October 30, 2020

Bulletin 2020-107 FHA Loans – Extension and Update to Temporary COVID-19 Guidance for Re-verification of Employment and Alternative Appraisal Report Options

FHA Loans – Extension and Update to Temporary COVID-19 Guidance for Re-verification of Employment and Alternative Appraisal Report Options

Background

 

NewRez is extending and updating the temporary guidance on FHA loans for re-verification of employment and use of alternative appraisal reports that was previously communicated in NewRez Announcement 2020-068.

 

This update to the guidance includes several changes. The previous option for Desk-top only appraisal reports has been eliminated. Desktop appraisal reports with effective dates on or before October 31, 2020 and performed in compliance with FHA Mortgagee Letter 2020-05, can still be used to close FHA transactions. A temporary waiver to suspend requirements for interior photographs on post disaster inspection reports has also been added. The guidance in this announcement supersedes all previous announcements on these topics.

 

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

 

The revised temporary appraisal guidance is effective immediately for loans currently in pipeline and new submissions for appraisal inspections (except for Desktop appraisals with effective dates on or before October 31) completed on or before December 31, 2020.

 

Below is a summary of the current 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 ten calendar days of the Note date. NewRez will waive the re-verification of employment within ten calendar 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 statement 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 10 calendar 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 a Exterior-Only appraisal report 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.

 

Transaction Type

Exterior-Only Appraisal

Standard FHA Interior and Exterior Inspection Appraisal Report

Purchase

Yes

Yes

Refinance

• Rate & Term Refinance
• Simple Refinance

 

Yes

Yes

Streamline Refinance

N/A

N/A

Cash-Out Refinance

No

Yes

New Construction

  • ​Purchase
  • Build on Own Land

No

Yes

 

The Exterior-Only option must contain or have attached the following amended certification and scope of work disclosure (Model Appraisal Exterior-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 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.

 

Temporary Policy to Waive Requirements for “Interior” Photographs in Presidentially Declared Major Disaster Areas (PDMDA).

 

FHA has issued a temporary waiver to suspend the standard inspection requirement for “interior” photographs of property in designated PDMDAs. In order to provide consistency, the effective dates for this waiver will be concurrent with the exterior-only inspections flexibilities described above.

 

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