Selling Guide

Published June 3, 2020

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COVID-19 FAQs: Appraisals (06/03/2020)

COVID-19 FAQs Selling - Appraisals

Last Updated: June 03, 2020

In response to the COVID-19 national emergency, Fannie Mae and Freddie Mac have provided temporary guidance to lenders on several policy areas that support selling mortgage originations.  These FAQs provide additional information on the temporary policies. We will be adding more FAQs, therefore we encourage you to check in frequently for updates - refer to the "NEW" or "UPDATED" notations after the question.

Note:  The numbering sequence is from the PDF document that contains all COVID-19 Selling FAQs. These have been separated for easier reference by topic. Click below to access COVID-related FAQs, Lender Letters and other resources:

COVID-19 FAQs

Lender Letters

Other Resources

 

Appraisals - FAQs

  1. May a desktop or exterior only inspection appraisal report completed using the appraisal flexibilities offered by Lender Letter LL-2020-04 include photos or other information provided by the borrower/owner?

Yes. Consistent with USPAP, appraisers are permitted to consider and develop any information deemed credible.  It is important to note, certification #10 has been removed in recognition that the appraiser may have relied on information from an interested party to the transaction (borrower, realtor, property contact, etc.) and additional verification may not have been possible. 

 

  1. How will the appraiser be able to obtain subject photos for a desktop appraisal report? 

Photos can be obtained from sources such as third-party websites, owners, or listing services, etc.

Note: Any use restrictions on photos must be honored. 

 

  1. What if adequate information is not available for the appraisal? 

Appraisers may use information in MLS, reach out to the broker, homeowner, public records, and/or other online tools such as satellite imagery and street views to obtain the necessary property information. A good faith effort should be used to provide information that the appraiser believes is reasonable. If adequate information about the subject property is not available, the mortgage will not be eligible for sale to us until the appraiser has sufficient information to complete the desktop appraisal or an appraisal with an exterior-only inspection. 

 

  1. Why does Fannie Mae allow the desktop appraisal for purchase but not refinances?

Homes available for purchase are the most likely to have current photos and data concerning the subject property. Refinances may have very dated information in the MLS, if any at all. Having the appraiser complete an exterior inspection provides current information about the home’s condition that might not be available otherwise. Reminder, for refinances of non-Fannie Mae owned loans and all cash-out refinances, we continue to require a traditional appraisal.

 

  1. What form should be used for a desktop appraisal obtained in accordance with the temporary COVID-19 flexibilities announced in Lender Letter LL-2020-04  Impact of COVID-19 on Appraisals

As noted in LL-2020-04, the following Forms can be used to complete a desktop appraisal: 

  • Uniform Residential Appraisal Report (Form 1004)
  • Individual Condominium Unit Appraisal Report (Form 1073)
  • Individual Cooperative Interest Appraisal Report (Form 2090)
  • Small Residential Income Property Appraisal Report (Form 1025)
  • Manufactured Home Appraisal Report (Form 1004C)

Other desktop appraisal forms are not allowed for a Fannie Mae-eligible loan. 
 

  1. What form should be used for an exterior-only inspection appraisal obtained in accordance with the temporary COVID-19 flexibilities announced in Lender Letter LL-2020-04, Impact of COVID-19 on Appraisals

As noted in LL-2020-04, the following Forms can be used to complete an exterior-only appraisal:

  • Exterior-Only Inspection Residential Appraisal Report (Form 2055)
  • Exterior-Only Inspection Individual Condominium Unit Appraisal Report (Form 1075)
  • Exterior Only Individual Cooperative Interest Appraisal Report (Form 2095)
  • Small Residential Income Property Appraisal Report (Form 1025)
  • Manufactured Home Appraisal Report (Form 1004C) 

Other exterior-only or drive-by appraisal forms are not allowed for a Fannie Mae-eligible mortgage.

 

  1. Why is Fannie Mae requiring the appraisal include the entry “desktop” in the Map Reference field of the appraisal report? 

This helps identify the scope of work completed. Because we are permitting desktop appraisals to be completed on forms that are typically used for interior and exterior inspection appraisals, we will be relying on the text in the Map Reference field to identify the type of appraisal (desktop) completed. It is critical that the Map Reference field show “desktop” when applicable. 

