August 4, 2020

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HUD Extends Modified Exterior-Only Appraisals During COVID-19

HUD Extends Modified Exterior-Only Appraisals During COVID-19

The World Heath Organization says “the worst is yet to come” with regard to the global coronavirus pandemic; the Department of Housing And Urban Development responded to COVID-19 quarantine measures in March 2020, eliminating a requirement temporarily to suspend in-person or indoor appraisal activity.

Those changes temporarily meant FHA appraisals would not be subject to a requirement for in-person appraisals that might run in violation of community social distancing policies.

The appraisal policy (as well as modified employment verification requiremets for certain loans). But that was all set to expire (more than once, as we’ll read below) until HUD acted to extend these measures anew.

Now, with COVID-19 hot spots in the forefront of American news headlines, 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. 

“The extension of re-verification of employment guidance in Mortgagee Letter2020-05 is effective immediately for cases closed on or before August 31, 2020”.

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. 

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 these temporarily modified rules issued 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.”

At the time of this writing, these measures are not being made a permanent feature of FHA home loan rules and extension of these policies are not being added to the FHA Lender’s Handbook as a permanent feature.

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