7.11.1 Lender’s Responsibilities

A. Contract for an appraisal establishing the replacement cost for the project utilizing the cost approaches in accordance with requirements found in Section 7.6. The appraiser will update the rental and expense analyses provided in the Pre-Application.

B. The appraiser is also required to determine the “warranted price of the land” for new construction projects and the "as is" value of the project for substantial rehabilitation projects. In addition, for Section 231 substantial rehabilitation projects, the appraiser must also determine the “value fully improved” of the project site.

C. The Lender must forward or otherwise coordinate sharing information prepared by its cost analyst, and any soft cost and land cost information provided by the Sponsor, with the appraiser for assistance in the calculation of the total replacement cost.

D. In accordance with USPAP Standard 2-3, “When a signing appraiser(s) has relied on work done by appraisers and others who do not sign the certification, the signing appraiser is responsible for the decision to rely on their work. The signing appraiser(s) is required to have a reasonable basis for believing that those individuals performing the work are competent. The signing appraiser(s) also must have no reason to doubt that the work of those individuals is credible.”

E. The Lender must assure that all applicable sections of the Rental Housing Project Income Analysis and Appraisal, form HUD-92264, are completed in accordance with current policy, for the type of project proposed.

• F. Form HUD-92664 items to be calculated by the appraiser include:

1. Market rents and estimated income,

2. Estimated total operating expenses,

3. Total estimated replacement cost of the project,

4. “Warranted Price of the Land” for new construction projects and the "As Is" value of the land and building for substantial rehabilitation projects,

5. Estimate of operating deficit and replacement reserve,

6. Estimate of REL, and

7. Estimate of Interest during Construction (line 53 in section G of form HUD-92264), to be calculated as the greater of a or b below:

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• By formula. The amount of the mortgage multiplied by 0.5, multiplied by construction interest rate and multiplied by construction years. (Construction Years is the construction time in months from line 52 in section G of form HUD-92264 plus 2 months, then divided by 12).

  • Lender’s estimate (optional). The Lender’s estimate of interest during construction must be documented with a pro-forma draw schedule or its equivalent, subject to USPAP Standard.

8. The Lender must also provide written explanations in the Underwriter’s narrative of any major changes to the pre-application invitation letter. Any inconsistency between the data reported on a form HUD-92264 prepared by the appraiser and the Lender’s form HUD-92264 must be explained in the Underwriting.