"I am in an NYC suburb.)" Which one?
re the FANNIE 1004, does the site "as-improved" represent a legal, legal-nonforming, or illegal use AS of the EDA?
re Highest and Best Use - which definition of HB&U (which must be a legally permissible use as of the EDA) did you use?
B4-1.4-06, Appraisal Report Review: Subject Property
Zoning (04/01/2009)
Introduction
This topic contains information on Appraisal Report Review: Subject Property Zoning.
• Subject Property Zoning
• Permissible Use of Land
• Highest and Best Use
Subject Property Zoning
Lenders must ensure that the specific zoning class has been reported in the appraisal, along with a general statement as to what the zoning permits.
The appraisal must include a statement that the subject property presents a legal, confirming; legal, non-conforming (grandfathered) use; or an illegal use under the zoning regulations; or whether there is no local zoning.
Permissible Use of Land
Fannie Mae does not purchase or securitize mortgage loans on properties if the improvements do
not constitute a legally permissible use of the land.
Certain exceptions to this policy are made provided the property is appraised and underwritten in accordance with the special requirements imposed as a condition to agreeing to make the exception:
Property Type Loan Eligible for Purchase or Securitization by Fannie Mae?
A property that is subject to certain land use regulations, such as coastal tideland or wetland laws that create setback lines or other provisions that prevent the reconstruction or maintenance of the property improvements if
they are damaged or destroyed.
No.
A property that represents a legal, but nonconforming, use of the land and the appraisal analysis reflects any adverse effect that the non-conforming use has on the value and marketability of the property.
Yes, if the mortgage is secured by a one-to four-unit property or a unit in a PUD project.
A property where the improvements from a project that represents a legal, but nonconforming, use of the land only can be rebuilt to current density in the event of partial or full destruction.
Yes, Fannie Mae will purchase or securitize a condo unit mortgage or co-op share loan, provided the mortgage file includes either a copy of the applicable zoning regulations or a letter from the local zoning authority that
authorizes reconstruction to current density.
A one- or two-unit property that includes an illegal additional unit or accessory apartment (sometimes referred to as a mother-in-law, mother-daughter, or granny unit).
Yes, provided that:
• The illegal use conforms to the subject neighborhood and to the market.
• The property is appraised based upon its current use.
• The borrower qualifies for the mortgage without considering any rental income from the illegal unit.
• The appraisal must report that the improvements represent an illegal use.
• The appraisal report must demonstrate that the improvements are typical for the market through an analysis of at least three comparable properties that have the same illegal use.
• The lender ensures that the existence of the illegal additional unit will not jeopardize any future hazard insurance claim that might need to be filed for the property.
A three- to four-unit property that includes an illegal accessory apartment.
No.
Highest and Best Use
If the current improvements clearly do not represent the highest and best use of the site as an improved site, the appraiser must so indicate on the appraisal report. Fannie Mae will not purchase or securitize a mortgage that does not represent the highest and best use of the site.
Printed copies may not be the most current version. For the most current version, go to the online version at
http://www.efanniemae.com/sf/guides/ssg/.
