Coronavirus has and COVID-19 containment measures have forced those in many career fields to change how business gets done–and the mortgage industry is no exception.
It is clear that the economic fallout from the current crisis will be felt for years to come, and there are many who look to the amount of time it took for the nation to economically recover from the housing crisis of 2008, thinking that better long-term planning this time around might be the best approach.
Mortgage Industry Changes
Consumers have already experienced how Coronavirus has forced changes in proceedures related to buying and selling a home.
The in-person walkthrough, the open house, and the in-person appraisal are all much more rare at the time of this writing in many communities. Not all require the same level of lockdown, but many many communities do.
And with that in mind, when it became clear that the global pandemic was not simply going to “disappear like magic”, mortgage industry professionals took action. What kind?
One good example–the FHA modified its appraisal guidelines to temporarily suspend the requirement that an appraiser must enter the home to perform the appraisal work.
This is one excellent reason why the FHA, HUD, lenders, and real estate agents insist that borrowers NOT skip the optional (but absolutely critical) home inspection.
Appraisals were NEVER inspections to begin with, but now that the appraiser is not required to set foot in home (however temporarily), it should be obvious to any buyer why an inspection is necessary.
What are we talking about here? Due to COVID-19, appraisals can be done, for a limited period, by observing the exterior of the property only, or with exterior review supplemented by other materials according to guidelines issued by the FHA during the pandemic.
But those aren’t the only changes–the FHA recently announced innovations in how its appraisals are submitted.
The FHA Catalyst: Electronic Appraisal Delivery module was announced the week of August 17, 2020 and was named in the FHA/HUD press release as being an “enhancement” to the agency’s electronic appraisal report submission features “while maintaining industry standard appraisal data sets in use today throughout the housing finance industry.”
The Future Of Loan Approval Standards?
The Consumer Financial Protection Bureau (CFPB) has announced it is reviewing the concept of a new Qualified Mortgage that could help future borrowers who were affected by financial hardship to qualify for a mortgage in spite of things like missed payments due to coronavirus-related unemployment, etc.
Qualified Mortgages are defined by CFBP as, “a category of loans that have certain, more stable features that help make it more likely that you’ll be able to afford your loan. A lender must make a good-faith effort to determine that you have the ability to repay your mortgage before you take it out…”
The hope is that such a program would benefit many including those affected by a disaster or pandemic-related national emergency.
According to CFPB’s statement about this concept, the idea is that such hardship “would not disqualify a loan from becoming a seasoned QM loan if the borrower received a temporary payment accommodation and made full contractual payments.”
CFPBs efforts in this area are still at the proposed stage and are not being drafted into law, but it’s an example of the kinds of thinking that are being done at the highest levels and with the consumer’s current plight firmly in mind.