Within the last several days, HUD/FHA and VA have both issued updated guidance for appraisers regarding appraisal scope of work and COVID-19.
HUD issued Mortgagee Letter 2020-05 on March 27, 2020. On a temporary basis, appraisers are permitted to perform desktop or exterior-only inspection appraisals for FHA loans. This guidance is effective until May 17, 2020, although it may be extended if warranted.
Most single-family forward and reverse mortgages, Home Equity Conversion Mortgage (HECM) for purchase transactions may utilize an optional exterior-only or desktop scope of work. Traditional HECM, HECM-to-HECM refinances, rate and term refinances, and simple refinances may use an optional exterior-only inspection scope of work. Appraisals made in connection with portfolio servicing may utilize either an exterior-only or desktop scope of work.
The appraiser is permitted to rely on supplemental information from reliable sources such as MLS and assessor’s records. The appraiser may also rely on information from an interested party to the transaction with clear appraisal report disclosure when additional verification was not feasible.
The appraiser must use FHA-approved forms (such as the 1004 and 1073) to report the appraisals. The 2055 and 1075 forms are not FHA-approved forms and are not compatible with HUD’s electronic appraisal delivery (EAD) portal.
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. FHA has provided model certifications for the exterior-only and desktop scope of work.
These appraisals will be completed “as-is” unless minimum property requirements (MPR)-related deficiencies are observed from the street (on an exterior-only inspection) or are known to the appraiser (on a desktop).
Appraisers are reminded that HUD/FHA is not the appraiser’s client; they are an intended user. If appraisers have questions about the acceptability of an exterior-only inspection or a desktop appraisal, they are advised to contact the lender/client.
Also on March 27th, VA issued Circular 26-20-11, which states that VA will temporarily change their requirements of requiring access to the interior of the home for certain types of loans. For purchase transactions, vacant properties will still require interior inspections unless the local jurisdiction has imposed restrictions prohibiting individuals from leaving their homes. For occupied properties, there are conditions that must be met in order for the appraiser to make an interior inspection. Otherwise, the appraiser may complete an exterior-only inspection appraisal and must report this on the Fannie Mae Form 2055 (or 1075 if a condominium unit). An appraiser must boldly and conspicuously provide disclosure that an exterior only inspection was performed.
Desktop appraisals may be performed in geographic areas where there are restrictions imposed by authorities prohibiting individuals from leaving their domiciles. Lenders are required to state in WebLGY and by email to the appraiser if they will accept a desktop appraisal. The appraiser will report the desktop appraisal on Fannie Mae Form 1004, 1073, 1004C or 1025 as appropriate for the property type.
Circular 26-20-11 is six pages in length. VA appraisers are advised to download this document and read it carefully in its entirety.
For more info regarding Coronavirus and appraisers, visit the Appraisal News section of our blog.
Written by Dan Bradley. Daniel A. Bradley, SRA, CDEI is the Director of Online Appraisal Curriculum for McKissock Learning. He has been a practicing real property appraiser since 1987, and has been instructing and authoring appraisal courses since 1992. He is a state certified general appraiser in Pennsylvania and is currently on the FHA appraiser roster. From 2004 to 2013, Dan was a member of the Pennsylvania State Board of Certified Real Estate Appraisers, serving for five years as vice-chairman and three years as chairman. He has also has served as a contracted expert witness appraisal reviewer for the Pennsylvania Department of State.