Government agencies are relaxing some requirements to help keep real estate transactions and refinancings moving forward. Last week, Fannie Mae and Freddie Mac announced they were easing standards for both property appraisals and employment verifications for loans they are purchasing, in light of the COVID-19 pandemic.
The Federal Housing Administration and Department of Veterans Affairs have also recently announced similar moves. The government agencies said they would allow for alternative appraisals and income verifications since both are more difficult to complete as the outbreak spreads across the U.S.
The FHA and VA said late Friday that they will permit exterior-only appraisals, also referred to as drive-by appraisals. Also, in some cases, they will permit alternative methods to complete an appraisal where the appraiser doesn’t examine the property at all. Instead, the appraiser may rely on public records, multiple service information, and third-party data sources to identify property characteristics.
The VA’s new appraisal rules apply to mortgages for home purchases and refinancings.
“The potential risks associated with COVID-19 provides unique challenges in the appraisal process as VA fee panel appraisers may be required to access the interior of homes,” the VA said in a statement. Therefore, the VA is changing its “long-standing practice of requiring access to the interior of the home for certain types of loans and characteristics of those loans. … Considering the health and safety of veterans and VA Appraiser Fee Panel members during this national emergency, valuations may come in a form of an exterior-only appraisal with enhanced assignment conditions or in limited instances, a desktop appraisal.” The VA said it will return to normal operations for appraisals and income verifications as soon as the national emergency lifts.
The FHA also approved appraisers to use “exterior-only or desktop-only appraisal inspections” as a substitute for interior inspections during this time for home purchases and refinancings.
Also, the agencies—like Fannie Mae and Freddie Mac did before them—announced easing their employment verification policies. “Many employers have suspended non-essential operations in compliance with state and local government directives,” the FHA said in a statement. “This has hampered the ability of mortgagees to fully comply with FHA requirements for reverification of employment, either verbal or electronic, to be completed within 10 days prior of the date of the note.”
Borrowers applying for an FHA loan can now use multiple methods to verify their employment, such as year-to-date pay stubs or direct electronic verification of income dated immediately prior to the note date or a bank statement showing a direct deposit from the borrower’s employer for the pay period that immediately precedes the settlement date.
View more information on the VA changes and FHA changes.
Source: “FHA: Exterior-Only and Desktop-Only Appraisal Scope of Work Options,” HUD.gov (March 27, 2020); “Veterans Affairs Dept. ‘Valuation Practices During COVID-19,” HUD.gov (March 27, 2020); and “FHA, VA Join Fannie, Freddie in Relaxing Some Standards,” Housingwire (March 30, 2020)
