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U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, D. C. 20410-8000

January 4, 1989
OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-
FEDERAL HOUSING COMMISSIONER
Mortgagee Letter 89-1
TO:  ALL APPROVED MORTGAGEES
SUBJECT:  Single Family Subdivision Processing Requirements-
              VA/CRVs and MCRVs
 
        Legislation signed by the President on November 7 directs
that for a one-year period the Secretary must consider the issuance
of a CRV or MCRV for any lot in a subdivision to be an administrative
approval of that subdivision by the Veterans Administration.
Therefore, under Section 535 of the Housing Act of 1949, HUD must
approve that subdivision on a reciprocal basis without further
subdivision processing.  The purpose of this legislation is to
facilitate the acceptance of subdivisions containing CRVs and MCRVs
by the Department.
 
        This authority to accept CRVs and MCRVs as evidence of
subdivision approval is valid until November 7, 1989.  So long as the
CRV or MCRV has not expired, it is acceptable evidence of subdivision
approval.  The instructions and time frames in any of the
Department's prior issuances which contradict these instructions are
now void.
 
        In language accompanying the legislation, the Conference
Committee stated as a basic objective that HUD reciprocal approvals
of subdivisions containing lots on which VA has issued CRVs/MCRVs
should "not result in insuring housing in obvious questionable
locations".
 
        Prior to the conversion of the initial CRV or MCRV in a
subdivision that is not on the local HUD Office's list of "HUD
Approved Subdivisions," Page 1 of the Appraiser/Reviewer Appraiser
Checksheet, HUD Form 54891 (copy enclosed), must be completed and the
subdivision accepted by the Department.  This may be done
concurrently with the processing of the builder/developer's
application for a CRV/MCRV, but the subdivision will not be added to
the list until the CRV/MCRV has been issued.
 
        The Checksheet shall be completed as described below by: A
HUD fee appraiser, a VA fee appraiser or a HUD approved DE
underwriter or DE staff appraiser employed by the lender to which the
CRV or MCRV has been presented for conversion.  The lender may select
the person from the above group to complete Page 1 of the checksheet.
Once completed, the lender must submit Page 1 to the HUD Office for
review and subdivision acceptance.  The fee schedule applicable for
checksheets being prepared in "improved areas" is to be used for
determining fee appraiser compensation.
 
        When completing Page 1 of the checksheet, the question "Does
the improved area meet the partially completed criteria?" is not to
be answered.  Also, questions 1.4 and 1.6 are not to be completed and
should be crossed out.  The person visiting the site and completing
Page 1 is also to:
 
        a.      Indicate Subdivision Phase and the number of lots
                included.
 
        b.      Indicate for Question 1.1 if the property is in a
                100-year floodplain, floodway or coastal high hazard
                area according to FEMA floodplain maps.
 
        c.      Indicate for Question 1.7 if the property is within 1
                mile of a civil airport or 5 miles of a military
                airfield.
 
        The person who has visited the site and completed Page 1
should sign on the Fee Appraiser line.  If that person is a DE
Underwriter or Staff Appraiser, the form should be so annotated.
 
        For purposes of the checksheet, the "subdivision" is that
portion of the subdivision being actively developed by the
builder/developer.  The builder/developer is responsible for
providing a copy of a recorded plat or subdivision plan to the lender
that sets forth the lots which are to be included in the portion
being considered for HUD acceptance.  Future phases of a development
are not to be included in the checksheet evaluation and will not be
considered as accepted until such time as the builder/developer
begins to actively develop that phase and goes through the procedures
required to qualify the new phase as a HUD Approved Subdivision.
 
        While the check sheet is being prepared and then subsequently
reviewed by HUD, the lender may not close the mortgage.  This
prohibition against loan closing without HUD's acceptance of the
subdivision extends to the DE program as well as HUD processed loans.
The completed checksheet together with a copy of the recorded plat
and a copy of the CRV or MCRV must be forwarded by the lender to the
HUD Office for review and acceptance.
 
        If, based upon a review of the checksheet and other
information known to the office, the HUD Office determines that no
known environmental or other adverse conditions exist, or that
acceptable mitigation measures have been completed, it shall include
the subdivision or phase, if appropriate, on its list of approved
subdivisions and immediately advise the lender in writing that it may
proceed with the conversion of the CRV or MCRV.  Once this acceptance
process has been completed, lenders may then convert other CRVs and
MCRVs in that subdivision as they would for a CRV or MCRV in any HUD
approved subdivision.
 
        The HUD Office is authorized to reject some or all of the
properties in a subdivision if it determines, after reviewing the
checksheet and other available information, as well as a meeting with
the developer/builder, that the properties are adversely affected by
environmental or other hazards that would affect the health or safety
of the occupants. In such cases, the HUD Office must advise the
lender in writing that the mortgages will not be eligible for
mortgage insurance.  Alternatively, the HUD Office may impose
requirements as conditions for acceptance.
 
        A five working day time limit is established from receipt of
the checksheet for completion of its review by the Field Office. If
necessary, completion of review should be promptly followed by a
meeting with the developer/builder in order to verify findings or
agree upon mitigation measures.  Acceptance, conditional acceptance
or rejection of the subdivision should immediately follow completion
of these processing steps by the Field Office.
 
        This checksheet process is only applicable to subdivisions
that are being accepted based on a CRV or MCRV for which the
application was submitted to the VA after August 1, 1988.  If the
subdivision is on HUD's list of approved subdivisions, CRVs or MCRVs
in such subdivisions may be converted in the normal manner.
 
        When processing a request for a HUD appraisal (DE or HUD
Conditional Commitment) on a spot lot which is located in a HUD
approved subdivision which was accepted based on a CRV or MCRV, the
appraisal is to be completed in the normal manner.  The appraiser is
required to determine that the property in question is not adversely
affected by environmental or other hazards that would affect the
health or safety of the occupants.  If such conditions exist, the
property is to be rejected for insured financing or the appraisal
conditioned for correction prior to eligibility for insurance
endorsement.  The appraiser must consider in the value estimate any
adverse conditions which would affect value.
 
        If the HUD Office is processing a subdivision which did not
previously qualify because the application for the CRV or MCRV was
received by VA after August 1, 1988, and the developer now wants to
use a CRV or MCRV to qualify the subdivision, the HUD Office will
cease subdivision processing upon notice from the applicant. No
refund of the subdivision processing fee is to be authorized.
 
        If you have questions concerning this Mortgagee Letter,
please contact the Valuation Branch of your local HUD Office.
 
                Sincerely yours,
                Thomas T. Demery
                Assistant Secretary
Enclosure