The Federal Housing Finance Agency (FHFA) announced on Monday that it is mandating federal loan servicers Fannie Mae and Freddie Mac relax standards for property appraisals and verification of employment amidst the extraordinary circumstances faced during the coronavirus outbreak.
The announcement comes about one week after the loan servicers said that borrowers may be able to postpone mortgage payments for up to 12 months.
In lieu of using these traditional measures of determining mortgage eligibility, the loan servicers will use “appraisal alternatives to reduce the need for appraisers to inspect the interior of a home for eligible mortgages,” the FHFA said in a statement. Likewise, because many businesses have either shut down or are operating with a bare minimum of employees for the time being, the FHFA conceded that obtaining a verbal employment verification is becoming more difficult, and will therefore accept alternatives like a recent paystub, a bank statement showing a payroll deposit or a written verification of employment sent directly from the employer via email.
Although a traditional appraisal and verbal verification of employment are still preferred, the loan servicers are allowing these alternatives because of the potential health risks involved in obtaining them and in order to help “facilitate liquidity in the mortgage market during the coronavirus national emergency,” the FHFA said in a statement.
“We will accept an alternative to the traditional appraisal required under Selling Guide Chapter B4-1, Appraisal Requirements, when an interior inspection is not feasible because of Covid-19 concerns,” Fannie Mae said in a lender letter released on Monday. “We will allow either a desktop appraisal or an exterior-only inspection appraisal in lieu of the interior and exterior inspection appraisal (i.e., traditional appraisal).”
A desktop appraisal would include the appraiser reviewing public records, multiple listing service data and other third-party data to assess the property. This type of appraisal would be conducted before resorting to an exterior-only inspection. However, these alternatives are only available for certain loans, namely purchase loans and limited cash-out refinance loans owned by Fannie Mae.
The new alternative measures for mortgage eligibility are currently in effect through May 17, 2020.