 

  1. Why is Fannie Mae requiring the appraisal include the entry “exterior” in the Map Reference field of the appraisal report? 

This helps identify the scope of work completed. Because we are  permitting exterior-only appraisals to be completed on forms that are typically used for interior and exterior inspection appraisals, we will be relying on the text in the Map Reference field to identify the type of appraisal (exterior-only) completed. It is critical that the Map Reference field show “exterior” when applicable. 

 

  1. Will desktop appraisals still be scored by Collateral Underwriter® the same way?  

Yes, desktop appraisals completed on Forms 1004 and 1073 will be scored by Collateral Underwriter just as traditional appraisals are scored when these forms are used. 

 

  1.  Will mortgages with desktop appraisals be eligible for representation and warranty relief for value?

Yes. When a desktop appraisal is obtained using Uniform Residential Appraisal Report (Form 1004) , or Individual Condominium Unit Appraisal Report (Form 1073) and submitted to Uniform Collateral Data Portal® (UCDP®), the appraisal will be assessed for valuation representation and warranty relief in Collateral Underwriter. All appraisals with a risk score of 2.5 or less that meet the requirements of the Selling Guide will receive valuation representation and warranty relief. 

 

  1. How should an appraiser include the revised scope of work, statements of assumptions and limiting conditions, and appraiser’s certifications in the appraisal report? 

The modified scope of work, statements of assumptions and limiting conditions, and appraiser’s certifications addressed in the Lender Letter must be copied and pasted, in its entirety, into a text addendum, with no edits or alterations. This may be done on a separate text addendum form, or as part of a general text addendum. 

 

  1. Must a desktop appraisal or exterior-only inspection appraisal report be submitted “subject to” an extraordinary assumption? 

The revised scope of work and certification removes the requirement for the appraisal to be submitted “subject to” an extraordinary assumption. If adequate information about the subject property is not available from a credible source, then the desktop or exterior-only inspection appraisal is not acceptable. Appraisers must have data sources they consider reliable. The assumption that data sources are correct is not considered an extraordinary assumption. 

 

  1. Lender Letter LL-2020-04, Impact of COVID-19 on Appraisals says that reports for desktop appraisals must include subject photos.  What photos are required? 

At a minimum, there must be a front photo of the subject property. Additionally, in order to pass through automated review systems used by many lenders and AMCs, it may be necessary for the report to include all photos required for an appraisal based on an interior and exterior inspection.  In such cases, an appraiser should include all photos that are available. 

Except for the required front photo, for photos that are not available, an appraiser may include a photo of a statement saying that the photo was not available. 

 

  1. Does an appraisal report have to include subject property and comparable sales photos when the report is an exterior-only appraisal assignment?

An exterior only appraisal must include a front photograph of the subject on a subject photo page. The appraiser may use photos obtained from credible and reliable sources to represent the subject and comparables used on the appraisal. Although not required the presence of a comparable photos page, with images, may be necessary to allow the appraisal report to pass automated review systems.

 

  1. Are manufactured homes  and two- to four-unit properties covered even though there is no exterior-only appraisal form to support them? 

We will allow lenders to use Interior/Exterior forms for two- to four-unit and manufactured homes with the appropriate scope of work, statements of assumptions and limiting conditions, and appraiser’s certifications provided with Lender Letter LL-2020-04Impact of COVID-19 on Appraisals.  

 

  1. Manufactured home appraisals require specific, and detailed information from the HUD Certification Label. How will the appraiser obtain this information for desktop appraisals and exterior-only inspection appraisals? 

For exterior-only inspection appraisals, the appraiser may obtain a photo of the HUD Certification Label, provided they are given permission by the property owner to access the site. For a desktop appraisal, the appraiser may request the owner or an individual that has access to the property to provide a photo of the HUD Certification Label, and deliver it via email or other means to the appraiser.  

With both the desktop and drive-by appraisal, the appraiser may request the borrower, owner, or an individual that has access to the property interior to provide a photo of the HUD Data Plate. The appraiser will need to communicate with the lender or AMC to ensure there is sufficient information available to complete the assignment type ordered. 

