*VA Pamphlet 26-7, Revised Chapter 13- Value Notices*

*Change 3*

## Chapter 13

## Value Notices

#### Overview

+------------+---------------------------------------------------------+
| #          | > This chapter contains the following topics.           |
| #### In th |                                                         |
| is Chapter |                                                         |
+------------+---------------------------------------------------------+

  ---------------------------------------------------------- ------------
  Topic                                                      See Page

  13.01 Reviewing Appraisal Reports                          13-3

  13.02 Resolving LAPP Appraisal Review Problems             13-5

  13.03 Documenting LAPP Appraisal Reviews                   13-7

  13.04 LAPP-Issuing a NOV at Other Than the Appraiser's     13-9
  Value Estimate                                             

  13.05 Preparing Notices of Value                           13-11

  13.06 Notice of Value Conditions and Requirements          13-12

  13.07 Distributing Notices of Value                        13-24

  13.08 How Long Notice of Value is Valid                    13-25

  13.09 Requesting Changes to the NOV                        13-26

  13.10 Transfer of Appraiser's Reports Between Lenders      13-29

  13.11 Discovery of Title Limitations & Conditions          13-30

  13.12 Effect of Major Disasters on Notices of Value        13-34

  Exhibit 1---LAPP Lender's Notice of Value                  13-35
  ---------------------------------------------------------- ------------

Continued on next page

July 14, 2003 13-1

*VA Pamphlet 26-7, Revised Chapter 13- Value Notices*

*Change 3*

Overview, Continued

+------------+---------------------------------------------------------+
| ##### I    | > Accurate value estimates based on proper appraisal    |
| mportance  | > reviews are essential to the viability of the VA Loan |
| of VA Valu | > Guaranty program and have a direct effect on the      |
| e Estimate | > interests of the Government, veterans and lenders.    |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ####       | > Since appraisal reports are subject to change upon    |
| # Rely Onl | > review, lenders and holders should rely only upon a   |
| y on Notic | > VA notice of value issued by the appraisal reviewer.  |
| e of Value |                                                         |
+------------+---------------------------------------------------------+

+------------+---+-----+-----------------------+--------------------------+
| #          | > |     |                       |                          |
| #### Issui |   |     |                       |                          |
| ng a Notic | T |     |                       |                          |
| e of Value | h |     |                       |                          |
|            | e |     |                       |                          |
|            | > |     |                       |                          |
|            |   |     |                       |                          |
|            | t |     |                       |                          |
|            | a |     |                       |                          |
|            | b |     |                       |                          |
|            | l |     |                       |                          |
|            | e |     |                       |                          |
|            | > |     |                       |                          |
|            |   |     |                       |                          |
|            | b |     |                       |                          |
|            | e |     |                       |                          |
|            | l |     |                       |                          |
|            | o |     |                       |                          |
|            | w |     |                       |                          |
|            | > |     |                       |                          |
|            |   |     |                       |                          |
|            | d |     |                       |                          |
|            | e |     |                       |                          |
|            | s |     |                       |                          |
|            | c |     |                       |                          |
|            | r |     |                       |                          |
|            | i |     |                       |                          |
|            | b |     |                       |                          |
|            | e |     |                       |                          |
|            | s |     |                       |                          |
|            | > |     |                       |                          |
|            |   |     |                       |                          |
|            | t |     |                       |                          |
|            | h |     |                       |                          |
|            | e |     |                       |                          |
|            | > |     |                       |                          |
|            |   |     |                       |                          |
|            | s |     |                       |                          |
|            | t |     |                       |                          |
|            | e |     |                       |                          |
|            | p |     |                       |                          |
|            | s |     |                       |                          |
|            | > |     |                       |                          |
|            |   |     |                       |                          |
|            | t |     |                       |                          |
|            | o |     |                       |                          |
|            | > |     |                       |                          |
|            |   |     |                       |                          |
|            | f |     |                       |                          |
|            | o |     |                       |                          |
|            | l |     |                       |                          |
|            | l |     |                       |                          |
|            | o |     |                       |                          |
|            | w |     |                       |                          |
|            | > |     |                       |                          |
|            |   |     |                       |                          |
|            | w |     |                       |                          |
|            | h |     |                       |                          |
|            | e |     |                       |                          |
|            | n |     |                       |                          |
|            | > |     |                       |                          |
|            |   |     |                       |                          |
|            | i |     |                       |                          |
|            | s |     |                       |                          |
|            | s |     |                       |                          |
|            | u |     |                       |                          |
|            | i |     |                       |                          |
|            | n |     |                       |                          |
|            | g |     |                       |                          |
|            | > |     |                       |                          |
|            |   |     |                       |                          |
|            | a |     |                       |                          |
|            | > |     |                       |                          |
|            |   |     |                       |                          |
|            | N |     |                       |                          |
|            | o |     |                       |                          |
|            | t |     |                       |                          |
|            | i |     |                       |                          |
|            | c |     |                       |                          |
|            | e |     |                       |                          |
|            | > |     |                       |                          |
|            |   |     |                       |                          |
|            | o |     |                       |                          |
|            | f |     |                       |                          |
|            | > |     |                       |                          |
|            |   |     |                       |                          |
|            | V |     |                       |                          |
|            | a |     |                       |                          |
|            | l |     |                       |                          |
|            | u |     |                       |                          |
|            | e |     |                       |                          |
|            | . |     |                       |                          |
+------------+---+-----+-----------------------+--------------------------+
|            |   | St  | Description           | Refer to                 |
|            |   | eps |                       |                          |
+------------+---+-----+-----------------------+--------------------------+
|            |   | 1   | Confirm eligibility   | -   Chapter 10, and      |
|            |   |     | of property for       |                          |
|            |   |     | appraisal and LAPP    | -   Section 15.09.       |
|            |   |     | processing.           |                          |
+------------+---+-----+-----------------------+--------------------------+
| -          |   | 2   | Review the appraisal  | -   Section 13.01, and   |
|            |   |     | report.               |                          |
|            |   |     |                       | -   Chapter 11.          |
+------------+---+-----+-----------------------+--------------------------+
| -          |   | 3   | Resolve any           | Section 13.02.           |
|            |   |     | appraisal-related     |                          |
|            |   |     | problems.             |                          |
+------------+---+-----+-----------------------+--------------------------+
|            |   | 4   | Document the          | Section 13.02.           |
|            |   |     | appraisal review.     |                          |
+------------+---+-----+-----------------------+--------------------------+
|            |   | 5   | Prepare the Notice of | -   Section 13.04        |
|            |   |     | Value.                |                          |
|            |   |     |                       | -   Section 13.05        |
|            |   |     |                       |                          |
|            |   |     |                       | -   Section 13.06, and   |
|            |   |     |                       |                          |
|            |   |     |                       | -   Section 12.08.       |
+------------+---+-----+-----------------------+--------------------------+
| -          |   | 6   | Distribute the Notice | Section 13.07.           |
|            |   |     | of Value.             |                          |
+------------+---+-----+-----------------------+--------------------------+

> ***Note:*** Every property eligible for the Lender Appraisal
> Processing Program (LAPP) should be processed under LAPP. If a LAPP
> lender fails to process an eligible property under LAPP, the request
> for VA guaranty must include a *detailed* explanation.

Continued on next page

July 14, 2003 13-2

VA Pamphlet 26-7, Revised Chapter 13: Value Notices

#### 13.01 Reviewing Appraisal Reports

+------------+---------------------------------------------------------+
| ###        | > Every appraisal made for VA purposes **must** be      |
| ## Purpose | > reviewed either by the lender's VA-authorized staff   |
|  of Review | > appraisal reviewer (SAR) under the Lender Appraisal   |
|            | > Processing Program (LAPP), or a VA staff appraiser in |
|            | > order to                                              |
|            |                                                         |
|            | -   confirm that the photographs accurately reflect the |
|            |     appraiser's description of the subject and          |
|            |     comparable properties                               |
|            |                                                         |
|            | -   verify that the appraisal report is fully complete, |
|            |     clear and prepared according to industry-accepted   |
|            |     appraisal techniques and VA instructions            |
|            |                                                         |
|            | -   determine that the appraiser\'s methodology is      |
|            |     appropriate and that the appraiser\'s conclusions   |
|            |     are consistent, sound, supportable, logical and     |
|            |     based upon data in the appraisal report             |
|            |                                                         |
|            | -   determine, through use of reasonably available      |
|            |     information, that the appraiser\'s value            |
|            |     recommendation and other conclusions are consistent |
|            |     with those in similar cases recently processed      |
|            |                                                         |
|            | -   identify all property-related conditions and        |
|            |     requirements that must be satisfactorily resolved   |
|            |     before the property can become the security for a   |
|            |     VA guaranteed loan, and                             |
|            |                                                         |
|            | -   issue a notice of value.                            |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### H    | > The following references in this handbook provide     |
| andbook Re | > additional information when reviewing appraisal       |
| ferences f | > reports.                                              |
| or Reviewi |                                                         |
| ng Apprais | -   Chapter 11                                          |
| al Reports |                                                         |
|            | -   Section 13.02                                       |
|            |                                                         |
|            | -   Section 13.03                                       |
|            |                                                         |
|            | -   Section 13.04                                       |
|            |                                                         |
|            | -   Section 13.05                                       |
|            |                                                         |
|            | -   Section 13.06                                       |
|            |                                                         |
|            | -   Section 13.07, and                                  |
|            |                                                         |
|            | -   Section 13.08.                                      |
+------------+---------------------------------------------------------+

Continued on next page

January 1, 2001 13-3

**VA Pamphlet 26-7, Revised Chapter 13: Value Notices**

13.01 Reviewing Appraisal Reports, Continued

+------------+---------------------------------------------------------+
| #          | > The appraisal reviewer must maintain up-to-date       |
| #### Other |                                                         |
|  Reference | -   copies of this handbook and all other VA-issued     |
|  Materials |     directives and other reference material pertaining  |
|            |     to the Loan Guaranty program.                       |
|            |                                                         |
|            | -                                                       |
|            |                                                         |
|            | -   For LAPP lenders, this includes the material issued |
|            |     by VA field stations having jurisdiction over each  |
|            |     area where the lender originates LAPP loans         |
|            |                                                         |
|            | -                                                       |
|            |                                                         |
|            | -   applicable Federal statutes and VA regulations      |
|            |                                                         |
|            | -   *"Uniform Standards of Professional Appraisal       |
|            |     Practice,"* published by The Appraisal Foundation   |
|            |     ([www.appraisalfoundation.org]{.underline}), and    |
|            |                                                         |
|            | -   real estate market sales data (to be used for       |
|            |     comparative purposes).                              |
|            |                                                         |
|            |     > Additional material is recommended:               |
|            |                                                         |
|            | -   Any publications providing instructions for         |
|            |     completing the *Uniform Residential Appraisal       |
|            |     Report* (URAR). In the event of a conflict between  |
|            |     VA and private source material, however, the        |
|            |     VA-issued material must be considered controlling.  |
|            |                                                         |
|            | -   Other current reference materials regarding major   |
|            |     real estate market conditions and trends. This      |
|            |     includes weekend subscriptions to major newspapers, |
|            |     which typically have expanded real estate sections; |
|            |     industry-related newsletters; publications which    |
|            |     provide analyses and forecasts of various housing   |
|            |     and mortgage trends and relevant statistical data.  |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > Although VA has no requirement that appraisal         |
| Real Estat | > reviewers visit the geographic areas where appraised  |
| e Market F | > properties are located, they should keep up-to-date   |
| amiliarity | > on major real estate market conditions and trends, in |
|            | > order to properly analyze the location-related        |
|            | > information contained in appraisal reports.           |
+------------+---------------------------------------------------------+

