In March of this year, FHFA published a news release granting flexibilities for appraisals on purchase and rate term refinance loans. This decision is designed to help borrowers and lenders during the COVID-19 pandemic. FHFA has extended the loan flexibilities numerous times since. It has now been extended once again until November 30, 2020, according to the latest news release from FHFA on October 19, 2020.
Appraisals are still required in order to secure a loan, however with the FHFA flexibilities, appraisals can now be done with alternative options. There is still the option of an in-person inspection. If a licensed appraiser conducts an on-site inspection, they are asking the homeowners to vacate the home while they perform an inspection wearing masks and gloves. If an on-site inspection is not an option, there are two alternative options, the desktop appraisal and the hybrid appraisal. With desktop appraisal, the licensed appraiser will determine how much a property is worth using market research and finding comparable properties using MLS and tax sites. The downside of desktop appraisal is that it will be difficult to account for the considerable amount of remodeling that had been completed and justify increasing the value of the property. The hybrid appraisal is a combination of a desktop appraisal and additional resources such as photos of the exterior and interior of the property, a drive-by of the property, or possibly having an interior inspection via video-call with the homeowner. Technology has allowed the hybrid appraisals to be popular and efficient.
Other FHFA flexibilities include:
- Alternative methods for documenting income and verifying employment before loan closing
- Expanding the use of power of attorney to assist with loan closings
For more in-depth information regarding these flexibilities during this coronavirus pandemic, click on the provided links below:
- FNMA Lending Letter LL-2020-03
- FNMA Lending Letter LL-2020-04
- Freddie Mac Bulletin 2020-5
- Freddie Mac Bulletin 2020-8
- Freddie Mac Bulletin 2020-11
- Freddie Mac Bulletin 2020-40