 

  1. When obtaining a desktop or exterior only appraisal, does the lender need to document that that they attempted to obtain a traditional appraisal and were not successful due to COVID-19?

No. Lender Letter LL-2020-04, Impact of COVID-19 on Appraisals, lists the appraisal types that are suitable for each transaction type while maintaining prudent and responsible lending practices. Lenders delivering mortgages with one of the permitted flexibilities are not required to provide documentation showing that they could not obtain a traditional appraisal due to COVID-19. Lenders are empowered to exercise the flexibilities as described in the lender letter.

 

  1. How should a lender address markets with “shelter in place” mandates where appraisers are not deemed an essential workforce?

Lenders may use flexibilities described in our lender letter. Travel restrictions will likely vary from location to location, and lenders and appraisers should comply with all applicable requirements in their jurisdiction. There may be instances where an appraisal simply cannot be obtained until circumstances change.

 

  1. Does an appraisal that includes the revised scope of work, statements of assumptions and limiting conditions, and appraiser’s certifications provided in LL-2020-04, Impact of COVID-19 on Appraisals also need an extraordinary assumption to address when information was provided by a party that may have a financial interest in the transaction?

No. As stated in LL-2020-04, the appraiser’s certification #10 was removed recognizing that the appraiser may have to rely on information from an interested party to the transaction (borrower, real estate agent, property contact, etc.) and additional verification may not be possible. The removal of this certification acknowledges this could affect the assignment’s results. If adequate information is not available to complete the appraisal, the assignment cannot be completed.

 

  1. For purchase transactions, Fannie Mae’s temporary requirements are dependent on mortgage LTV ratios which may be difficult for lenders to operationalize. Does Fannie Mae have any suggestions on how to manage this operational challenge?

Each lender will need to operationalize as they deem appropriate. In cases where the lender is reasonably certain they will not be able to obtain an interior and exterior inspection appraisal, some lenders use the sales contract price in order to estimate the LTV ratio prior to ordering the appraisal.

 

  1. What guidance can lenders provide to appraisers who claim it is a violation of USPAP to complete a desktop appraisal using forms designed for traditional appraisals, like the Form 1004/70?

The Appraisal Standards Board has issued guidance specific to this topic. They indicate that, with proper disclosure, the modified appraisal report form does not result in a misleading appraisal report or a violation of USPAP. The published Q&A can be found on The Appraisal Foundation website.

 

  1. If a desktop appraisal is ordered and accepted by the appraiser, may the appraiser expand the scope of work to include an exterior inspection of the subject property or comparable sales? In this situation, what identifier would the appraisal include in the Map Reference field?

Yes. The appraiser is responsible for determining what is an adequate scope of work for any assignment and may choose to expand the scope beyond the minimum requirements. In this instance, the appraiser would enter “desktop” as this reflects the appraisal type agreed to with the acceptance of the assignment and the minimum scope of work required for the assignment.

 

  1. Are lenders permitted to submit an appraisal with an exterior-only inspection on forms 1004, 1073, or 2090?

No, the exterior-only inspection appraisals permitted in accordance with the temporary flexibilities announced in Fannie Mae Lender Letter LL-2020-04, Impact of COVID-19 on Appraisals must be completed on the following appraisal forms:

  • Exterior-Only Inspection Residential Appraisal Report (Form 2055)
  • Exterior-Only Inspection Individual Condominium Unit Appraisal Report (Form 1075)
  • Exterior Only Individual Cooperative Interest Appraisal Report (Form 2095)
  • Small Residential Income Property Appraisal Report (Form 1025)
  • Manufactured Home Appraisal Report (Form 1004C)

 

  1. Given the appraisal flexibilities provided in Lender Letter LL-2020-04, Impact of COVID-19 on Appraisals, how will Fannie Mae perform post-purchase quality control reviews on the exterior-only inspection appraisal report and desktop appraisal reports?

When Fannie Mae performs quality control or any other post purchase reviews on these appraisal reports, they will be based on the modified scopes of work for the exterior-only inspection appraisal reports and desktop appraisal reports, respectively. The appraiser’s description of the subject property must be complete, and the opinion of the market value of the subject property must be adequately supported. The review will include an assessment of whether there are property deficiencies, including those impacting safety, soundness, or structural integrity, that were reasonably discoverable in the normal course of business as of the effective date of the appraisal, given the applicable scope of work.