January 1, 2001 13-4

*Chapter 13- Value Notices VA Pamphlet 26-7, Revised Change 3*

#### 13.02 Resolving LAPP Appraisal Review Problems

+------------+---------------------------------------------------------+
| ##### Con  | > LAPP lenders are expected to take reasonable steps to |
| tact and C | > resolve problems detected during their appraisal      |
| ooperation | > reviews. While branch office staff and authorized     |
|            | > agents may contact the fee appraiser about the        |
|            | > timeliness of a particular appraisal, only the        |
|            | > lender's VA-authorized staff appraisal reviewer (SAR) |
|            | > may contact the appraiser to discuss valuation        |
|            | > matters.                                              |
|            | >                                                       |
|            | > VA fee appraisers are expected to cooperate in        |
|            | > addressing concerns about the content of their        |
|            | > appraisal reports and timeliness in completing        |
|            | > assignments.                                          |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Ad   | > When information, methodology or conclusions in the   |
| ditional I | > appraisal report require additional clarification or  |
| nformation | > support, the SAR must contact the fee appraiser and   |
|            | > obtain the necessary information.                     |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Appr | > Any clarification, correction or revision by a fee    |
| aisal Repo | > appraiser to an appraisal report must be in writing,  |
| rt Changes | > signed and dated. The fee appraiser must clearly      |
|            | > identify any revised appraisal report as such in bold |
|            | > letters.                                              |
|            | >                                                       |
|            | > The lender must attach any clarification, correction  |
|            | > or revision to the original appraisal report provided |
|            | > by the fee appraiser. The withholding of this or any  |
|            | > other appraisal documentation is unacceptable and may |
|            | > result in administrative action against the lender    |
|            | > and/or fee appraiser, as appropriate.                 |
|            | >                                                       |
|            | > *See:* Section 13.04, which addresses restrictions on |
|            | > changes by the SAR to the fee appraiser's value       |
|            | > estimate.                                             |
+------------+---------------------------------------------------------+

Continued on next page

July 14, 2003 13-5

*Chapter 13- Value Notices VA Pamphlet 26-7, Revised Change 3*

13.02 Resolving LAPP Appraisal Review Problems, Continued

+------------+---------------------------------------------------------+
| ##### Refe | > When a substantive problem is not corrected after a   |
| rral to VA | > reasonable effort, the SAR must send the VA office of |
|            | > jurisdiction                                          |
|            |                                                         |
|            | -   a written report which clearly outlines the         |
|            |     problem(s) and the dates and results of contact     |
|            |     with the fee appraiser, and                         |
|            |                                                         |
|            | -   the appraisal report and/or other pertinent         |
|            |     documentation.                                      |
|            |                                                         |
|            |     > VA will subsequently notify the appropriate       |
|            |     > parties of its decision and document the fee      |
|            |     > appraiser\'s performance file, the lender's file  |
|            |     > and the case file, as appropriate. It may be      |
|            |     > necessary for VA staff to review the appraisal    |
|            |     > report and issue a VA Certificate of Reasonable   |
|            |     > Value.                                            |
|            |                                                         |
|            |     > ***Note***: Refer all **complaints** about        |
|            |     > property condition or appraiser performance to    |
|            |     > VA.                                               |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > LAPP lenders are responsible for resolving any        |
| Timeliness | > timeliness problems involving authorized agents and   |
|            | > branch personnel.                                     |
|            | >                                                       |
|            | > SARs should notify VA when fee appraiser timeliness   |
|            | > expectations are not being met.                       |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### VA C | > VA offices are expected to be as consistent as        |
| onsistency | > possible regarding NOV conditions and requirements.   |
|            | > They must notify LAPP lenders by posting changes to   |
|            | > the "approved local conditions" section of the C&V    |
|            | > web pages when a local situation dictates an          |
|            | > additional condition or requirement not listed on the |
|            | > standard NOV.                                         |
|            | >                                                       |
|            | > ***Reference**:* See Chapter 13, Exhibit 1, LAPP      |
|            | > Lender's Notice of Value.                             |
+------------+---------------------------------------------------------+

July 14, 2003 13-6

**VA Pamphlet 26-7, Revised Chapter 13: Value Notices**

#### 13.03 Documenting LAPP Appraisal Reviews

+------------+---------------------------------------------------------+
| ##### SA   | > VA does not consider the lender\'s staff appraisal    |
| R are not  | > reviewer (SAR) to be acting as an "appraiser" when    |
| Appraisers | > reviewing appraisal reports, or taking on the         |
|            | > responsibility of a "cosigner" or a "supervisory      |
|            | > appraiser." Except for the certification described    |
|            | > below, the SAR should not sign, initial or make any   |
|            | > comments or adjustments anywhere on the appraisal     |
|            | > report.                                               |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > The SAR **must**                                      |
| SAR's Resp |                                                         |
| onsibility | -   circle the fee appraiser\'s market value estimate   |
|            |                                                         |
|            | -   sign and date any SAR comments or other             |
|            |     documentation relative to the appraisal review and  |
|            |     attach that material to the appraisal report, and   |
|            |                                                         |
|            | -   complete the SAR certification.                     |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ###        | > The certification must be either                      |
| ## SAR Cer |                                                         |
| tification | -   stamped on the appraisal report in the "cost        |
|  Placement |     approach" or "reconciliation" block in a manner     |
|            |     which least obscures other information, or          |
|            |                                                         |
|            | -   attached as a separate sheet which also includes    |
|            |     the VA case number and property address.            |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > The certification must be signed, dated and read, "I  |
| #### SAR C | > reviewed this appraisal report to determine the       |
| ertificati | > acceptability of the property for VA Loan Guaranty    |
| on Wording | > purposes in light of VA minimum property requirements |
|            | > and the appropriateness, completeness, consistency    |
|            | > and accuracy of the fee appraiser's reasonable value  |
|            | > determination. In completing this administrative      |
|            | > review, I'm performing a due diligence function and   |
|            | > not acting as, or taking the responsibility of, a     |
|            | > cosigner of the report or supervisory appraiser. Any  |
|            | > disagreements or comments, etc., resulting from the   |
|            | > administrative review of this appraisal are fully     |
|            | > explained on the attachment to this report.           |
|            | >                                                       |
|            | > This box \[ \] is checked if there were none.         |
|            | >                                                       |
|            | > \_\_\                                                 |
|            | _\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ |
|            | > \_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_"          |
|            | >                                                       |
|            | > Signature LAPP ID. No. Date                           |
+------------+---------------------------------------------------------+

Continued on next page

January 1, 2001 13-7

**VA Pamphlet 26-7, Revised Chapter 13: Value Notices**

13.03 Documenting LAPP Appraisal Reviews, Continued

+------------+---------------------------------------------------------+
| ##### Im   | > By making this certification and the certifications   |
| plication  | > required with the application to participate in LAPP, |
| of SAR Cer | > the SAR is stating that in every case he/she          |
| tification |                                                         |
|            | -   personally reviewed the appraisal report            |
|            |                                                         |
|            | -   concurred with the fee appraiser's recommendation,  |
|            |     except as noted in an attachment to the report      |
|            |                                                         |
|            | -   determined that the appraiser                       |
|            |                                                         |
|            | -   used methodologies that were appropriate and        |
|            |     reasonable in light of industry-accepted appraisal  |
|            |     techniques                                          |
|            |                                                         |
|            | -   made conclusions that were consistent, based upon   |
|            |     data in the report, and                             |
|            |                                                         |
|            | -   complied with applicable VA requirements.           |
|            |                                                         |
|            | -   did not exert pressure or undue influence on the    |
|            |     appraiser to change information or to reach a       |
|            |     predetermined value for the subject property in     |
|            |     order to accommodate the sale price or mortgage     |
|            |     transaction, if clarification or corrections to the |
|            |     appraisal report were requested.                    |
+------------+---------------------------------------------------------+

January 1, 2001 13-8

*Chapter 13- Value Notices VA Pamphlet 26-7, Revised Change 3*

#### 13.04 LAPP- Issuing a NOV at Other Than the Appraiser's Value Estimate

+------------+---------------------------------------------------------+
| #####      | > The lender's staff appraisal reviewer (SAR) may issue |
|  Change Re | > a NOV that is up to                                   |
| strictions | >                                                       |
|            | > 5 percent above or below the fee appraiser\'s value   |
|            | > estimate provided the adjustment is:                  |
|            |                                                         |
|            | -   *clearly warranted and fully supported*             |
|            |                                                         |
|            | -   by the real estate market, **or**                   |
|            |                                                         |
|            | -   by other valid data considered adequate and         |
|            |     reasonable by professional appraisal standards,     |
|            |                                                         |
|            |     **And**                                             |
|            |                                                         |
|            | -   *fully documented.*                                 |
|            |                                                         |
|            |     The documentation must:                             |
|            |                                                         |
|            | -   be attached to the original appraisal report,       |
|            |                                                         |
|            | -   include any supporting documentation from the fee   |
|            |     appraiser or any other source, **and**              |
|            |                                                         |
|            | -   include a completed sales comparison grid in        |
|            |     appraisal report format, or similar format, when    |
|            |     appropriate. This analyzes any additional sales     |
|            |     data, including adjustments for all value-related   |
|            |     differences between the subject property and the    |
|            |     additional sales.                                   |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Oth  | > Changes in fee appraiser repair recommendations are   |
| er Changes | > addressed in Section 13.06 (under "NOV Item-Repairs") |
|            | >                                                       |
|            | > Value increases of more than five percent or other    |
|            | > changes requested after the notice of value is issued |
|            | > are addressed in Section 13.09.                       |
+------------+---------------------------------------------------------+

Continued on next page

13-9 July 14, 2003

*Chapter 13- Value Notices VA Pamphlet 26-7, Revised Change 3*

13.04 LAPP- Issuing a NOV at Other Than the Appraiser's Value Estimate,
Continued

+------------+---------------------------------------------------------+
| ###        | > If VA determines that the SAR's value change was      |
| ## Penalty | > unwarranted and resulted in a VA loss due to payment  |
|  for Abuse | > of a claim under guaranty, the lender must indemnify  |
|            | > VA to the extent that VA determines such loss was     |
|            | > caused or increased by the increase in value.         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > SARs may not wish to exercise this authority where it |
|  Potential | > is considered to be in conflict with State            |
|  Conflict  | > requirements.                                         |
| With State | >                                                       |
|            | > In some states, the agency which regulates appraisers |
|            | > may take the position that any change in value by an  |
|            | > appraisal reviewer subjects that individual to the    |
|            | > State\'s requirements for appraisers.                 |
+------------+---------------------------------------------------------+

13-10 July 14, 2003

*Chapter 13- Value Notices VA Pamphlet 26-7, Revised Change 3*

#### 13.05 Preparing Notices of Value

+------------+---------------------------------------------------------+
| ###        | > Under LAPP, the lender's VA-authorized staff          |
| ## Format  | > appraisal reviewer (SAR) must complete the standard   |
| Under LAPP | > notice of value form in TAS, or on                    |
|            |                                                         |
|            | -   the lender's corporate letterhead, **or**           |
|            |                                                         |
|            | -   attached to a statement on that letterhead which    |
|            |     references it.                                      |
|            |                                                         |
|            |     > ***Reference**:* See Chapter 13, Exhibit 1, LAPP  |
|            |     > Lender's Notice of Value.                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | -   If prepared by VA staff, the notice of value may be |
| Format If  |     TAS generated or prepared on VA Form 26-1843a,      |
| Prepared b |     Master Certificate of Reasonable Value (MCRV) for a |
| y VA Staff |     group of related properties.                        |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Noti | > Every notice of value will include                    |
| ce of Valu |                                                         |
| e Contents | -   estimated reasonable value of the property (*See*   |
|            |     Section 11.02).                                     |
|            |                                                         |
|            | -   estimated remaining economic life of the property   |
|            |     (*See* Section 11.10), and                          |
|            |                                                         |
|            | -   a list of any property-related conditions and       |
|            |     requirements necessary for VA loan guaranty.        |
|            |                                                         |
|            |     > ***Reference**:* See Section 13.06.               |
+------------+---------------------------------------------------------+

