FHA Requiring 2nd Appraisals on Jumbos

The Federal Housing Administration is requiring a second appraisal on jumbo mortgages above $417,000 in declining markets and limiting the maximum LTV on cash-out refinancings to 85%. The direct endorsement lender must select the appraiser for the second appraisal if the property is located in a market where house prices are declining, according to an FHA mortgagee letter. The letter also imposes a maximum loan-to-value ratio on cash-out refinancings. If the "loan balance exclusive of FHA's upfront mortgage insurance premium will exceed $417,000, the LTV may not exceed 85% of the appraiser's estimated value," the FHA says. The economic stimulus bill signed by President Bush in mid-February temporarily raises the FHA loan limit to 125% of median home prices in high-cost areas, with a cap of $729,725.