October 20, 2020

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Time Is Running Out On Exterior-Only FHA Appraisals

Time Is Running Out On Exterior-Only FHA Appraisals

In August 2020, the FHA and HUD issued an extension of their temporary exterior-only appraisal guidelines for borrowers applying for FHA mortgages and refinance loans.

This measure, and others similar to it, came after the President declared a national emergency with respect to the coronavirus pandemic and, according to the FHA/HUD official site, “initiated actions to stem the threat to public health and the American economy.”

On March 27, 2020, HUD published Mortgagee Letter 2020-05, authorizing “flexibilities to the re-verification of employment and Acceptable Appraisal Reporting Forms and Protocols by allowing exceptions for Exterior-Only and Desktop Appraisal inspections in certain transactions”.

The original measures were issued in March of 2020 to allow FHA appraisers to perform their work on FHA mortgages without having to put themselves at risk of COVID-19 by entering homes to do appraisal work–temporary rules permitted appraisers to review property from the exterior only or by using online tools instead of in-person, in-the-home work.

These temporary guidelines were originally set to expire in May 2020 but the updated guidance issued in August extends the exterior-only appraisal rules until October 31, 2020.

That’s according to FHA mortgagee letter 2020-28, titled, Re-Extension of the Effective Date of Mortgagee Letter (ML) 2020-05, Re-verification of Employment and Exterior-Only and Desktop-Only Appraisal Scope of Work Options for the Federal Housing Administration (FHA) Single Family programs impacted by the CoronavirusDisease of 2019(COVID-19).

The FHA and HUD have extended these appraisal rules for the third time and if conditions warrant, the agencies could choose to extend the guidelines a fourth time, though at press time there is no indication that it may actually do so.

The extension of appraisal guidelines mentioned here is “effective immediately for appraisals with an effective date on or before October 31, 2020.”

The third extension also included an extension to the FHA’s modified employment verification guidelines, which are intended to, “allow industry partners additional opportunity to utilize flexible guidance related to reverification of employment and appraisal protocol for FHA Single Family programs affected by COVID-19.”

The extension of re-verification of employment guidance is also effective for cases closed on or before October 31, 2020.

FHA borrowers should not expect the modified appraisal and employment verification guidelines to be permanent–the changes are strictly temporary in spite of multiple extensions, and will not be incorporated into the FHA Lender’s Handbook, HUD 4000.1.

Those who have questions about how these rules may affect their home loan transaction should discuss their concerns with a participating FHA lender.

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