13-11 July 14, 2003

*Chapter 13- Value Notices VA Pamphlet 26-7, Revised Change 3*

#### 13.06 Notice of Value Conditions and Requirements

+------------+---------------------------------------------------------+
| ##### In   | > Every notice of value (NOV) issued in conjunction     |
| troduction | > with an appraisal review must include a list of any   |
|            | > conditions and requirements that must be satisfied    |
|            | > for the property to be eligible for VA loan guaranty. |
|            | >                                                       |
|            | > ***Reference**:* See Section 13.05.                   |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ####       | > The Table of NOV Conditions and Requirements below    |
| # Table of |                                                         |
|  NOV Condi | -   lists each condition and requirement shown on the   |
| tions & Re |     standard LAPP NOV in the same order as shown on     |
| quirements |     that NOV,                                           |
|            |                                                         |
|            | -   explains when each item is applicable,              |
|            |                                                         |
|            | -   explains what action is required to satisfy the     |
|            |     condition or requirement, and                       |
|            |                                                         |
|            | -   references any additional information about the     |
|            |     item in this handbook.                              |
|            |                                                         |
|            |     > ***Reference**:* See Chapter 13, Exhibit 1, LAPP  |
|            |     > Lender's Notice of Value.                         |
+------------+---------------------------------------------------------+

+--------------+-------------------------------------------------------+
| NOV Item     | Instructions for Preparing the NOV                    |
+--------------+-------------------------------------------------------+
| Energy       | > Check this item for every property appraised as     |
| Conservation | > "existing construction."                            |
| Improvements | >                                                     |
|              | > This action allows lenders to increase the loan     |
|              | > amount for buyers to make energy efficiency         |
|              | > improvements to the property.                       |
|              | >                                                     |
|              | > ***Note***: "Proposed" or "under construction" and  |
|              | > "new construction" cases are not eligible for VA's  |
|              | > Energy Efficient Mortgage program. For more on      |
|              | > Energy efficient improvements, *see* Item 1 on the  |
|              | > NOV or Section 7.03.                                |
+--------------+-------------------------------------------------------+

Continued on next page

13-12 July 14, 2003

**VA Pamphlet 26-7, Revised Chapter 13: Value Notices**

13.06 Notice of Value Conditions and Requirements, Continued

  -----------------------------------------------------------------------
  Table of NOV Conditions & Requirements (continued)

  -----------------------------------------------------------------------

+--------------+-------------------------------------------------------+
| NOV Item     | Instructions for Preparing the NOV                    |
+--------------+-------------------------------------------------------+
| Wood         | > Check the appropriate items if the property is      |
| Destroying   | > located in an area where the probability of termite |
| Insect       | > infestation is \"very heavy\" or \"moderate to      |
| Information  | > heavy\" according to the Termite Infestation        |
|              | > Probability Map published in The *Council of        |
|              | > American Building Officials* (CABO) One and Two     |
|              | > Family Dwelling Code.                               |
|              | >                                                     |
|              | > ***Note***: If there is a question about the        |
|              | > location of an infestation probability boundary     |
|              | > line in relation to the subject property, contact   |
|              | > the VA office of jurisdiction to determine if this  |
|              | > requirement is applicable.                          |
|              | >                                                     |
|              | > ***Additional Requirements***                       |
|              |                                                       |
|              | -   In cases processed as "New Construction," the     |
|              |     builder can meet the requirements for either      |
|              |     "existing construction" or "proposed or under     |
|              |     construction."                                    |
|              |                                                       |
|              | -   The pest control operator must meet all           |
|              |     requirements of the State in which the property   |
|              |     is located.                                       |
|              |                                                       |
|              | -   In States which require the use of a State        |
|              |     inspection form in all transactions, the State    |
|              |     form is acceptable for VA loan guaranty purposes. |
|              |                                                       |
|              | -   Inspection reports are valid for VA purposes for  |
|              |     90 days from the date of inspection.              |
|              |                                                       |
|              |     ***References***: See Section12.06.               |
+--------------+-------------------------------------------------------+
| -   Lien     | > Check the appropriate items and provide the         |
|              | > required information, if applicable. Generally,     |
|    Supported | > this involves only units in a planned unit          |
|              | > development or condominium.                         |
|   Assessment | >                                                     |
|              | > ***References***:                                   |
|              |                                                       |
|              | -   *Item 3* on the NOV                               |
|              |                                                       |
|              | -   Chapter 16, Section B.                            |
+--------------+-------------------------------------------------------+

Continued on next page

January 1, 2001 13-13

**VA Pamphlet 26-7, Revised Chapter 13: Value Notices**

**Change 1**

13.06 Notice of Value Conditions and Requirements, Continued

+---+-------------+-------------------------------------------------------+
| T |             |                                                       |
| a |             |                                                       |
| b |             |                                                       |
| l |             |                                                       |
| e |             |                                                       |
| o |             |                                                       |
| f |             |                                                       |
| N |             |                                                       |
| O |             |                                                       |
| V |             |                                                       |
| C |             |                                                       |
| o |             |                                                       |
| n |             |                                                       |
| d |             |                                                       |
| i |             |                                                       |
| t |             |                                                       |
| i |             |                                                       |
| o |             |                                                       |
| n |             |                                                       |
| s |             |                                                       |
| & |             |                                                       |
| R |             |                                                       |
| e |             |                                                       |
| q |             |                                                       |
| u |             |                                                       |
| i |             |                                                       |
| r |             |                                                       |
| e |             |                                                       |
| m |             |                                                       |
| e |             |                                                       |
| n |             |                                                       |
| t |             |                                                       |
| s |             |                                                       |
| ( |             |                                                       |
| c |             |                                                       |
| o |             |                                                       |
| n |             |                                                       |
| t |             |                                                       |
| i |             |                                                       |
| n |             |                                                       |
| u |             |                                                       |
| e |             |                                                       |
| d |             |                                                       |
| ) |             |                                                       |
+---+-------------+-------------------------------------------------------+
|   | NOV Item    | Instructions for Preparing the NOV                    |
+---+-------------+-------------------------------------------------------+
|   | Condominium | > Check the appropriate items if the property is      |
|   | R           | > located in a condominium.                           |
|   | equirements | >                                                     |
|   |             | > ***Important***: The project must be acceptable to  |
|   |             | > VA, and all project approval-related requirements   |
|   |             | > satisfied, for the property to be eligible for VA   |
|   |             | > loan guaranty.                                      |
|   |             | >                                                     |
|   |             | > ***Reference***: See Chapter 16, Section A.         |
+---+-------------+-------------------------------------------------------+
|   | Water/Sewer | > Check the appropriate items for a property served   |
|   | System      | > by an individual                                    |
|   | Ac          |                                                       |
|   | ceptability | -   water supply, such as a well, or                  |
|   |             |                                                       |
|   |             | -   septic system in all cases appraised as "proposed |
|   |             |     or under" construction, and in "new" and          |
|   |             |     "existing" construction cases in which there is   |
|   |             |     an indication of a problem or the property is in  |
|   |             |     an area known to have soil percolation problems.  |
|   |             |                                                       |
|   |             |     A spring or cistern water supply or pit privy may |
|   |             |     be acceptable in areas where they meet the        |
|   |             |     standards of the locality and are properly        |
|   |             |     constructed. Lenders should contact the VA office |
|   |             |     of jurisdiction regarding such cases.             |
|   |             |                                                       |
|   |             |     ***References***:                                 |
|   |             |                                                       |
|   |             | -   *Item 5* on the NOV                               |
|   |             |                                                       |
|   |             | -   Section 10.10 ("Required Exhibits")               |
|   |             |                                                       |
|   |             | -   Section 12.08.                                    |
|   |             |                                                       |
|   |             | -   Section 14.02 ("Third Inspection").               |
+---+-------------+-------------------------------------------------------+
| - | Connection  | > Check the appropriate items if the property is      |
|   | to Public   | > served by an individual well or septic system and   |
|   | Water/Sewer | > there is an indication that public water or sewer   |
|   |             | > is available.                                       |
|   |             | >                                                     |
|   |             | > ***References***:                                   |
|   |             |                                                       |
|   |             | -   *Item 6* on the NOV                               |
|   |             |                                                       |
|   |             | -   Section 12.08.                                    |
+---+-------------+-------------------------------------------------------+
| - | Private     | > Check this item if access to the property is by a   |
|   | Road/Common | > private road or common-use driveway.                |
|   | Use         | >                                                     |
|   | Driveway    | > ***References***:                                   |
|   |             |                                                       |
|   |             | -   *Item 7* on the NOV                               |
|   |             |                                                       |
|   |             | -   Section 12.05.                                    |
+---+-------------+-------------------------------------------------------+

Continued on next page

February 5, 2001 13-14

*Chapter 13- Value Notices VA Pamphlet 26-7, Revised Change 3*

13.06 Notice of Value Conditions and Requirements, Continued

  -----------------------------------------------------------------------
  Table of NOV Conditions & Requirements (continued)

  -----------------------------------------------------------------------

+--------------+-------------------------------------------------------+
| NOV Item     | Instructions for Preparing the NOV                    |
+--------------+-------------------------------------------------------+
| Flood        | > Check this item if the dwelling is located in a     |
| Insurance    | > Special Flood Hazard Area (SFHA). It is the         |
|              | > lender\'s responsibility to assure that flood       |
|              | > insurance is obtained and maintained on properties  |
|              | > located in SFHAs, whether or not the appraiser      |
|              | > correctly identifies the property as being in an    |
|              | > SFHA.                                               |
|              | >                                                     |
|              | > ***Exceptions***:                                   |
|              |                                                       |
|              | -   The property is not eligible as the security for  |
|              |     a VA home, if the property is located in an SFHA  |
|              |     and flood insurance is not available because the  |
|              |     community is not participating in the National    |
|              |     Flood Insurance Program (NFIP)                    |
|              |                                                       |
|              | -   The lender can appeal to the Federal Insurance    |
|              |     Administration (FIA), if there is an indication   |
|              |     that a property is incorrectly included in a      |
|              |     SFHA.                                             |
|              |                                                       |
|              | -   ***Note***: Based on FIA's administrative review  |
|              |     of the scientific or technical data submitted by  |
|              |     the lender, FIA may issue a Letter of Map         |
|              |     Amendment (LOMA) to amend the current FEMA map    |
|              |     and establish that the property is not located in |
|              |     a SFHA.                                           |
|              |                                                       |
|              |     ***References*:**                                 |
|              |                                                       |
|              | -   Item 8 on the NOV                                 |
|              |                                                       |
|              | -   Section 9.10                                      |
|              |                                                       |
|              | -   Section 10.06                                     |
|              |                                                       |
|              | -   Chapter 11, Figure 1.                             |
+--------------+-------------------------------------------------------+
| -   Airport  | > Check this item if the property is located in an    |
|     Ack      | > airport noise zone or safety-related zone           |
| nowledgement | > acceptable to VA.                                   |
|              | >                                                     |
|              | > ***Reference:***                                    |
|              |                                                       |
|              | -   Item 9 on the NOV                                 |
|              |                                                       |
|              | -   Section 10.06                                     |
|              |                                                       |
|              | -   Chapter 11, Figure 1.                             |
+--------------+-------------------------------------------------------+

