APPRAISALS COVID-19 © 2020 Fannie Mae LL-2020-04
During this COVID-19 national emergency, in many cases, lenders are unable to obtain an appraisal based on a full interior and exterior inspection of the subject property. In response, we are allowing temporary flexibilities to our appraisal requirements. We are working closely with Freddie Mac under the guidance of FHFA to offer these temporary measures.
We are releasing information to our customers as quickly as possible and will update and republish this Lender Letter as new guidance becomes available. We have also published LL-2020-02, Impact of COVID-19 on Servicing, and LL-2020-03, Impact of COVID-19 on Originations.
This Lender Letter provides information about the following:
Temporary appraisal requirement flexibilities: allowing exterior-only inspection appraisals or desktop appraisals
Desktop appraisals: allowing for purchase transactions when an interior and exterior appraisal is not available
Exterior-only inspection appraisals: allowing for purchase and refinances of Fannie Mae-owned loans
Revisions to the scope of work, statements of assumptions and limited conditions, and appraiser’s certifications: requiring modified language to be used with exterior-only and desktop appraisals
Additional form instructions for appraisals: requiring identification of “exterior” or “desktop” on the interior and exterior reports
Identification of a Fannie Mae loan: reminding lenders about our Loan Lookup tool to identify Fannie Mae-owned loans
Appraisal waivers: encouraging lenders to accept waiver offers when eligible
Delivery requirements: changes are not required at this time in Loan Delivery
Completion reports (Form 1004D): allowing alternatives when a Form 1004D cannot be obtained
HomeStyle® Renovation and HomeStyle Energy requirements: requiring traditional appraisals for these transactions
Effective: These temporary flexibilities are effective immediately for all loans in process and remain in place for loans with application dates on or before May 17, 2020.
Temporary appraisal requirement flexibilities:
Effective immediately, we are allowing temporary flexibilities to our appraisal inspection and reporting requirements. As described below, 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. 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).
If a traditional appraisal is not obtained and there is insufficient information about the property for an appraiser to be able to complete an appraisal assignment with a desktop or exterior-only inspection appraisal, the loan will not be eligible for delivery to us.
*Excludes new construction and construction-to-permanent loans. NOTE: For all loans with LTV ratios greater than 80%, we require mortgage insurance in accordance with our standard Selling Guide policy. Lenders must consult with their mortgage insurance companies to confirm coverage for mortgages using one of the temporary appraisal flexibilities.
Desktop appraisals:
For purchase money transactions when an interior and exterior appraisal is not available, lenders are encouraged to obtain a desktop appraisal rather than an exterior-only appraisal.
The minimum scope of work for a desktop appraisal does not include an inspection of the subject property or comparable sales. The appraiser relies on public records, multiple listing service (MLS) information, and other third-party data sources to identify the property characteristics.
When a desktop appraisal is performed, reported on Form 1004 or Form 1073, and submitted to us through the Uniform Collateral Data Portal® (UCDP®), the appraisal will be scored by Collateral Underwriter® (CU®). All loans with a CU risk score of 2.5 or less will receive value representation and warranty relief under Day 1 Certainty. With desktop appraisals, lenders will have the added risk management and efficiency benefit of being able to use CU to aid in the appraisal review process.
The table below provides the appraisal report form that must be used to complete the desktop appraisal for each property type.
As described below, Freddie Mac and Fannie Mae have worked together to develop documents that include modified appraisal report language for the scope of work, statement of assumptions and limiting conditions, and certifications that must be used with these appraisal forms.
Exhibits for desktop appraisals:
Each desktop appraisal report must include the following exhibits:
a location map indicating the location of the subject and comparables, and
photographs of the subject property. We recognize that it may be challenging in some instances to obtain photographs; however, it is expected that the appraiser utilize available means to obtain relevant pictures of the subject property.
Exterior-only inspection appraisals:
An exterior-only inspection appraisal may be obtained in lieu of an interior and exterior inspection appraisal for the following transactions:
Purchase money loans
Limited cash-out refinances where the loan being refinanced is owned by Fannie Mae
Lenders will not receive value representation and warranty relief under Day 1 Certainty® for loans with exterior-only appraisals.
