Under Fannie Mae's Selling Guide, each of the following DU loan casefiles received an Approve/Eligible recommendation. Which one is eligible for a hybrid appraisal?
Correct Answer
B) A cash-out refinance of an existing one-unit investment property
Fannie Mae's hybrid option covers existing one-unit properties used as a principal residence, second home or investment property, in a purchase, limited cash-out refinance or cash-out refinance. A cash-out refinance of an existing one-unit investment property fits. Two- to four-unit properties, manufactured homes and proposed construction are each on the hybrid ineligible list.
Why This Is the Correct Answer
Option B is correct because an existing one-unit investment property is an eligible property and occupancy type for a hybrid appraisal, and a cash-out refinance is one of the three permitted transaction types. With an Approve/Eligible recommendation, the casefile meets the hybrid criteria.
Why the Other Options Are Wrong
Option A: A purchase of a two-unit property to be used as a principal residence
Option A fails because it is a two-unit property, and two- to four-unit properties are ineligible for a hybrid appraisal. A principal residence purchase does not cure the property-type exclusion.
Option C: A purchase of a manufactured home to be used as a principal residence
Option C fails because manufactured homes are on the hybrid ineligible list. Being a purchase of a principal residence does not make the manufactured home eligible.
Option D: A purchase of a proposed-construction one-unit principal residence
Option D fails because proposed construction is ineligible for a hybrid appraisal. Fannie Mae allows under-construction properties and existing properties with incomplete work, but not proposed construction.
Hybrid: one unit, any occupancy
For a hybrid, think existing one-unit (including condo or PUD unit), any of the three occupancies, and purchase or either kind of refinance; multi-unit, manufactured and proposed construction are out.
How to use: Use this to separate hybrid eligibility from desktop eligibility, which is limited to principal residence purchases.
Exam Tip
Do not carry the desktop restrictions over to hybrids; investment properties and refinances can qualify for a hybrid appraisal.
Common Mistakes to Avoid
- -Assuming investment properties are excluded from hybrid appraisals as they are from desktop appraisals
- -Treating refinances as ineligible for a hybrid appraisal
- -Confusing under-construction properties, which are eligible, with proposed construction, which is not
Concept Deep Dive
Analysis
This question tests the hybrid appraisal eligibility rules, which are broader than the desktop rules on occupancy and transaction type but still exclude certain property types. The reasoning is to check property type first, since every wrong choice fails on property type, and then confirm occupancy and transaction type.
Background Knowledge
Hybrid appraisals combine a property data collection by a trained and vetted third party with an appraisal completed by an appraiser. Fannie Mae permits them on a wider range of occupancy and transaction types than desktop appraisals, including second homes, investment properties and refinances.
Real-World Application
An investor is taking cash out of an existing single-family rental. DU returns Approve/Eligible and presents a hybrid appraisal option, so the lender orders a property data collection from a trained third party and then engages an appraiser.
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