Continued on next page

13-15 July 14, 2003

*Chapter 13- Value Notices VA Pamphlet 26-7, Revised Change 3*

13.06 Notice of Value Conditions and Requirements, Continued

  -----------------------------------------------------------------------
  Table of NOV Conditions & Requirements (continued)

  -----------------------------------------------------------------------

+--------------+-------------------------------------------------------+
| NOV Item     | Instructions for Preparing the NOV                    |
+--------------+-------------------------------------------------------+
| Repairs      | > Check the appropriate items and list the repairs    |
|              | > recommended by the appraiser which are necessary to |
|              | > make the property meet VA Minimum Property          |
|              | > Requirements (MPRs).                                |
|              | >                                                     |
|              | > ***Lead-Paint Conditions***                         |
|              | >                                                     |
|              | > Since properties built prior to 1978 may contain    |
|              | > lead-based paint, the correction of any defective   |
|              | > paint condition on such properties must be made     |
|              | > according to the requirements in Section 12.03 and  |
|              | > inspected only by VA fee personnel or VA staff.     |
|              | >                                                     |
|              | > ***Notes***:                                        |
|              |                                                       |
|              | -   A notice of value should not be issued for a      |
|              |     property in a badly deteriorated condition unless |
|              |     there is a reasonable likelihood that it can be   |
|              |     repaired to meet VA MPRs prior to loan closing.   |
|              |                                                       |
|              | -   A certification regarding the condition or        |
|              |     adequacy of the roof, electrical/plumbing/heating |
|              |     systems, etc., should not be required unless      |
|              |     there is an indication of a problem.              |
|              |                                                       |
|              | -   Lenders and fee appraisers should use their own   |
|              |     letterhead when certifying that required repairs  |
|              |     have been satisfactorily completed. Generally,    |
|              |     fee inspectors will not inspect repairs to        |
|              |     existing properties, unless the loan involves     |
|              |     alterations or improvements for which             |
|              |     construction exhibits are required.               |
|              |                                                       |
|              |     > Lender and purchaser disagreements with fee     |
|              |     > appraiser repair recommendations will be        |
|              |     > resolved by either:                             |
|              |                                                       |
|              | -   SAR contact with the fee appraiser (if the repair |
|              |     recommendations do not appear necessary per       |
|              |     Section 11.09, for the property to meet MPRs).    |
|              |     SAR must then provide in writing any changes made |
|              |     by the appraiser, **or**                          |
|              |                                                       |
|              | -   VA contact with SAR or fee appraiser (if initial  |
|              |     lender/appraiser contact does not resolve the     |
|              |     issue), **or**                                    |
|              |                                                       |
|              | -   SAR and purchaser request VA to waive the repair  |
|              |     item(s) in question, **if** necessary **and**     |
|              |     appropriate per Section 12.01 under "Exemptions". |
+--------------+-------------------------------------------------------+

Continued on next page

13-16 July 14, 2003

*Chapter 13- Value Notices VA Pamphlet 26-7, Revised Change 3*

13.06 Notice of Value Conditions and Requirements, Continued

  -----------------------------------------------------------------------
  Table of NOV Conditions & Requirements (continued)

  -----------------------------------------------------------------------

+--------------+-------------------------------------------------------+
| NOV Item     | Instructions for Preparing the NOV                    |
+--------------+-------------------------------------------------------+
| Repairs,     | > ***Reference:***                                    |
| continued    |                                                       |
|              | -   Item 10 on the NOV                                |
|              |                                                       |
|              | -   Section 10.01                                     |
|              |                                                       |
|              | -   Section 10.05                                     |
|              |                                                       |
|              | -   Section 10.06                                     |
|              |                                                       |
|              | -   Section 11.04                                     |
|              |                                                       |
|              | -   Section 11.09                                     |
|              |                                                       |
|              | -   Chapter 12.                                       |
+--------------+-------------------------------------------------------+
| -   Local    | -   Check this item if the property is existing       |
|     Housing/ |     construction which is located in an area where    |
|     Planning |     specific local housing/planning authority code    |
|              |     requirements are enforced in conjunction with the |
|    Authority |     sale of homes                                     |
|     Code     |                                                       |
|              | -                                                     |
| Requirements |                                                       |
|              | > ***Reference***:                                    |
|              |                                                       |
|              | -   Item 11 on the NOV                                |
|              |                                                       |
|              | -   Section 10.07                                     |
|              |                                                       |
|              | -   Figure 1 in Chapter 11                            |
+--------------+-------------------------------------------------------+

Continued on next page

13-17 July 14, 2003

*Chapter 13- Value Notices VA Pamphlet 26-7, Revised Change 3*

13.06 Notice of Value Conditions and Requirements, Continued

  -----------------------------------------------------------------------
  Table of NOV Conditions & Requirements (continued)

  -----------------------------------------------------------------------

+--------------+-------------------------------------------------------+
| NOV Item     | Instructions for Preparing the NOV                    |
+--------------+-------------------------------------------------------+
| "Not         | > Check the appropriate items if the property was     |
| Inspected"   | > appraised as "new construction".                    |
| Ack          | >                                                     |
| nowledgement | > ***Note**: Item 12a* on the NOV applies if the      |
|              | > property is to be covered by a one-year builder's   |
|              | > warranty per Section 10.08. *Item 12b* on the NOV   |
|              | > applies if the property is to be covered by a       |
|              | > 10-year insured protection plan per Section 10.09.  |
|              | >                                                     |
|              | > ***Reference***:                                    |
|              |                                                       |
|              | -   Item 12 on the NOV                                |
|              |                                                       |
|              | -   Section 10.05                                     |
|              |                                                       |
|              | -   Section 10.08                                     |
|              |                                                       |
|              | -   Chapter 10, Figure 1.                             |
+--------------+-------------------------------------------------------+
| -   10-Year  | > Check this item if the property was appraised as    |
|     Insured  | > either "proposed or under construction" or "new     |
|              | > construction" and is to be covered by a 10-year     |
|   Protection | > insured protection plan.                            |
|     Plan     | >                                                     |
|              | > ***Note**:* A copy of the builder's application to  |
|              | > enroll the subject property in an acceptable        |
|              | > 10-year plan is adequate "evidence of enrollment."  |
|              | > It is the builder's responsibility to ensure that   |
|              | > all enrollment fees are paid and the enrollment     |
|              | > process is otherwise completed.                     |
|              | >                                                     |
|              | > ***Reference:***                                    |
|              |                                                       |
|              | -   Item 13 on the NOV                                |
|              |                                                       |
|              | -   Section 10.05                                     |
|              |                                                       |
|              | -   Section 10.09                                     |
|              |                                                       |
|              | -   Chapter 14, Overview.                             |
+--------------+-------------------------------------------------------+

Continued on next page

13-18 July 14, 2003

**VA Pamphlet 26-7, Revised Chapter 13: Value Notices**

13.06 Notice of Value Conditions and Requirements, Continued

  -----------------------------------------------------------------------
  Table of NOV Conditions & Requirements (continued)

  -----------------------------------------------------------------------

+--------------+-------------------------------------------------------+
| NOV Item     | Instructions for Preparing the NOV                    |
+--------------+-------------------------------------------------------+
| Energy       | > Check this item if the property was appraised as    |
| Efficient    | > "new construction."                                 |
| Construction | >                                                     |
|              | > The certification is required even when State or    |
|              | > local energy-related requirements exceed the 1992   |
|              | > Council of American Building Officials (CABO) Model |
|              | > Energy Code (MEC) standard.                         |
|              | >                                                     |
|              | > The certification is not required if the dwelling   |
|              | > is either                                           |
|              |                                                       |
|              | -   manufactured home built to HUD code and inspected |
|              |     by HUD in the factory, or                         |
|              |                                                       |
|              | -   individual unit in a condominium over two stories |
|              |     high.                                             |
|              |                                                       |
|              |     ***References***:                                 |
|              |                                                       |
|              | -   *Item 14* of the NOV                              |
|              |                                                       |
|              | -   Section 12.02.                                    |
+--------------+-------------------------------------------------------+
| -            | > Check this item if the property was appraised as    |
|   Lead/Water | > "new construction."                                 |
|              | >                                                     |
| Distribution | > This requirement also applies to cases involving    |
|     System   | > alterations, improvements or repairs to the potable |
|              | > water distribution system.                          |
|              |                                                       |
|              | ***Reference***: See *Item 15* on the NOV.            |
+--------------+-------------------------------------------------------+

Continued on next page

January 1, 2001 13-19

**VA Pamphlet 26-7, Revised Chapter 13: Value Notices**

13.06 Notice of Value Conditions and Requirements, Continued

  -----------------------------------------------------------------------
  Table of NOV Conditions & Requirements (continued)

  -----------------------------------------------------------------------

+--------------+-------------------------------------------------------+
| NOV Item     | Instructions for Preparing the NOV                    |
+--------------+-------------------------------------------------------+
| Offsite      | > Check this item if the property was appraised as    |
| Improvements | > either "proposed or under construction" or "new     |
|              | > construction" and off-site improvements have not    |
|              | > been completed and accepted for maintenance by the  |
|              | > local authority at that time, such as               |
|              |                                                       |
|              | -   streets                                           |
|              |                                                       |
|              | -   sidewalks                                         |
|              |                                                       |
|              | -   drains, and/or                                    |
|              |                                                       |
|              | -   sewers.                                           |
|              |                                                       |
|              |     ***References***:                                 |
|              |                                                       |
|              | -   *Item 16* on the NOV                              |
|              |                                                       |
|              | -   Section 9.09                                      |
|              |                                                       |
|              | -   Figure 1 in Chapter 10.                           |
+--------------+-------------------------------------------------------+
| -   Proposed | > If the property was appraised as "proposed or under |
|              | > construction," check this item and provide the      |
| Construction | > information required to identify the construction   |
|              | > exhibits used.                                      |
|              | >                                                     |
|              | > ***References***:                                   |
|              |                                                       |
|              | -   *Item 17* on the NOV                              |
|              |                                                       |
|              | -   Section 10.10.                                    |
+--------------+-------------------------------------------------------+
| -            | > Check this item and identify the VA-assigned fee    |
| Construction | > inspector if the property was appraised as          |
|              | > "proposed or under construction."                   |
|  Inspections | >                                                     |
|              | > ***References***:                                   |
|              |                                                       |
|              | -   *Item 18* on the NOV                              |
|              |                                                       |
|              | -   Section 10.04                                     |
|              |                                                       |
|              | -   Chapter 14.                                       |
+--------------+-------------------------------------------------------+

Continued on next page

January 1, 2001 13-20

**VA Pamphlet 26-7, Revised Chapter 13: Value Notices**

**Change 1**

13.06 Notice of Value Conditions and Requirements, Continued

  -----------------------------------------------------------------------
  Table of NOV Conditions & Requirements (continued)

