Eminent Domain
Junior Member
- Joined
- Jan 19, 2002
- Professional Status
- Certified General Appraiser
- State
- North Carolina
Folks,
Just wondering if anyone else is running into refinance problems with recapture on FHA loans. I hardly ever check into this forum so if this has been covered previously I apologize.
Anyway, several homeowners have had appraisals ordered which were refinancing for the obvious reasons of lower rates and/or consolidation purposes. Apparently some FHA spoke people state that what ever the home owner has spent on the property during the FHA lien period can be used to off set the recapture. However, when I spoke to an FHA spokes person he stated that rarely does this change the recapture except with capital improvements which can be shown to have added market value.
So my question is what is recapture? The amount which the government subsidized the loan over the holding period or what? I know this is probably a stupid question but I do not do FHA appraisals and have never had an FHA loan. My impression was that if the owner made capital improvements (ie. adding additional GLA footage, finished the pre-existing basement, added a garage or carport, etc....) this could be used to off set recapture should the value of the property have increased from the time of the initial FHA loan and the refinance. However, home owners are giving us lists of how many times the home has been painted, when new carpet was installed, new phone jacks installed and the driveway was paved. Most of these items and many others are merely, IMO, regular maintenance and upkeep and not capital improvement. And for a paved driveway versus a gravel driveway, extra phone jacks, etc I can't prove by market data that these items add value to a particular property.
In a round about way is the home owner penalized (via the recapture payment) just simply because the home appreciates in value over time? And if so why is it my fault? In all of these I have encountered the borrower states they were never told of this at the time of the initial funding. If this is the case I think FHA should do a better job of explaining this because I am getting tired of being blamed for loan recapture problems which arose while I was still crapping my diaper. :x
We are either pressured to be high in value and in cases like this low. I finally look forward to some time in the future when I may get to do an appraisal when true market value is what is being sought.
Bryan
Just wondering if anyone else is running into refinance problems with recapture on FHA loans. I hardly ever check into this forum so if this has been covered previously I apologize.
Anyway, several homeowners have had appraisals ordered which were refinancing for the obvious reasons of lower rates and/or consolidation purposes. Apparently some FHA spoke people state that what ever the home owner has spent on the property during the FHA lien period can be used to off set the recapture. However, when I spoke to an FHA spokes person he stated that rarely does this change the recapture except with capital improvements which can be shown to have added market value.
So my question is what is recapture? The amount which the government subsidized the loan over the holding period or what? I know this is probably a stupid question but I do not do FHA appraisals and have never had an FHA loan. My impression was that if the owner made capital improvements (ie. adding additional GLA footage, finished the pre-existing basement, added a garage or carport, etc....) this could be used to off set recapture should the value of the property have increased from the time of the initial FHA loan and the refinance. However, home owners are giving us lists of how many times the home has been painted, when new carpet was installed, new phone jacks installed and the driveway was paved. Most of these items and many others are merely, IMO, regular maintenance and upkeep and not capital improvement. And for a paved driveway versus a gravel driveway, extra phone jacks, etc I can't prove by market data that these items add value to a particular property.
In a round about way is the home owner penalized (via the recapture payment) just simply because the home appreciates in value over time? And if so why is it my fault? In all of these I have encountered the borrower states they were never told of this at the time of the initial funding. If this is the case I think FHA should do a better job of explaining this because I am getting tired of being blamed for loan recapture problems which arose while I was still crapping my diaper. :x
We are either pressured to be high in value and in cases like this low. I finally look forward to some time in the future when I may get to do an appraisal when true market value is what is being sought.
Bryan