Under Fannie Mae's Selling Guide, each DU loan casefile below received an Approve/Eligible recommendation. Which could be considered for a value acceptance offer?
Correct Answer
A) A limited cash-out refinance of a one-unit investment property valued at $650,000
Fannie Mae will consider value acceptance for one-unit properties in principal residence and second home transactions and in investment property refinance transactions, so a limited cash-out refinance of a $650,000 investment property can be considered. An investment property purchase is not on the eligible list, a purchase price of $1,000,000 or more is ineligible, and transactions using gifts of equity are ineligible.
Why This Is the Correct Answer
Option A is correct because investment property refinance transactions, including limited cash-out refinances, are on the value acceptance eligible list. The one-unit property and the $650,000 estimated value are below the $1,000,000 threshold, so the casefile can be considered for an offer.
Why the Other Options Are Wrong
Option B: A purchase of a one-unit investment property with a purchase price of $400,000
Option B is wrong because, for investment properties, the eligible list covers refinance transactions; an investment property purchase is not among the listed eligible transactions.
Option C: A purchase of a one-unit principal residence with a purchase price of $1,000,000
Option C is wrong because transactions with a purchase price or estimated value of $1,000,000 or more are ineligible for value acceptance. A purchase price of exactly $1,000,000 meets that exclusion.
Option D: A purchase of a one-unit principal residence at $500,000 that uses a gift of equity
Option D is wrong because transactions using gifts of equity are ineligible for value acceptance. The $500,000 price and principal residence occupancy do not overcome that exclusion.
Investors refinance; under a million
Investment properties qualify only through refinances, the price or estimate must stay under $1,000,000, and gifts of equity are out.
How to use: Use this to work through a value acceptance eligibility question one screen at a time.
Exam Tip
Read the dollar figure closely: the exclusion applies at $1,000,000 or more, so a figure of exactly $1,000,000 is excluded.
Common Mistakes to Avoid
- -Treating investment property purchases as eligible for value acceptance
- -Reading the $1,000,000 exclusion as applying only above $1,000,000
- -Overlooking the gift-of-equity exclusion
Concept Deep Dive
Analysis
This question tests several value acceptance screens at once: occupancy combined with transaction type, a value ceiling, and the gift-of-equity exclusion. Each wrong choice fails one screen, so the candidate has to check every choice against each rule.
Background Knowledge
Value acceptance lets DU accept the lender's value estimate without an appraisal for certain loan casefiles. Fannie Mae limits it by occupancy and transaction type, by value, and by transaction features such as gifts of equity that may make the price less reliable as market evidence.
Real-World Application
A landlord does a limited cash-out refinance of a single-family rental valued at about $650,000. DU returns Approve/Eligible and may offer value acceptance, so the lender may not need an appraisal if all other conditions are met.
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