  -----------------------------------------------------------------------

+--------------+---+---------------------+-----------------------------+---+
| NOV Item     | I |                     |                             |   |
|              | n |                     |                             |   |
|              | s |                     |                             |   |
|              | t |                     |                             |   |
|              | r |                     |                             |   |
|              | u |                     |                             |   |
|              | c |                     |                             |   |
|              | t |                     |                             |   |
|              | i |                     |                             |   |
|              | o |                     |                             |   |
|              | n |                     |                             |   |
|              | s |                     |                             |   |
|              | f |                     |                             |   |
|              | o |                     |                             |   |
|              | r |                     |                             |   |
|              | P |                     |                             |   |
|              | r |                     |                             |   |
|              | e |                     |                             |   |
|              | p |                     |                             |   |
|              | a |                     |                             |   |
|              | r |                     |                             |   |
|              | i |                     |                             |   |
|              | n |                     |                             |   |
|              | g |                     |                             |   |
|              | t |                     |                             |   |
|              | h |                     |                             |   |
|              | e |                     |                             |   |
|              | N |                     |                             |   |
|              | O |                     |                             |   |
|              | V |                     |                             |   |
+--------------+---+---------------------+-----------------------------+---+
| Construction | > |                     |                             |   |
| Warranty     |   |                     |                             |   |
|              | C |                     |                             |   |
|              | h |                     |                             |   |
|              | e |                     |                             |   |
|              | c |                     |                             |   |
|              | k |                     |                             |   |
|              | > |                     |                             |   |
|              |   |                     |                             |   |
|              | t |                     |                             |   |
|              | h |                     |                             |   |
|              | i |                     |                             |   |
|              | s |                     |                             |   |
|              | > |                     |                             |   |
|              |   |                     |                             |   |
|              | i |                     |                             |   |
|              | t |                     |                             |   |
|              | e |                     |                             |   |
|              | m |                     |                             |   |
|              | > |                     |                             |   |
|              |   |                     |                             |   |
|              | i |                     |                             |   |
|              | f |                     |                             |   |
|              | > |                     |                             |   |
|              |   |                     |                             |   |
|              | t |                     |                             |   |
|              | h |                     |                             |   |
|              | e |                     |                             |   |
|              | > |                     |                             |   |
|              |   |                     |                             |   |
|              | p |                     |                             |   |
|              | r |                     |                             |   |
|              | o |                     |                             |   |
|              | p |                     |                             |   |
|              | e |                     |                             |   |
|              | r |                     |                             |   |
|              | t |                     |                             |   |
|              | y |                     |                             |   |
|              | > |                     |                             |   |
|              |   |                     |                             |   |
|              | w |                     |                             |   |
|              | a |                     |                             |   |
|              | s |                     |                             |   |
|              | > |                     |                             |   |
|              |   |                     |                             |   |
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|              | . |                     |                             |   |
+--------------+---+---------------------+-----------------------------+---+
| -            |   |                     |                             |   |
+--------------+---+---------------------+-----------------------------+---+
|              |   | When cases ...      | Then ...                    |   |
+--------------+---+---------------------+-----------------------------+---+
|              |   | processed as        | the contractor responsible  |   |
|              |   | "proposed or under  | for the construction of the |   |
|              |   | construction" (See  | foundation and other onsite |   |
|              |   | the definition in   | features must provide the   |   |
|              |   | Section 10.10)      | one-year warranty.          |   |
+--------------+---+---------------------+-----------------------------+---+
|              |   | involve a new       | the manufacturer must       |   |
|              |   | manufactured home   | provide the purchaser with  |   |
|              |   | unit                | a one-year warranty on VA   |   |
|              |   |                     | Form 26-8599, Manufactured  |   |
|              |   |                     | Home Warranty.              |   |
|              |   |                     |                             |   |
|              |   |                     | ***Note***: This warranty   |   |
|              |   |                     | will cover the manufactured |   |
|              |   |                     | home unit only.             |   |
+--------------+---+---------------------+-----------------------------+---+
|              |   |                     |                             |   |
+--------------+---+---------------------+-----------------------------+---+

Continued on next page

February 5, 2001 13-21

**VA Pamphlet 26-7, Revised Chapter 13: Value Notices**

13.06 Notice of Value Conditions and Requirements, Continued

  -----------------------------------------------------------------------
  Table of NOV Conditions & Requirements (continued)

  -----------------------------------------------------------------------

+--------------+---+---------------------+-----------------------------+---+
| NOV Item     | I |                     |                             |   |
|              | n |                     |                             |   |
|              | s |                     |                             |   |
|              | t |                     |                             |   |
|              | r |                     |                             |   |
|              | u |                     |                             |   |
|              | c |                     |                             |   |
|              | t |                     |                             |   |
|              | i |                     |                             |   |
|              | o |                     |                             |   |
|              | n |                     |                             |   |
|              | s |                     |                             |   |
|              | f |                     |                             |   |
|              | o |                     |                             |   |
|              | r |                     |                             |   |
|              | P |                     |                             |   |
|              | r |                     |                             |   |
|              | e |                     |                             |   |
|              | p |                     |                             |   |
|              | a |                     |                             |   |
|              | r |                     |                             |   |
|              | i |                     |                             |   |
|              | n |                     |                             |   |
|              | g |                     |                             |   |
|              | t |                     |                             |   |
|              | h |                     |                             |   |
|              | e |                     |                             |   |
|              | N |                     |                             |   |
|              | O |                     |                             |   |
|              | V |                     |                             |   |
+--------------+---+---------------------+-----------------------------+---+
| Construction |   |                     |                             |   |
+--------------+---+---------------------+-----------------------------+---+
| Warranty,    |   | **When cases \...** | **Then \...**               |   |
+--------------+---+---------------------+-----------------------------+---+
| continued    |   | involve a used      | the dealer must provide the |   |
|              |   | manufactured home   | purchaser with a six-month  |   |
|              |   | sold by a dealer    | warranty on VA Form         |   |
|              |   |                     | 26-8730, Used Manufactured  |   |
|              |   |                     | Home Limited Warranty.      |   |
|              |   |                     |                             |   |
|              |   |                     | This warranty that the      |   |
|              |   |                     | mechanical equipment,       |   |
|              |   |                     | electrical, gas and heating |   |
|              |   |                     | systems, and water and      |   |
|              |   |                     | plumbing systems are in     |   |
|              |   |                     | operating condition and the |   |
|              |   |                     | roof is weathertight. This  |   |
|              |   |                     | warranty is not required in |   |
|              |   |                     | connection with the sale of |   |
|              |   |                     | a used manufactured home    |   |
|              |   |                     | not involving a dealer.     |   |
+--------------+---+---------------------+-----------------------------+---+
|              | * |                     |                             |   |
|              | * |                     |                             |   |
|              | * |                     |                             |   |
|              | R |                     |                             |   |
|              | e |                     |                             |   |
|              | f |                     |                             |   |
|              | e |                     |                             |   |
|              | r |                     |                             |   |
|              | e |                     |                             |   |
|              | n |                     |                             |   |
|              | c |                     |                             |   |
|              | e |                     |                             |   |
|              | s |                     |                             |   |
|              | * |                     |                             |   |
|              | * |                     |                             |   |
|              | * |                     |                             |   |
|              | : |                     |                             |   |
|              |   |                     |                             |   |
|              | - |                     |                             |   |
|              |   |                     |                             |   |
|              |   |                     |                             |   |
|              |   |                     |                             |   |
|              | * |                     |                             |   |
|              | I |                     |                             |   |
|              | t |                     |                             |   |
|              | e |                     |                             |   |
|              | m |                     |                             |   |
|              |   |                     |                             |   |
|              |   |                     |                             |   |
|              |   |                     |                             |   |
|              |   |                     |                             |   |
|              | 1 |                     |                             |   |
|              | 9 |                     |                             |   |
|              | * |                     |                             |   |
|              |   |                     |                             |   |
|              |   |                     |                             |   |
|              |   |                     |                             |   |
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|              |   |                     |                             |   |
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|              | t |                     |                             |   |
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|              | 1 |                     |                             |   |
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|              | 5 |                     |                             |   |
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|              | n |                     |                             |   |
|              |   |                     |                             |   |
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|              | 1 |                     |                             |   |
|              | 0 |                     |                             |   |
|              | . |                     |                             |   |
|              | 0 |                     |                             |   |
|              | 8 |                     |                             |   |
|              |   |                     |                             |   |
|              | - |                     |                             |   |
|              |   |                     |                             |   |
|              |   |                     |                             |   |
|              |   |                     |                             |   |
|              | S |                     |                             |   |
|              | e |                     |                             |   |
|              | c |                     |                             |   |
|              | t |                     |                             |   |
|              | i |                     |                             |   |
|              | o |                     |                             |   |
|              | n |                     |                             |   |
|              |   |                     |                             |   |
|              |   |                     |                             |   |
|              |   |                     |                             |   |
|              |   |                     |                             |   |
|              | 1 |                     |                             |   |
|              | 0 |                     |                             |   |
|              | . |                     |                             |   |
|              | 0 |                     |                             |   |
|              | 9 |                     |                             |   |
|              |   |                     |                             |   |
|              | - |                     |                             |   |
|              |   |                     |                             |   |
|              |   |                     |                             |   |
|              |   |                     |                             |   |
|              | S |                     |                             |   |
|              | e |                     |                             |   |
|              | c |                     |                             |   |
|              | t |                     |                             |   |
|              | i |                     |                             |   |
|              | o |                     |                             |   |
|              | n |                     |                             |   |
|              |   |                     |                             |   |
|              |   |                     |                             |   |
|              |   |                     |                             |   |
|              |   |                     |                             |   |
|              | 1 |                     |                             |   |
|              | 0 |                     |                             |   |
|              | . |                     |                             |   |
|              | 1 |                     |                             |   |
|              | 0 |                     |                             |   |
|              | . |                     |                             |   |
+--------------+---+---------------------+-----------------------------+---+

Continued on next page

January 1, 2001 13-22

*Chapter 13- Value Notices VA Pamphlet 26-7, Revised Change 3*

13.06 Notice of Value Conditions and Requirements, Continued

+---+-------------+-------------------------------------------------------+
| T |             |                                                       |
| a |             |                                                       |
| b |             |                                                       |
| l |             |                                                       |
| e |             |                                                       |
| o |             |                                                       |
| f |             |                                                       |
| N |             |                                                       |
| O |             |                                                       |
| V |             |                                                       |
| C |             |                                                       |
| o |             |                                                       |
| n |             |                                                       |
| d |             |                                                       |
| i |             |                                                       |
| t |             |                                                       |
| i |             |                                                       |
| o |             |                                                       |
| n |             |                                                       |
| s |             |                                                       |
| & |             |                                                       |
| R |             |                                                       |
| e |             |                                                       |
| q |             |                                                       |
| u |             |                                                       |
| i |             |                                                       |
| r |             |                                                       |
| e |             |                                                       |
| m |             |                                                       |
| e |             |                                                       |
| n |             |                                                       |
| t |             |                                                       |
| s |             |                                                       |
| ( |             |                                                       |
| c |             |                                                       |
| o |             |                                                       |
| n |             |                                                       |
| t |             |                                                       |
| i |             |                                                       |
| n |             |                                                       |
| u |             |                                                       |
| e |             |                                                       |
| d |             |                                                       |
| ) |             |                                                       |
+---+-------------+-------------------------------------------------------+
|   | NOV Item    | Instructions for Preparing the NOV                    |
+---+-------------+-------------------------------------------------------+
|   | Other       | > Check this item and list any other conditions or    |
|   | Conditions  | > requirements necessary to satisfy fee appraiser or  |
|   | &           | > local VA office concerns, or otherwise cause the    |
|   | R           | > property to meet all VA requirements.               |
|   | equirements | >                                                     |
|   |             | > ***Example***:                                      |
|   |             | >                                                     |
|   |             | > If the dwelling will have a permanently installed,  |
|   |             | > non-electric, non-vented fireplace or other         |
|   |             | > non-vented space heater, the NOV must be            |
|   |             | > conditioned to require                              |
|   |             |                                                       |
|   |             | -   the veteran purchaser's written acknowledgement   |
|   |             |     that the dwelling contains an non-vented          |
|   |             |     fireplace or space heater which has not been      |
|   |             |     inspected by VA, and                              |
|   |             |                                                       |
|   |             | -   a written heating/air conditioning contractor,    |
|   |             |     that identifies the property and states that the  |
|   |             |     non-vented appliance                              |
|   |             |                                                       |
|   |             | -   is equipped with an approved Oxygen Depletion     |
|   |             |     Sensor, and                                       |
|   |             |                                                       |
|   |             | -   meets local building authority requirements, or   |
|   |             |     is installed according to the manufacturer's      |
|   |             |     recommendations if there are no local             |
|   |             |     requirements.                                     |
|   |             |                                                       |
|   |             |     > ***Consistency and Additional Conditions***     |
|   |             |                                                       |
|   |             |     > VA offices are expected to be as consistent as  |
|   |             |     > practicable regarding NOV conditions and        |
|   |             |     > requirements. They will notify lenders in       |
|   |             |     > writing when a local situation dictates an      |
|   |             |     > additional condition/requirement not listed on  |
|   |             |     > the standard NOV.                               |
+---+-------------+-------------------------------------------------------+
| - | SAR         | **If ... ...then...**                                 |
|   | Signature   |                                                       |
|   |             | the NOV **was** \*the signature of the SAR is         |
|   |             | required on the NOV                                   |
|   |             |                                                       |
|   |             | issued through sent to the veteran,                   |
|   |             |                                                       |
|   |             | -   TAS \*however, no SAR signature is required on    |
|   |             |                                                       |
|   |             |     E-mailed copies to the veteran.                   |
|   |             |                                                       |
|   |             |     the NOV **was not \*** the signature of the SAR   |
|   |             |     is required on **both** the                       |
|   |             |                                                       |
|   |             |     issued through TAS \*NOV sent to the veteran and  |
|   |             |     the NOV sent to VA.                               |
|   |             |                                                       |
|   |             |     \*the SAR's signature is also required on the SAR |
|   |             |                                                       |
|   |             |     Certification which must be sent to VA with a     |
|   |             |     copy of a reviewed appraisal and NOV.             |
+---+-------------+-------------------------------------------------------+

