is the delivery code for exercising value acceptance, and obtaining an appraisal is inconsistent with exercising value acceptance.
Why This Is the Correct Answer
Option D is correct because the Selling Guide states that when a CU Overvaluation Flag was issued on the prior appraisal, that prior appraisal will not be used and value acceptance will not be offered on the new loan casefile. The flag signals that the prior value may be too high to support accepting the lender's estimate.
Why the Other Options Are Wrong
Option A: DU uses the prior appraisal, and the lender may exercise value acceptance if the new estimate is lower
Option A is wrong because a flagged prior appraisal is not used at all. A lower new estimate does not restore the value acceptance offer.
Option B: DU uses the prior appraisal, but the lender must add SFC 801 to show the flag was reviewed
Option B is wrong because SFC 801 is the code a lender includes at delivery when it exercises value acceptance; it is not a way to clear an Overvaluation Flag. The flagged prior appraisal is not used and no offer is made.
Option C: DU offers value acceptance once a desktop appraisal confirms the prior appraised value
Option C is wrong because the Selling Guide provides no path from a desktop appraisal to a value acceptance offer, and a lender may not exercise value acceptance when an appraisal is obtained for the transaction.
Flagged prior, no offer
If CU flagged the earlier appraisal for overvaluation, DU sets it aside, and without a usable prior appraisal there is no value acceptance offer.
How to use: Use this when a question describes a problem with the prior appraisal DU found in CU data.
Exam Tip
Remember the two named problems with a prior appraisal: an Overvaluation Flag and an appraisal that could not be scored both stop the offer.
Common Mistakes to Avoid
- -Assuming any prior appraisal in CU data supports a value acceptance offer
- -Believing a lower new value estimate overcomes a CU Overvaluation Flag
- -Confusing the SFC 801 delivery code with an eligibility remedy
Concept Deep Dive
Analysis
This question tests the prior-appraisal gateway for value acceptance. DU relies on a usable prior appraisal in CU data, so a prior appraisal that CU flagged for overvaluation removes the basis for the offer.
Background Knowledge
Value acceptance is a DU offer under which an appraisal is not required and Fannie Mae accepts the lender's value estimate. DU generally decides eligibility using a prior appraisal of the subject found in Collateral Underwriter data, and some prior appraisals are not acceptable for that purpose.
Real-World Application
A homeowner applies to refinance a home that was appraised two years earlier. CU had flagged that earlier appraisal for overvaluation, so DU does not issue a value acceptance offer and requires an appraisal on the appropriate form.
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