 

  1. For new construction appraisals completed using the flexibilities in Lender Letter LL-2020-04, Impact of COVID-19 on Appraisals, does a builder have to provide bedroom photographs for dwellings that are complete to at least the drywall stage?

Yes. In addition to the plans, specification and other photograph exhibits, a builder must provide photos of the bedrooms to the appraiser.

 

  1. In Lender Letter LL-2020-04, Impact of COVID-19 on Appraisals, Fannie Mae provided appraisal flexibility for new construction purchase transactions by allowing for completion of “desktop” appraisals. Is this flexibility available for all new construction purchase transactions, including second homes?

No. New construction purchase transactions are subject to the requirements provided in LL-2020-04, including all requirements in the permissible appraisal requirements chart. Therefore, second homes with an LTV greater than 85% require a traditional appraisal report.

 

  1. For mortgages that require interior and exterior inspection appraisals, would the use of technology like Skype, FaceTime, etc. be sufficient to meet the requirement for an appraiser’s physical inspection?

No. The Uniform Residential Appraisal Report (Form 1004) (along with the 1073, 1004c, 1025, and 2090) require the appraiser to certify “I performed a complete visual inspection of the interior and exterior areas of the subject property.” Virtual inspections are insufficient to comply with our Form 1004 and other interior/exterior appraisal form requirements.

Appraisers are free to voluntarily deploy this technology as a means of augmenting the exterior-only (in combination with a drive by inspection from the street) and/or desktop appraisal flexibilities we announced for COVID-19. Appraisers must describe these as either “desktop” or “exterior”, as the case may be.

 

  1. Using the COVID-19 appraisal flexibilities for a desktop appraisal report, what information must the appraiser include in the Map Reference field?

For a desktop appraisal report, the Map Reference # field must ONLY contain “desktop.” No other entries may be included in this field. It is the lender’s responsibility to ensure the appraisal is accurately reported.

 

  1. Using the COVID-19 appraisal flexibilities for an exterior-only appraisal report, what information must the appraiser include in the Map Reference field?

For an exterior-only appraisal report, the Map Reference field must ONLY contain “exterior.” No other entries may be included in this field. It is the lender’s responsibility to ensure the appraisal is accurately reported.

 

  1. Can “virtual” inspections provided by a vendor or homeowner be used to complete the Completion Report (1004D) required to remove recourse on Homestyle® Renovation loans?

No. We require an independent on-site inspection by the appraiser for a Homestyle Renovation loan to qualify for recourse removal.

 

  1. As a lender, we used the flexibilities in Lender Letter LL-2020-04, Impact of COVID-19 on Appraisals and engaged a desktop appraisal. However, the appraiser expanded the scope of work and viewed the subject and comparable sales from the street. The appraisal report also included interior photos provided by the borrower. What should the appraiser enter into the Map Reference field?

On a desktop assignment, nothing precludes the appraiser from expanding the scope of work; however, the Map Reference field must reflect “desktop” as it represents the minimum scope of work.

 

  1. In Lender Letter LL-2020-04, Impact of COVID-19 on Appraisals, we stated that when an appraisal is completed “subject to repairs or alterations” a signed letter from the borrower confirming that the work was completed is allowed. Can the requirements of this letter be provided via email

The lender is responsible for ensuring this letter and supporting documentation is in the mortgage file. The borrower and lender can use electronic means of communication, for example email, to transmit the signed letter and verification documentation.

 

  1. Does DU identify Fannie Mae-owned loans?

Lender Letter LL-2020-04 specified temporary flexibilities that lenders may apply to limited cash-out refinance transactions when the loan being refinanced is owned by us. To assist lenders in applying these flexibilities, beginning Apr. 11, 2020, DU will issue a new message stating that the borrower's existing loan has been identified by DU as a Fannie Mae loan. This message will be issued on limited cash-out refinance loan casefiles when DU finds an active Fannie Mae first mortgage loan for the subject property address, and also confirms that the Social Security number (SSN) of at least one of the borrowers on the loan casefile matches one of the SSNs on the existing loan.

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