*Chapter 13- Value Notices VA Pamphlet 26-7, Revised Change 3*

#### 13.07 Distributing Notices of Value

+------------+---------------------------------------------------------+
| #####      | > For cases processed under LAPP, the SAR must send the |
| LAPP Cases |                                                         |
|            | -   veteran borrower the NOV and a copy of the reviewed |
|            |     appraisal report, within five business days of the  |
|            |     lender's earliest receipt of the appraisal report   |
|            |     by the SAR or an authorized agent/broker.           |
|            |                                                         |
|            |     ***Note***: Any delay without documented,           |
|            |     reasonable extenuating circumstances, such as the   |
|            |     need to obtain additional information from the fee  |
|            |     appraiser, will not be acceptable.                  |
|            |                                                         |
|            | -   VA office of jurisdiction                           |
|            |                                                         |
|            | -   a copy of the NOV, and                              |
|            |                                                         |
|            | -   a complete set of the appraisal report contents     |
|            |     (Section 11.04), either on the same day the NOV is  |
|            |     sent to the veteran or by the last day of the month |
|            |     along with the other NOVs issued that month, and    |
|            |                                                         |
|            | -   fee inspector if assigned by VA, a copy of the NOV, |
|            |     if applicable                                       |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ###        | > For VA processed cases, VA will send the              |
| ## NOV Iss |                                                         |
| ued by VA  | -   lender the original NOV or Master CRV and an        |
|            |     original copy of the VA-reviewed appraisal report   |
|            |     with all related exhibits, **and**                  |
|            |                                                         |
|            | -   veteran borrower a copy of the NOV. If the borrower |
|            |     is unknown at the time the NOV is prepared, the     |
|            |     copy will be                                        |
|            |                                                         |
|            | -   retained in the case file and mailed to him/her     |
|            |     upon VA receipt of the Uniform Residential Loan     |
|            |     Application (in "prior approval" cases), **or**     |
|            |                                                         |
|            | -   sent \[ \] after the loan is guaranteed (for loans  |
|            |     processed on the automatic basis).                  |
|            |                                                         |
|            | > ***Note***: For properties valued on a Master CRV,    |
|            | > the veteran borrower's notice of value will be        |
|            | > considered to be [VA Form 26-1820]{.underline},       |
|            | > Report and Certification of Loan Disbursement or [VA  |
|            | > Form 26-1802a]{.underline}, HUD/VA Addendum to        |
|            | > Uniform Residential Loan Application.                 |
+------------+---------------------------------------------------------+

*Chapter 13- Value Notices VA Pamphlet 26-7, Revised Change 3*

#### 13.08 How Long Notice of Value is Valid

+------------+---------------------------------------------------------+
| ####       | > A notice of value for property appraised as existing  |
| # Existing | > or new construction is valid for six months. Rapidly  |
|  or New Co | > fluctuating real estate market conditions may         |
| nstruction | > temporarily dictate the use of a shorter validity     |
|            | > period.                                               |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > A notice of value for a property appraised as         |
| Proposed o | > proposed or under construction is valid for 12        |
| r Under Co | > months. Rapidly fluctuating real estate market        |
| nstruction | > conditions may temporarily dictate the use of a       |
|            | > shorter validity period.                              |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Ve   | > If a veteran signs a purchase agreement during a      |
| teran Unde | > notice of value's validity period, that notice of     |
| r Contract | > value will remain valid until that transaction is     |
|            | > either completed or terminated.                       |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ####       | > VA will extend the validity period only when it is    |
| # Extensio | > determined that current market conditions make it     |
| n of Valid | > likely that the original value estimate will remain   |
| ity Period | > valid through the extended period.                    |
|            | >                                                       |
|            | > Generally, extension requests will be sent to the VA  |
|            | > office of jurisdiction, which will contact the fee    |
|            | > appraiser involved, if appropriate, and issue an      |
|            | > endorsement to the notice of value, if justified.     |
+------------+---------------------------------------------------------+

#### 

*Chapter 13- Value Notices VA Pamphlet 26-7, Revised Change 3*

#### 13.09 Requesting Changes to the NOV

+------------+---------------------------------------------------------+
| ##         | > After a notice of value is issued, the value estimate |
| ### Policy | > or any NOV condition or requirement may be changed if |
|            | > either                                                |
|            |                                                         |
|            | -   the change is clearly warranted and fully supported |
|            |     by real estate market or other valid information    |
|            |     which would be considered adequate and reasonable   |
|            |     by professional appraisal standards, or             |
|            |                                                         |
|            | -   the NOV's issuance involved fraud,                  |
|            |     misrepresentation or substantial VA or LAPP lender  |
|            |     administrative error and action is necessary to     |
|            |     make the valuation consistent with the real estate  |
|            |     market.                                             |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### How  | > Any party of interest may request a change to a NOV.  |
|  to Reques | > For documentation purposes, every such request must   |
| t a Change | > be in writing.                                        |
|            | >                                                       |
|            | > The change request should be submitted to the lender. |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ###        | > Although there is no requirement that comparable      |
| ## Submiss | > sales or other real estate market information be      |
| ion of Rea | > submitted with a request for a change in value, such  |
| l Estate M | > supporting information will greatly assist in         |
| arket Data | > reviewing the request.                                |
|            | >                                                       |
|            | > ***Note:*** A new VA appraisal must not be requested  |
|            | > for any property which already has a valid NOV.       |
|            | > However, an additional appraisal not assigned by VA   |
|            | > can be used to support a request for an increase in   |
|            | > value, provided the veteran purchaser was not         |
|            | > required to pay any portion of the cost of that       |
|            | > additional appraisal.                                 |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Pr   | > Upon receipt of a request to change a notice of       |
| ocessing C | > value, the lender will either:                        |
| hange of N |                                                         |
| OV Request | -   Process the request per Section 13.04               |
|            |     > ("LAPP-Issuing NOV at Other Than Appraiser's      |
|            |     > Value Estimate") or Section 13.06 ("NOV Item --   |
|            |     > Repairs"), if applicable, **or**                  |
|            |                                                         |
|            | -   Forward the request to the VA-assigned appraiser if |
|            |     > it involves a request for increase in the value   |
|            |     > estimate of more than five percent but less than  |
|            |     > 10 percent or otherwise needs fee appraiser       |
|            |     > involvement, (i.e. repairs/condition waivers)     |
|            |     > **or**.                                           |
|            |                                                         |
|            | -   Forward the request to the VA office of             |
|            |     > jurisdiction if it involves a request for         |
|            |     > increase in the value estimate of 10 percent or   |
|            |     > more or if it involves matters regarding          |
|            |     > appraiser's performance.                          |
+------------+---------------------------------------------------------+

Continued on next page

*Chapter 13- Value Notices VA Pamphlet 26-7, Revised Change 3*

13.09 Requesting Changes to the NOV, Continued

+------------+---------------------------------------------------------+
| ###        | > When a fee appraiser receives a request from a lender |
| ## Apprais | > regarding a change in a notice of value, the fee      |
| er's Role  | > appraiser will                                        |
|            |                                                         |
|            | -   record on the request the date that it was received |
|            |     (for VA timeliness calculation purposes)            |
|            |                                                         |
|            | -   review the request and any supporting documentation |
|            |                                                         |
|            | -   prepare a written recommendation, with              |
|            |     justification that would be considered adequate and |
|            |     reasonable by professional appraisal standards, and |
|            |                                                         |
|            |     > ***Note***: In most cases, this will include a    |
|            |     > sales comparison analysis grid or similar         |
|            |     > analysis.                                         |
|            |                                                         |
|            | -   forward the recommendation and all related          |
|            |     documentation to either the                         |
|            |                                                         |
|            | -   lender, if the case is being processed under LAPP   |
|            |     and an increase in value of not more than 5 percent |
|            |     is justified, or                                    |
|            |                                                         |
|            | -   VA office of jurisdiction, in all other cases.      |
|            |                                                         |
|            |     ***Note**:* The appraiser may charge a reasonable   |
|            |     fee (not to exceed that allowed by VA) if the       |
|            |     market data necessary to reconsider the value       |
|            |     estimate was not available at the time of the       |
|            |     appraisal.                                          |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | -   Upon receipt of either a request from a lender to   |
|  VA's Role |     change a notice of value or a fee appraiser's       |
|            |     recommendation regarding a change to a notice of    |
|            |     value, VA staff will:                               |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   review the material received,                       |
|            |                                                         |
|            | -   contact the fee appraiser, if necessary, and        |
|            |     otherwise determine if the requested change is      |
|            |     justified, and                                      |
|            |                                                         |
|            | -   notify the lender of VA's decision.                 |
+------------+---------------------------------------------------------+

Continued on next page

*Chapter 13- Value Notices VA Pamphlet 26-7, Revised Change 3*

13.09 Requesting Changes to the NOV, Continued

+------------+---------------------------------------------------------+
| ##### Len  | > For cases processed under LAPP, an amended NOV will   |
| der's Role | > be issued in TAS and provided to the veteran          |
|            | > purchaser,                                            |
|            |                                                         |
|            | -   upon reconsideration by the SAR of additional data  |
|            |     > justifying an increase in value, of not greater   |
|            |     > than five percent, or                             |
|            |                                                         |
|            | -   upon receipt of a fee appraiser's justified         |
|            |     > recommendation for an increase in value, of not   |
|            |     > greater than five percent, or                     |
|            |                                                         |
|            | -   upon receipt of the VA letter authorizing an        |
|            |     > increase in value or other changes to the NOV.    |
|            |                                                         |
|            |     > Documentation concerning the change is to be      |
|            |     > retained for future VA reference. The amended NOV |
|            |     > will replace the original NOV which will not be   |
|            |     > retained.                                         |
+------------+---------------------------------------------------------+

