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Prefab Systems Can Help Solve Freddie Mac Appraisal Issue
Building systems that expedite the construction process can help home builders deal with a new appraisal policy from Freddie Mac on one-time close loans that combine construction financing and a permanent mortgage, housing industry experts said at a press conference at last month’s International Builders’ Show in Las Vegas.
In a Nov. 24, 2008 bulletin, Freddie Mac reminded lenders that an appraisal must be completed within 120 days of the permanent financing of the home for mortgages with settlement dates on or after Jan. 2, 2009. If the effective date of the appraisal is more than 120 days before the effective date of the permanent financing, then the seller must provide an appraisal update.
Building systems can help builders complete their homes within the 120-day period and avoid the need for a new appraisal, participants at the press conference said, and modular homes are a prime example.
“While the builder is working on site to complete the foundation, the various modules are being framed and finished,” said Charles Bevier, editor of Building Systems Magazine. “Sometimes manufacturers will even install cabinets and floor coverings in the factory. This leaves minimal work for a set crew to finish on site.”
Even large, custom modular homes can be completed in less than 120 days from the start of construction, Bevier said.
Panelized homes, concrete homes and log homes include some amount of prefabrication, according to participants at the press conference. These building system techniques save builders time and money, and in the case of the new Freddie Mac lending requirement, the time saved can make an important difference.
However, there will be occasions in which not even the speediest of systems can produce a house in such a short time frame.
“That does not mean that the builder is out of luck,” said Tracy Keyser, a vice president of M&T Bank. “A re-appraisal or official confirmation of the original appraisal will keep the loan intact and the project moving forward.”
For more information on building systems resources available from NAHB, e-mail Tony Gacek at NAHB, or call him at 800-368-5242 x8357.
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