July 19, 2020
In March, 2020 in response to the coronavirus outbreak in the United States, the FHA and HUD issued a press release announcing changes in FHA appraisal policy. Those changes temporarily eliminated the requirement to do in-person appraisals that might run in violation of community social distancing policies.
The FHA and HUD modified the appraisal policy for FHA home loan transactions that meet specific criteria (see below) temporarily–but those modifications were originally set to expire near the end of May 2020.
Now, with COVID-19 gaining momentum once again, HUD has extended the modified appraisal guidelines (as well as employment verification rules)–they will now be in effect until the end of August 2020.
Exterior-Only Appraisal Extensions: Not the First Time
The extension announced by HUD is not the first time such extensions have been announced; according to the HUD official site, the most current action is a “re-extension of Appraisal guidance in Mortgagee Letter2020-05” which is effective immediately for appraisal inspections completed on or before August 31, 2020.
“The extension of re-verification of employment guidance in Mortgagee Letter 2020-05 is effective immediately for cases closed on or before August 31, 2020.”
What the Extensions Do
According to the press release at HUD.gov, the newly extended guidelines include but may not be limited to the following:
- “Most” Single Family forward and FHA Reverse Mortgage (for purchase) transactions may use an optional Exterior-Only or Desktop-Only Appraisal.
- Traditional FHA Reverse Mortgages (also known as FHA Home Equity Conversion Mortgages), HECM-to-HECM refinances, Rate and Term Refinances and Simple Refinances are also permitted to use an optional Exterior-Only.
- According to HUD.gov, “all appraisals made in connection with the servicing of FHA’s forward or reverse mortgage portfolios” may use either the Exterior-Only or Desktop-Only Appraisal inspection scope of work.
Streamline Loans and Cash-Out Refi
HUD has announced no changes in this area for FHA Streamline Refinance loans, FHA Cash-Out refinances, 203(k) Rehabilitation mortgages, and “certain purchase transactions”.
Exterior-only appraisals include the following instructions by HUD:
“Appraiser will observe the Property and Improvements from the street. The Appraisal will be completed “AS IS” unless Minimum Property Requirements (MPR) related deficiencies are observed from the street or otherwise known.”
The amended guidelines also state, “The Appraiser may utilize extraordinary assumptions when necessary. No sketch, interior photos or rear exterior photographs are required.”
The extensions to appraisal and other policies in response to COVID-19 are at the time of this writing NOT permanent and the extensions of this policy are not being added to the FHA Lender’s Handbook as a permanent feature.
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