**VA Pamphlet 26-7, Revised Chapter 13: Value Notices**

#### 13.10 Transfer of Appraiser's Reports Between Lenders

+------------+---------------------------------------------------------+
| ####       | > Lenders are expected to cooperate on a reciprocal     |
| # Lender C | > basis when a veteran purchaser chooses to have        |
| ooperation | > his/her mortgage transaction completed by a lender    |
|            | > other than the one who ordered the appraisal.         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > A LAPP notice of value is **not** transferable to     |
| LAPP Cases | > another lender. However, an appraisal report          |
|            | > requested by one lender can be subsequently used by a |
|            | > LAPP lender, if the LAPP lender assumes full          |
|            | > responsibility for LAPP processing by performing a    |
|            | > complete review of the appraisal report and issuing,  |
|            | > on its own letterhead, a notice of value to the       |
|            | > veteran borrower.                                     |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### O    | > If the subsequent lender does not have LAPP authority |
| ther Cases | > and no VA Form 26-1843, Certificate of Reasonable     |
|            | > Value, was ever issued by VA staff, then all          |
|            | > appraisal documentation must be submitted to VA. VA   |
|            | > staff will review that material and issue a VA Form   |
|            | > 26-1843 to the subsequent lender.                     |
|            | >                                                       |
|            | > A notice of value issued by VA staff on VA Form       |
|            | > 26-1843 can be transferred to a subsequent lender.    |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | -   If a subsequent lender is unable to obtain an       |
|  If Unable |     original copy of a needed appraisal report and all  |
|  to Obtain |     addenda, including clear copies of all pictures,    |
|  Appraisal |     that lender may contact the fee appraiser involved  |
|            |     for that documentation. The fee appraiser may       |
|            |     negotiate a reasonable fee, to be paid by the       |
|            |     lender or veteran, for any additional work that may |
|            |     be necessary.                                       |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Va   | > For information on validity period issues, see        |
| lidity Per | > Section 13.08.                                        |
| iod Issues |                                                         |
+------------+---------------------------------------------------------+

January 1, 2001 13-29

**VA Pamphlet 26-7, Revised Chapter 13: Value Notices**

#### 13.11 Discovery of Title Limitations & Conditions

+------------+---------------------------------------------------------+
| ##### Requ | > Any title limitation or condition discovered after    |
| irement to | > examination of the title but prior to loan closing    |
|  Notify VA | > must be submitted to the VA office of jurisdiction    |
|            | > (along with a copy of the appraisal report in LAPP    |
|            | > cases), unless it                                     |
|            |                                                         |
|            | -   was considered in the appraisal report, or          |
|            |                                                         |
|            | -   is listed in [38 CFR 36.4350]{.underline} as        |
|            |     **not** materially affecting the reasonable value   |
|            |     of residential property.                            |
|            |                                                         |
|            |     > **\[[38 CFR 36.4350]{.underline}\]**              |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### If V | > If the VA notice of value was based on a HUD value    |
| A Value Ba | > determination per Chapter 10.11, and neither of the   |
| sed on HUD | > above two exclusions apply, the lender must           |
|  Appraisal |                                                         |
|            | -   contact HUD to determine what effect, if any, the   |
|            |     limitation or condition has on the value of the     |
|            |     property, and                                       |
|            |                                                         |
|            | -   provide the VA office of jurisdiction with the      |
|            |     results so that office can issue a VA Form 26-6363, |
|            |     Endorsement to Certificate of Reasonable Value.     |
+------------+---------------------------------------------------------+

Continued on next page

January 1, 2001 13-30

**VA Pamphlet 26-7, Revised Chapter 13: Value Notices**

13.11 Discovery of Title Limitations & Conditions, Continued

+------------+---------------------------------------------------------+
| ##         | > Per, the following conditions or limitations to title |
| ### Limita | > have been determined by VA as not materially          |
| tions and  | > affecting the VA value estimate of residential        |
| Conditions | > property (whether or not enforceable by a reverter    |
|  Not Affec | > clause), provided there has been no breach of the     |
| ting Value | > conditions affording a right to an exercise of the    |
|            | > reverter clause.                                      |
|            | >                                                       |
|            | > **\[[38 CFR 36.4350]{.underline}\]**                  |
+------------+---------------------------------------------------------+

+----------------------------+-----------------------------------------+
| When the limitation or     | There is no material affect on the VA   |
| condition is ...           | value estimate if ...                   |
+----------------------------+-----------------------------------------+
| Building or use            | -   no violation exists, and            |
| Restriction                |                                         |
|                            | -   the proposed use by the veteran is  |
|                            |     not likely to result in a           |
|                            |     violation.                          |
+----------------------------+-----------------------------------------+
| -   Violation of Building  | -   they have existed for more than one |
|     or Use Restrictions of |     year,                               |
|     Record                 |                                         |
|                            | -   are not the subject of pending or   |
|                            |     threatened litigation, and          |
|                            |                                         |
|                            | -   do not provide for a reversion or   |
|                            |     termination of title, condemnation  |
|                            |     by municipal authorities, or a lien |
|                            |     for liquidated damages which may be |
|                            |     superior to the lien of the         |
|                            |     guaranteed or insured mortgage.     |
+----------------------------+-----------------------------------------+
| -   Easement               | -   public utility/drainage easement    |
|                            |     along one or more of the property   |
|                            |     lines or easement for drainage or   |
|                            |     irrigation ditches, provided the    |
|                            |     exercise of the rights of such      |
|                            |     easement does not interfere with    |
|                            |     the use of any of the buildings or  |
|                            |     improvements located on the subject |
|                            |     property                            |
|                            |                                         |
|                            | -   mutual easement for joint driveway  |
|                            |     located partly on the subject       |
|                            |     property and partly on adjoining    |
|                            |     property, provided the agreement is |
|                            |     recorded in public records, or      |
|                            |                                         |
|                            | -   easement for underground conduits   |
|                            |     which are in place and which do not |
|                            |     extend under any buildings on the   |
|                            |     subject property.                   |
+----------------------------+-----------------------------------------+

Continued on next page

January 1, 2001 13-31

**VA Pamphlet 26-7, Revised Chapter 13: Value Notices**

13.11 Discovery of Title Limitations & Conditions, Continued

  -----------------------------------------------------------------------
  Limitations and Conditions Not Affecting Value (continued)

  -----------------------------------------------------------------------

+----------------------------+-----------------------------------------+
| When the limitation or     | There is no material affect on the VA   |
| condition is ...           | value estimate if ...                   |
+----------------------------+-----------------------------------------+
| Encroachment               | -   encroachment on the subject         |
|                            |     property by improvement on the      |
|                            |     adjoining property when such        |
|                            |     encroachment does not exceed one    |
|                            |     foot within the subject boundaries, |
|                            |     provided such encroachment does not |
|                            |     touch any buildings or interfere    |
|                            |     with the use or enjoyment of any    |
|                            |     building or improvement on the      |
|                            |     subject property                    |
|                            |                                         |
|                            | -   encroachment by hedges or removable |
|                            |     fences belonging to subject or      |
|                            |     adjoining property                  |
|                            |                                         |
|                            | -   encroachment not exceeding one foot |
|                            |     on adjoining property by driveway   |
|                            |     belonging to subject property,      |
|                            |     provided there exists a clearance   |
|                            |     of at least eight feet between the  |
|                            |     buildings on the subject property   |
|                            |     and the property line affected by   |
|                            |     the encroachment, or                |
|                            |                                         |
|                            | -   lot line variation between the      |
|                            |     length of the subject property      |
|                            |     lines as shown on the plot plan or  |
|                            |     other exhibits submitted to VA and  |
|                            |     as shown by the record or           |
|                            |     possession lines, provided such     |
|                            |     variation does not interfere with   |
|                            |     the current use of any of the       |
|                            |     improvements on the subject         |
|                            |     property and does not involve a     |
|                            |     deficiency of more than two percent |
|                            |     with respect to the length of the   |
|                            |     front line, or more than five       |
|                            |     percent with respect to the length  |
|                            |     of any other line.                  |
+----------------------------+-----------------------------------------+

Continued on next page

January 1, 2001 13-32

**VA Pamphlet 26-7, Revised Chapter 13: Value Notices**

13.11 Discovery of Title Limitations & Conditions, Continued

+------------+---------------------------------------------------------+
| #####      | -   For limitations/conditions submitted to VA which    |
|  VA Proces |     were not considered in the appraisal report or      |
| sing of Li |     covered by [38 CFR 36.4350]{.underline}, the VA     |
| mitations/ |     office of jurisdiction will                         |
|            |                                                         |
| ###        | -                                                       |
| ## Conditi |                                                         |
| ons Affect | -   contact the fee appraiser (via VA Form Letter       |
| ing Value  |     26-209) if additional information is needed to      |
|            |     determine the effect of the limitation/condition on |
|            |     the value estimate                                  |
|            |                                                         |
|            | -   consider the impact of the condition/limitation on  |
|            |     the reasonable value of the property, and           |
|            |                                                         |
|            | -   notify the lender or other interested party of its  |
|            |     determination via either VA Form Letter 26-210 or   |
|            |     an endorsement (containing the language found on FL |
|            |     26-210) to the request for VA consideration of the  |
|            |     condition/limitation.                               |
|            |                                                         |
|            | -                                                       |
|            |                                                         |
|            | -   **\[[38 CFR 36.4350]{.underline}\]**                |
+------------+---------------------------------------------------------+

January 1, 2001 13-33

**VA Pamphlet 26-7, Revised Chapter 13: Value Notices**

#### 13.12 Effect of Major Disasters on Notices of Value

+------------+---------------------------------------------------------+
| ##### VA   | > As soon as practicable after a major natural          |
| Notice to  | > disaster, VA offices in the area(s) affected by the   |
| Program Pa | > disaster will send their program participants         |
| rticipants | > instructions regarding the handling of cases in which |
|            | > a notice of value is outstanding.                     |
+------------+---------------------------------------------------------+

January 1, 2001 13-34

**VA Pamphlet 26-7, Revised Chapter 13: Value Notices**

#### Exhibit 1---LAPP Lender's Notice of Value

\[on lender\'s letterhead\]

**LENDER\'S NOTICE OF VALUE**

\[date of notice\] LENDER LOAN NO.: VA CASE NO.:

APPRAISAL REVIEWER: \[SAR name, SAR id #\]

\[Mr. and/or Ms.\] \[purchaser\'s PROPERTY ADDRESS: \[complete address\]

name and current mailing address\]

Dear \[Mr. and/or Ms.\] \[purchaser\'s last name\]:

The above property has been appraised by a fee appraiser assigned by the
VA regional office in \[city and state\]. On \[date\], our VA-authorized
appraisal reviewer personally reviewed the fee appraiser\'s report and
determined the property\'s estimated reasonable value to be
\$\[amount\]. The maximum repayment period for a loan to purchase this
property is \[fee appraiser\'s \"economic life\" estimate or 30,
whichever is less\] years.

**The VA appraisal was made to determine the reasonable value of the
property for loan purposes. It must not be considered a building
inspection. Neither VA nor the lender can guarantee that the home will
be satisfactory to you in all respects or that all equipment will
operate properly. A thorough inspection of the property by you or a
reputable inspection firm may help minimize any problems that could
arise after loan closing. In an existing home, particular attention
should be given to plumbing, heating, electrical and roofing
components.**

**REMEMBER: VA GUARANTEES THE LOAN, NOT THE CONDITION OF THE PROPERTY.**

**THE CONDITIONS/REQUIREMENTS CHECKED BELOW APPLY TO THIS PROPERTY:**

\_\_\_\_\_ 1. **ENERGY CONSERVATION IMPROVEMENTS.** You may wish to
contact the utility company or a reputable firm for a home energy audit
to identify needed energy efficiency improvements to this previously
occupied property. Lenders may increase the loan amount to allow buyers
to make energy efficiency improvements such as: Solar or conventional
heating/cooling systems, water heaters, insulation,
weather-stripping/caulking and storm windows/doors. Other energy-related
improvements may also be considered. The mortgage may be increased by up
to \$3,000 based solely on documented costs; or up to \$6,000 provided
the increase in monthly mortgage payment does not exceed the likely
reduction in monthly utility costs; or more than \$6,000 subject to a
value determination by VA.

