August 31, 2020

Bulletin 2020-068 FHA Loans – Temporary COVID-19 Underwriting Guidance

FHA Loans – Temporary COVID-19 Underwriting Guidance. Updated to extend effective date for temporary guidance.

FHA Loans – Temporary COVID-19 Underwriting Guidance

 

  • Updated May 20, June 30, and August 31, 2020 to extend effective date for temporary guidance
  • Updated April 3 to revise re-verification of employment time frame to within three business days of note date

 

FHA Loans – Temporary Guidance for Verifications of Employment and Appraisal Reports

NewRez is implementing several temporary guideline changes for re-verification of employment and utilizing Exterior-Only and Desktop-Only Appraisal reports as alternatives to the standard Exterior-Interior Inspection Appraisal report. These changes were made to reflect current realities with the public health emergency and market conditions as a result of the COVID-19 pandemic. Several of the changes are specific NewRez product overlays and the other changes are adoption of temporary flexibilities that FHA has made for alternative appraisal reports.

 

The temporary re-verification of employment guidance is effective immediately for loans currently in pipeline and new submissions for cases closed on or before October 31, 2020.

 

The temporary appraisal guidance is effective immediately for loans currently in pipeline and new submissions for appraisal inspections completed on or before October 31, 2020.

 

Below is a summary of the guideline flexibilities that NewRez LLC will offer and implement for the underwriting of FHA loans.

 

Re-Verification of Employment

 

Effective immediately, NewRez will require a verbal re-verification of employment within three business days of the Note date. NewRez will waive the re-verification of employment within three business days of the Note date, provided:

 

  • that the correspondent is not aware of any loss of employment by the borrower, and
  • for purchase transactions, evidence that the borrower has a minimum of two-month PITI reserves; and
  • a year-to-date paystub or direct electronic verification of income (e.g., TPV vendor such as The Work Number) for the pay period that immediately precedes the Note date. (Bank statements showing direct deposit from the borrower’s employment is not eligible).

 

For self-employed borrowers, NewRez is requiring verification that the borrower’s business remains operational and must be done within 20 business days of the Note date.

 

Temporary FHA Appraisal Protocols including Appraisal Forms and Amended Certifications

 

When standard Exterior-Interior Inspection Appraisal reports are not feasible due to circumstances caused by the COVID-19 pandemic emergency, FHA will temporarily permit the use of Exterior-Only and Desktop-Only appraisal report options for certain types of purchase and refinance transactions. Please refer to the below grid to ensure that correct appraisal type is selected when ordering the appraisal for the transaction.

 

The optional appraisal reports must be reported on the existing acceptable FHA appraisal reporting forms by Property and Assignment Type.

 

The appraisal report must include a signed certification indicating whether the appraiser did or did not personally inspect the subject property and the extent of the inspection.

 

 

The Exterior-Only and Desktop Appraisal options must contain or have attached the following amended certifications and scope of work disclosures (Model Appraisal Exterior-Only Certification (3/20) and Model Appraisal Desktop-only Certification (3/20). Please note that the Exterior-Only Appraisal forms Fannie Mae/Freddie Mac 2055 and Fannie Mae/Freddie Mac 1075 are not FHA approved forms and therefore, not compatible with FHA’s Electronic Appraisal Delivery (EAD) portal.

 

The required protocols and exhibits for the Exterior-Only report option are:

 

  • 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 appraiser may utilize extraordinary assumptions when necessary.
  • No sketch, interior photos or rear exterior photographs are required.

 

The required protocols and exhibits under the Desktop-Only Option are:

 

  • Appraiser will not physically observe the property and improvements.
  • The appraisal will be completed “AS IS” unless MPR related deficiencies are known.
  • The appraiser may utilize extraordinary assumptions when necessary.
  • No sketch, interior photos, exterior photographs are required.
  • No comparable viewing nor photos are required.

 

The appraiser may rely on supplemental information from other reliable sources such as Multiple Listing Service (MLS), and Tax Assessor’s Property Record to prepare an appraisal report. The appraiser may rely on information from an interested party to the transaction (borrower, real estate agent, property contact, etc.) with clear appraisal report disclosure when additional verification is not feasible. The appraisal report must contain adequate information to enable the intended users to understand the extent of the inspection that was performed.

 

When evidencing MPR repair completion and the Appraisal Update and/or Completion Report (Form 1004D/442) Part B cannot be completed by the FHA Roster appraiser. FHA will permit a letter signed by the borrower affirming that the repair work was completed and accompanied with supporting evidence of completion, such as photographs of the completed work, paid invoices indicating completion, occupancy permits, or other substantially similar documentation. All completion documentation must be retained in the case binder.

 

These flexibilities for evidencing repair completions are not permitted on New Construction and Building on Own Land transactions.

 

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