The table below shows the appraisal report form that must be used to complete an exterior-only inspection appraisal for each property type. Because there are not appropriate exterior-only appraisal report forms available for two-four unit properties and manufactured homes, we will accept an exterior appraisal scope of work completed using the applicable forms listed below.
As further described below, Freddie Mac and Fannie Mae have worked together to develop documents that include modified appraisal report language for the scope of work, statement of assumptions and limiting conditions, and certifications that must be used with these appraisal forms.
Exhibits for exterior-only inspection appraisals:
Lenders are reminded that the following exhibits to the appraisal report are required for an exterior-only inspection appraisal:
a street map that shows the location of the subject property and of all comparable sales that the appraiser used;
clear, descriptive photographs (either in black and white or color) that show the front of the subject property, and that are appropriately identified (photographs must be originals that are produced either by photography or electronic imaging); and
any other data−as an attachment or addendum to the appraisal report form−that are necessary to provide an adequately supported opinion of market value.
Revisions to the scope of work, statements of assumptions and limited conditions, and appraiser’s certification:
We recognize that the existing appraisal report forms do not accommodate the revised scope of work, statement of assumptions and limiting conditions, and certifications for some of the scenarios presented. To accommodate the temporary flexibilities in this Lender Letter, Freddie Mac and Fannie Mae have jointly developed the following documents that include modified language to be used with desktop appraisal reports and exterior-only appraisal reports:
These documents include modified language for the scope of work, statement of assumptions and limiting conditions, and certifications. It is important to note that certification #10 has been removed in recognition that the appraiser may have relied on information from an interested party to the transaction (borrower, realtor, property contact, etc.) and additional verification may not have been feasible. Appraisal reports submitted to us using the flexibilities provided in this Lender Letter must include these documents with the modified language for scope of work, statement of assumptions and limiting conditions, and certifications.
Additional form instructions for appraisals:
For a desktop appraisal or an appraisal with an exterior-only inspection that is completed on a form for an interior and exterior inspection (e.g., Form 2055) as permitted above, the appraisal report must include, in the “Map Reference” field, the corresponding text identifier that reports the type of appraisal completed: “desktop” or “exterior.”
Identification of a Fannie Mae loan
Lenders can determine whether the existing loan is a Fannie Mae loan by referencing their own servicing records or by using the Loan Lookup tool.
Appraisal waivers:
Lenders are encouraged to accept appraisal waiver offers when eligible and provided through DU to address concerns around contact between appraisers and homeowners. Lenders are reminded to submit the case to DU to determine whether an appraisal waiver is offered before ordering an appraisal. We remind lenders that all Selling Guide requirements pertaining to appraisal waivers apply (see Selling Guide B4-1.4-10). We are continuing to monitor the impact of COVID-19 and will evaluate additional appraisal waiver flexibilities if the situation warrants such action.
Delivery requirements :
At this time, lenders are not required to make any changes to the data they submit to Loan Delivery in connection with the flexibilities announced in this Lender Letter. We will assess whether changes will be necessary and will notify lenders if changes are required at a future date.
Completion reports (Form 1004D) :
We require the Appraisal Update and/or Completion Report (Form 1004D) to evidence completion when the appraisal report has been completed “subject to.” For all loans for which a completion certification is not available due to issues related to COVID-19, with the exception of HomeStyle® Renovation and HomeStyle Energy loans, we will permit a letter signed by the borrower confirming that the work was completed. Lenders must also provide further evidence of completion, which may include photographs of the completed work, paid invoices indicating completion, occupancy permits, or other substantially similar documentation. All completion documentation must be retained in the loan file.
HomeStyle Renovation and HomeStyle Energy requirements:
The temporary appraisal flexibilities for desktop and exterior-only appraisals and completion reports may not be used with HomeStyle Renovation or HomeStyle Energy loans when the appraisal is done subject to completion. Lenders must use a traditional appraisal with an interior and exterior inspection for these transactions as well as a 1004D when one is required. If a lender is unable to obtain a traditional appraisal, the loan is not eligible for sale to us. Additional information concerning other requirements for renovation loans will be provided in a forthcoming Lender Letter.
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