Continued on next page

January 1, 2001 13-35

**VA Pamphlet 26-7, Revised Chapter 13: Value Notices**

Exhibit 1---LAPP Lender's Notice of Value, Continued

CONDITIONS/REQUIREMENTS (CONTINUED)

\[Check all items which apply and give appropriate information\]

PROPERTY ADDRESS \[complete address\] VA CASE NO.:

\_\_\_\_\_2. **WOOD-DESTROYING INSECT INFORMATION**

\_\_\_\_\_a. **Inspection Report (Existing Construction).** The property
must be inspected at no cost to you by a qualified pest control operator
using Form NPCA-1, or other form acceptable to VA. Any reported
infestation or structural damage affecting the value of the property
must be corrected to VA\'s satisfaction prior to loan settlement. You
must acknowledge receipt of a copy of the inspection report in the space
provided on the form.

\_\_\_\_\_b. **Soil Treatment Guarantee (Proposed or Under
Construction).** A properly completed Form NPCA-99a is required. If the
soil is treated with a termiticide, a properly completed Form NPCA-99b
is also required. The lender will provide you with a copy.

\_\_\_\_\_3. **LIEN-SUPPORTED ASSESSMENT.** This property is located in
a development with mandatory membership in a homeowners' association.
The lender is responsible for ensuring that title meets VA requirements
for such property and that homeowner association assessments are
subordinate to the VA-guaranteed mortgage.

\_\_\_\_\_a. **Homeowner Association Fee.** Estimated fee of
\$[\[amount\]]{.underline} per \[[period of time]{.underline}\].

\_\_\_\_\_b. **Other.**
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_4. **CONDOMINIUM REQUIREMENTS.** The lender is responsible for
ensuring that this condominium is acceptable to VA and that any
condominium-related special conditions or requirements have been met.
There may be additional information in "Other Conditions/Requirements"
below.

\_\_\_\_\_5. **WATER/SEWAGE SYSTEM ACCEPTABILITY.** Evidence from the
local health authority or other source authorized by VA that the
individual \_\_\_\_\_ **water supply**, **\_\_\_\_\_sewage disposal**
system(s) is/are acceptable.

\_\_\_\_\_6. **CONNECTION TO PUBLIC WATER/SEWER.** Evidence of
connection to \_\_\_\_\_ **public water**, \_\_\_\_\_ **public sewer**,
if available, and that all related costs have been paid in full.

\_\_\_\_\_7. **PRIVATE ROAD/COMMON-USE DRIVEWAY.** Evidence that use of
the private road or common-use driveway is protected by a recorded
permanent easement or recorded right-of-way from the property to a
public road, and that a provision exists for its continued maintenance.

Continued on next page

January 1, 2001 13-36

**VA Pamphlet 26-7, Revised Chapter 13: Value Notices**

Exhibit 1---LAPP Lender's Notice of Value, Continued

**CONDITIONS/REQUIREMENTS (CONTINUED)**

\[Check all items which apply and give appropriate information\]

PROPERTY ADDRESS: \[complete address\] VA CASE NO.:

\_\_\_\_\_8. **FLOOD INSURANCE.** Since improvements on this property
are located in a FEMA Special Flood Hazard Area, flood insurance is
required.

\_\_\_\_\_9. **"AIRPORT" ACKNOWLEDGEMENT.** Your written acknowledgement
that you are aware that this property is located near an airport and
that aircraft noise may affect the livability, value and marketability
of the property.

\_\_\_\_\_10.**REPAIRS.** The \_\_\_\_\_ **lender** \_\_\_\_\_ **fee
appraiser**
(\_\_\_\_\_\_\_\_\_[\[name\]]{.underline}\_\_\_\_\_\_\_\_\_\_)
\_\_\_\_\_ **fee compliance inspector**
(\_\_\_\_\_\_\_\_\_[\[name\]]{.underline}\_\_\_\_\_\_\_\_\_\_) is to
certify that the following repairs have been satisfactorily completed.
See the above second paragraph about your responsibility concerning the
condition of the property.

[\[List repairs recommended by fee appraiser which are necessary to make
the]{.underline}

[property meet VA minimum property requirements for existing
construction.]{.underline}

[Inspections/certifications should not be required unless there is an
indication]{.underline}

[of a potential problem.\]]{.underline}

\_\_\_\_\_11. **LOCAL HOUSING/PLANNING AUTHORITY CODE REQUIREMENTS.**
Evidence that local housing or planning authority code requirements, if
any, have been met.

\_\_\_\_\_12. **"NOT INSPECTED" ACKNOWLEDGEMENT.** Your written
Acknowledgement that, you are aware that since this new property was not
inspected during construction by VA,

\_\_\_\_\_a. VA assistance with construction complaints will be limited
to defects in equipment, material and workmanship reported during the
one-year builder's warranty period.

\_\_\_\_\_b. VA will not intercede on your behalf in the processing of
any construction complaints.

\_\_\_\_\_13. **TEN-YEAR INSURED PROTECTION PLAN.** Evidence of
enrollment of this new property in a 10-year insured protection plan
acceptable to the Department of Housing and Urban Development (HUD).

Continued on next page

January 1, 2001 13-37

**VA Pamphlet 26-7, Revised Chapter 13: Value Notices**

Exhibit 1---LAPP Lender's Notice of Value, Continued

**CONDITIONS/REQUIREMENTS (CONTINUED)**

\[Check all items which apply and give appropriate information\]

PROPERTY ADDRESS: \[complete address\] VA CASE NO.:

\_\_\_\_\_14. **ENERGY EFFICIENT CONSTRUCTION.** Builder\'s
certification which identifies this new dwelling and states that it was
constructed to meet the energy conservation standards of the Council of
American Building Officials (CABO) 1992 Model Energy Code (MEC).

\_\_\_\_\_15. **LEAD/WATER DISTRIBUTION SYSTEM.** Builder\'s
certification which identifies this new dwelling and states that the
solders and flux used in construction did not contain more than 0.2
percent lead and that the pipes and pipe fittings used did not contain
more than 8.0 percent lead.

\_\_\_\_\_16. **OFFSITE IMPROVEMENTS.** Evidence that the streets,
sidewalks, drains, water, sewer, etc. have been completed and accepted
for maintenance by the local authority.

\_\_\_\_\_17 **PROPOSED CONSTRUCTION.** To be completed based on
construction exhibits identified as \_\_\_\_[\[model name; or type of
construction, square footage, \# rooms, \# bedrooms and \#
bathrooms\]]{.underline}\_\_\_\_\_\_

\_\_\_\_\_18. **CONSTRUCTION INSPECTIONS.** By VA fee compliance
inspector (\_\_\_\_\_\_\_\_\_[\[name\]]{.underline}\_\_\_\_\_\_\_\_\_\_)
or HUD fee inspector (with prior VA approval). \_\_\_\_\_ Only a final
inspection is required if local building authority inspections are
acceptable to VA, or if builder to provide you with a ten-year insured
protection plan acceptable to HUD.

\_\_\_\_\_19. **CONSTRUCTION WARRANTY.** One-year VA builder\'s warranty
on a fully completed VA Form 26-1859, Warranty of Completion of
Construction.

Continued on next page

January 1, 2001 13-38

**VA Pamphlet 26-7, Revised Chapter 13: Value Notices**

Exhibit 1---LAPP Lender's Notice of Value, Continued

**CONDITIONS/REQUIREMENTS (CONTINUED)**

\[Check all items which apply and give appropriate information\]

PROPERTY ADDRESS: \[complete address\] VA CASE NO.:

\_\_\_\_\_20. **OTHER CONDITIONS/REQUIREMENTS**

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Sincerely,

\[signature, name and title of person authorized to sign notice\]

January 1, 2001 13-39

**VA Pamphlet 26-7, Revised Chapter 13: Value Notices**

Airport Acknowledgement, 13-15

Appraisal Report Changes, 13-5

Appraiser's Role on NOVs, 13-27

Building or use Restriction, 13-31

Certification Wording, 13-7

Change in the Fee Appraiser's Value Estimate, 13-9

Change Justification, 13-9

Change Restrictions to Value Estimate, 13-9

Changing Notices of Value, 13-26

Changing Notices of Value - Lender's Role, 13-28

Connection to Public Water/Sewer, 13-14

Construction Inspections, 13-20

Construction Warranty, 13-21

Discovery of Title Limitations & Conditions, 13-30

Distributing Notices of Value, 13-24

Documenting LAPP Appraisal Reviews, 13-7

Easement, 13-31

Effect of Major Disasters on Notices of Value, 13-34

Encroachment, 13-32

Energy Conservation Improvements, 13-12

Energy Efficient Construction, 13-19

Exhibit 1---LAPP Lender's Notice of Value, 13-35

Extension of Validity Period, 13-25

Flood Insurance, 13-15

How Long Notice of Value is Valid, 13-25

Importance of VA Value Estimate, 13-1

Issuing a Notice of Value, 13-1

LAPP Cases, 13-24

LAPP Notice of Value, 13-29

LAPP---Related Changes to Appraiser's Value Estimate, 13-9

Lead/Water Distribution System, 13-19

Lead-Paint Conditions, 13-16

Lender Timeliness, 13-6

Lender\'s Staff Appraisal Reviewer, 13-7

Lien Supported Assessment, 13-13

Limitations and Conditions Not Affecting Value, 13-31

Limitations, 13-33

Local Housing/ Planning Authority Code Requirements, 13-17

Not Inspected Acknowledgement, 13-18

Notice of Value Conditions and Requirements, 13-12

Notice of Value Contents, 13-11

NOV fFrmat When Prepared by VA Staff, 13-11

NOV Format Under LAPP, 13-11

NOV Validity Length for Existing or New Construction, 13-25

NOV Validity Length for Proposed or Under Construction, 13-25

NOV's Issued by VA Staff, 13-24

Offsite Improvements, 13-20

Other Conditions & Requirements, 13-23

Penalty for Abuse, 13-9

Potential Conflict With State, 13-10

Preparing Notices of Value, 13-11

Private Road/Common Use Driveway, 13-14

Proposed Construction, 13-20

Proposed or Under Construction, 13-20, 13-25

PUD Condominium Requirements, 13-14

Purpose of Appraisal Report Review, 13-3

Real Estate Market Familiarity, 13-4

References for Reviewing Appraisal Reports, 13-3

Referral to VA, 13-6

Repairs, 13-16

Request a Change on a NOV, 13-26

Requirement to Notify VA, 13-30

Resolving LAPP Appraisal Review Problems, 13-5

Reviewing Appraisal Reports, 13-3

SAR Certification, 13-8

SAR Certification Placement, 13-7

SAR's Responsibility, 13-7

SAR's Value Change was Unwarranted, 13-9

State\'s Requirements for Appraisers, 13-10

Submission of Real Estate Market Data, 13-26

Table of NOV Conditions & Requirements, 13-12

Ten Year Insured Protection Plan, 13-18

Transfer of Appraiser's Reports Between Lenders, 13-29

Unable to Obtain Appraisal, 13-29

VA Notice to Program Participants, 13-34

VA Value Based on HUD Appraisal, 13-30

VA's Role on NOVs, 13-27

Validity Period Issues, 13-29

Value Notices, 13-1

Veteran Under Contract, 13-25

Violation of Building or Use Restrictions of Record, 13-31

Water/Sewer System Acceptability, 13-14

Wood Destroying Insect Information, 13-13