e. Examples of Restrictions that do not Require VA Approval

Title to property involving reasonable encroachments, easements, servitudes, and reservations for water, timber, or subsurface rights, generally do not require VA approval.  However, they must be taken into consideration in determining reasonable value.

If any of these restrictions impact the basic livability of the property, VA approval is required.

f. Effect of Title Limitations on Reasonable Value

Title conditions or limitations must be shown on the [ ] NOV and considered by the appraiser in determining the reasonable value of the property.

If the lender discovers, prior to loan closing, title conditions or limitations not shown on the [ ] NOV, the lender must have VA review the conditions and determine whether the value assigned to the property is materially affected. 

Without such a determination by VA, the lender risks a later finding that the condition or limitation affects the reasonable value of the property to the extent that

·   the loan will be ineligible for guaranty, or

·   a claim on the guaranty will be subject to reduction under

·   38 CFR 36.4325(b)(10). 

When VA reasonable value is based on HUD Form 92800.5B, Conditional Commitment, Direct Endorsement, Statement of Appraised Value, lenders must contact HUD to process requests for review of title conditions or limitations.