DEPARTMENT OF VETERANS AFFAIRS REGIONAL OFFICE NORRIS COTTON FEDERAL BUILDING 275 CHESTNUT STREET MANCHESTER, NH 03101

					           In Reply Refer to:373/26
                						         LOCAL RELEASE 26-00-22






TO:	LENDERS


SUBJ:	REVISED VA LENDER'S HANDBOOK






The Department of Veterans Affairs introduced a revised VA Lender's Handbook on August 2, 2000.  The most
significant changes affect appraisals processing and are included in Chapters 10 through 16 of the new Handbook.  A
Summary of these changes is included below.  Please note that our office has jurisdiction over VA Construction &
Valuation (appraisal) processing in the six New England states (CT, ME, MA, NH, RI, VT).  Our Loan Processing
Department has jurisdiction over the state of New York in addition to the New England states.  The Buffalo, NY and
New York City VA offices still handle all appraisal issues for their appropriate areas.  A list of VA offices, with their
areas of jurisdiction, is contained in Appendix A of the new Handbook.


How can you get a copy of the revised VA Lender's Handbook?


The document my be viewed and downloaded at the VA Internet site http://homeloans.va.gov/handbook.htm.
Lenders should periodiclly monitor the VA Loan Guaranty homepage at http://homeloans.va.gov to view changes
to our program.


When are the procedures in the new Handbook effective?


To the extent the VA Lenders Handbook encompasses changes to VA procedures, program participants may 
choose to process any case closed on or before December 31, 2000, under the policies and procedures stated in the
VA Lenders Handbook dated March 1991, or under the July 2000 revision.


What are the major changes which affect VA appraisal processing?



Lenders with approved Lender Appraisal Processing Program (LAPP) staff appraisal reviewers may now
process appraisals involving multi-family dwellings, proposed/new construction, and manufactured (mobile)
homes categorized as real estate and affixed to permanent foundations on their own lot.


Appraisals of multi-family dwellings must be on the Small Residential Income Property Appraisal Report,
Fannie Mae Form 1025 and appraisals of condominium units must be on Appraisal Report-Individual 
Condominium or PUD Unit, Freddie Mac Form 465/Fannie Mae Form 1073.  Although appraisers may
voluntarily use these forms immediately, our office will not require mandatory use until January 1, 2001.


Appraisers may transmit VA appraisal reports electronically, with an electronically affixed signature, in
accordance with USPAP Statement #8.


The requirement for VA approval of Planned Unit Developments (PUDs) has been elimiated.  The lender must
ensure that title and lien requirements conform to applicable VA regulations.  PUD unit appraisal will continue to 
be submitted on FNMA Form 1004.


Revised instructions for VA condominium approval procedures are contained in Chapter 16 of the new Handbook.


Our office previously required the lender to send appraisal requests involving proposed construction or new
construction, not coverd by an approved 10 year insurance backed protection plan, directly to our office for
appraisal assignment.  Lenders may now send requests for appraisals involving new construction or proposed
construction directly to the appraiser assigned through the VA Appraisal Assignment System (VAAS).



What is the distinction between proposed/under construction and new construction?



Proposed or under construction is when construction has either not started (proposed) or is at a stage between
construction of the foundation and completion except for customer preference items.


To be eligible for appraisal as "new construction", the property must be fully completed or completed except for
customer preference items (such as interior wall finishes, floor coverings, appliances, fixtures and equipment, etc.)
and those improvements for which escrows are permitted.  This eliminates the need for construction exhibits.



Note: Properties which has been previously owner-occupied, regardless of date of completion, or fully completed
for at least one year considered to be "existing construction" for VA appraisal purposes.


What should the lender send the appraiser in cases involving proposed/under construction?


The lender should provide VA Form 26-1805, Request for Determination of Reasonable Value, a copy of the 
purchase/construction contract and the required construction exhibits listed in Section 10.10 of the revised
Lender's Handbook.


What about the stamp VA puts on the exhibits for proposed construction the appraiser must sign and date?


Appraisers will be responsible for including the following certification on an addendum to their report in all cases
involving proposed/under construction:


"I hereby certify that the information contained in      [specific identification of all construction exhibits (e.g.,
Smith Construction Plan Type A, 9 sheets, VA Form 26-1852, plot plan by Jones, Inc.)]       was used to arrive at
the estimate of reasonable value noted in this report.       [appraiser's signature]      


Any other changes that affect VA loans processed through the Mancester Regional Loan Center?



Our office will increase the fee for compliance inspections from $50.00 to $65.00 effective with assignments
made on or after November 1, 2000.


Section 9.09 of the new Handbook contains instructions relative to processing escrows for postponed completion
of improvements.  It is noted that it is no longer necessary for lenders to submit VA Form 26-1847 to VA for
approval of the escrow before loan closing.



What about local requirements that Lender Appraisal Processing Program (LAPP) staff appraisal reviewers
(SARs) must adhere to for properties in New England?



Our office requires a wood destroying inspect (existing construction) or soil treatment guarantee
(proposed construction) in all of MA, RI, and CT, and parts of southern VT (Bennington and Windham counties)
and southern NH (Cheshire, Sullivan, Merrimack, Rockingham, Belknap, Hillsborough, and Strafford counties).


If the property is located in Massachusetts and has an individual sewage disposal system, VA requires evidence
the system meets Massachusetts Department of Environmental Protection Title 5 requirements. This requirement
only pertains to properties that require a VA appraisal and is not applicable in Interest Rate Reduction 
Refinancing loans.



Will the Manchester RLC offer any training to LAPP SARs relative to the revised procedures which allow the
SAR to review appraisals involving proposed or new construction, multi-family dwellings, or manufactured
homes affixed to permanent foundations on their own lot?


LAPP SARs located in New England may contact our LAPP liason, Jim Hanley at (800) 827-6311, extension
3071 to schedule training.


How does a lender apply for LAPP authority?


Any lender with VA "automatic" authority may apply.  The application procedures are fully explained in Chapter
15 of the new Lender's Handbook and questions may be referred to Mr. Hanley at the telephone number.
referenced above.


Please contact our appraisal section at (800) 827-6311, extension 6, or our loan processing section at extension 7, if
there are any questions concerning loan origination issues.








A. A. Snyder
Loan Guaranty Officer