Under Fannie Mae's Selling Guide, DU issues a value acceptance offer on an eligible loan casefile. Which circumstance requires the lender to order an appraisal instead of exercising the offer?
Correct Answer
A) The lender is using rental income from the subject property to qualify the borrower
Fannie Mae lists circumstances in which the lender may not exercise a value acceptance offer and must order an appraisal, including when the lender uses rental income from the subject property to qualify the borrower. Second homes, limited cash-out refinances and one-unit condos are all within the eligible transactions for value acceptance.
Why This Is the Correct Answer
Option A is correct because the Selling Guide states that the lender may not exercise a value acceptance offer and must order an appraisal when it uses rental income from the subject property to qualify the borrower. Qualifying income tied to the property's rents is a case where Fannie Mae wants an appraisal.
Why the Other Options Are Wrong
Option B: The subject is a one-unit second home being purchased with an Approve/Eligible finding
Option B is wrong because second home transactions are listed among those eligible for a value acceptance offer. A second-home purchase with an Approve/Eligible finding does not by itself require an appraisal.
Option C: The loan is a limited cash-out refinance of a one-unit principal residence
Option C is wrong because limited cash-out refinances are among the eligible transaction types for value acceptance. A one-unit principal residence refinance does not trigger a required appraisal.
Option D: The subject is a condominium unit used as the borrower's principal residence
Option D is wrong because eligible one-unit properties include condos. A condo used as a principal residence can be considered for value acceptance.
Rent income? Order an appraisal
If the borrower qualifies using rent from the subject, the property's value matters to the income, so the lender orders an appraisal.
How to use: Use this to spot which lender-side facts block exercising a value acceptance offer.
Exam Tip
Know both lists: what makes a casefile eligible for an offer, and what stops a lender from exercising an offer it received.
Common Mistakes to Avoid
- -Assuming a DU value acceptance offer can be exercised in every case
- -Believing second homes or condos are excluded from value acceptance
- -Overlooking subject rental income as a trigger for a required appraisal
Concept Deep Dive
Analysis
This question tests the circumstances that override a value acceptance offer even after DU issues one. The candidate must separate those lender-side triggers from features that are simply part of the eligible transaction list.
Background Knowledge
Even when DU offers value acceptance, the lender still has to check conditions DU may not see, such as a legal requirement for an appraisal, the use of subject rental income, or information suggesting an appraisal is warranted. In those cases the lender orders an appraisal instead.
Real-World Application
A borrower buying a home plans to rent out the property and the lender uses the projected rental income to qualify the loan. Although DU returned a value acceptance offer, the lender orders an appraisal.
More Emerging Methods Questions
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