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FHA Amends Appraisal Guidelines

HUD Building

COVID-19 is loud, blistering, in fact, and, when it comes to real estate, carries a big stick.

Case in point: during the pandemic, appraisal prerequisites for most Federal Housing Administration (FHA) insured loans are being relaxed by the FHA, it’s been announced.

This was announced in Mortgagee Letter 2020-20 runs through August 31 in Mortgage Letter 2020-20. It overrides the allowance for desktop and curbside appraisals, in place through May 17, per ML 2020-05 published in late March.

According to the Department of House and Urban Development (HUD), the re-extension of Appraisal guidance in Mortgagee Letter 2020-05 is immediately effective for appraisal inspections completed on or before Aug. 31, 2020. Effective immediately for cases closed on or before Aug. 31, 2020, is the extension of re-verification of employment guidance in Mortgagee Letter 2020-05.

According to the FHA, appraisers are among many at risk in the home loan industry. After all, under normal circumstances, they are required to enter strangers’ homes, risking exposure to infection.

A press release, issued by the FHA and HUD at the end of March, pronounced revisions in FHA appraisal policy. It addresses the importance of completing appraisals without exposing individuals to additional risks. A set of temporary modifications to FHA appraisal requirements for single-family home loans was included in the announcement. The release, available at HUD.gov, stated that a few changes include:

“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.

HUD stated that “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.

“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,” HUD stated.

The amended guidelines also stated, “The Appraiser may utilize extraordinary assumptions when necessary. No sketch, interior photos or rear exterior photographs are required.”

These rule changes are not made to last; they expire May 17, 2020, unless otherwise extended by the FHA and HUD.

About Author: Chuck Green

Chuck Green has contributed to the Wall Street Journal, Washington Post, Los Angeles Times, San Francisco Chronicle, Chicago Tribune and others covering various industries, including real estate, business and banking, technology, and sports

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