Agency Appraisal Requirements

Overview

Carrington Mortgage Services, LLC (CMS) is actively monitoring the spread of COVID-19 (coronavirus) throughout the United States and its potential impact to our borrowers and loan originations. Our ability to continue to serve our customers is a top priority. As the Agencies provide additional Appraisal guidance, this bulletin will be updated and republished.

FNMA Temporary Appraisal Requirement Flexibilities

These temporary flexibilities are effective immediately for all Mortgages in process and remain in place for Mortgages with Application Received Dates on or before May 17, 2020.

Effective immediately, Fannie Mae is allowing temporary flexibilities to their appraisal inspection and reporting requirements. As described below, FNMA will accept an alternative to the traditional appraisal required under Selling Guide Chapter B4-1, Appraisal Requirements, when an interior inspection is not feasible because of COVID-19 concerns. FNMA will allow either a desktop appraisal or an exterior-only inspection appraisal in lieu of the interior and exterior inspection appraisal (i.e., traditional appraisal).

If a traditional appraisal is not obtained and there is insufficient information about the property for an appraiser to be able to complete an appraisal assignment with a desktop or exterior-only inspection appraisal, the loan will not be eligible for delivery to FNMA.

Loan purpose LTV ratio Occupancy Ownership of loan being refinanced Permissible appraisals
(in order of preference)
Purchase* Per Eligibility Matrix Principal residence N/A Traditional appraisal

Desktop appraisal

Exterior-only appraisal

≤ 85% Second home Investment Traditional appraisal

Desktop appraisal

Exterior-only appraisal

> 85% Second home Traditional appraisal
Limited cash-out refinance Per Eligibility Matrix All Fannie Mae-owned Traditional appraisal

Exterior-only appraisal

Not Fannie Mae-owned Traditional appraisal
Cash-out refinance Fannie Mae or not Fannie Mae-owned Traditional appraisal

*Excludes new construction and construction-to-permanent loans.

NOTE: For all loans with LTV ratios greater than 80%, FNMA require mortgage insurance in accordance with their standard Selling Guide policy. Lenders must consult with their mortgage insurance companies to confirm coverage for mortgages using one of the temporary appraisal flexibilities.

Desktop appraisals

For purchase money transactions when an interior and exterior appraisal is not available, lenders are encouraged to obtain a desktop appraisal rather than an exterior-only appraisal.

The minimum scope of work for a desktop appraisal does not include an inspection of the subject property or comparable sales. The appraiser relies on public records, multiple listing service (MLS) information, and other third-party data sources to identify the property characteristics.

When a desktop appraisal is performed, reported on Form 1004 or Form 1073, and submitted to FNMA through the Uniform Collateral Data Portal® (UCDP®), the appraisal will be scored by Collateral Underwriter® (CU®). All loans with a CU risk score of 2.5 or less will receive value representation and warranty relief under Day 1 Certainty. With desktop appraisals, lenders will have the added risk management and efficiency benefit of being able to use CU to aid in the appraisal review process.

The table below provides the appraisal report form that must be used to complete the desktop appraisal for each property type.

Property Type Acceptable Appraisal Form
One-unit property, including a unit in a planned unit development (PUD) or a detached condominium unit Uniform Residential Appraisal Report (Form 1004)
Condominium unit Individual Condominium Unit Appraisal Report (Form 1073)
2-4 Unit Property Small Residential Income Property Appraisal Report (Form 1025)
Manufactured Home Manufactured Home Appraisal Report (Form 1004C)

Exhibits for Desktop Appraisals

Each desktop appraisal report must include the following exhibits:

  • a location map indicating the location of the subject and comparables, and
  • photographs of the subject property. FNMA recognizes that it may be challenging in some instances to obtain photographs; however, it is expected that the appraiser utilize available means to obtain relevant pictures of the subject property.

Exterior-only Inspection Appraisals

An exterior-only inspection appraisal may be obtained in lieu of an interior and exterior inspection appraisal for the following transactions:

  • Purchase money loans
  • Limited cash-out refinances where the loan being refinanced is owned by Fannie Mae

Lenders will not receive value representation and warranty relief under Day 1 Certainty® for loans with exterior-only appraisals.

The table below shows the appraisal report form that must be used to complete an exterior-only inspection appraisal for each property type. Because there are not appropriate exterior-only appraisal report forms available for two-four unit properties and manufactured homes, FNMA will accept an exterior appraisal scope of work completed using the applicable forms listed below.

Property Type Acceptable Appraisal Form
One-unit property, including a unit in a planned unit development (PUD) or a detached condominium unit Exterior-Only Inspection Residential Appraisal Report (Form 2055)
Condominium unit Exterior-Only Inspection Individual Condominium Unit Appraisal Report (Form 1075)
2-4 Unit Property Small Residential Income Property Appraisal Report (Form 1025)
Manufactured Home Manufactured Home Appraisal Report (Form 1004C)

Exhibits for Exterior-only Inspection Appraisals

Lenders are reminded that the following exhibits to the appraisal report are required for an exterior-only inspection appraisal:

  • a street map that shows the location of the subject property and of all comparable sales that the appraiser used;
  • clear, descriptive photographs (either in black and white or color) that show the front of the subject property, and that are appropriately identified (photographs must be originals that are produced either by photography or electronic imaging); and
  • any other data−as an attachment or addendum to the appraisal report form−that are necessary to provide an adequately supported opinion of market value.

FHLMC Temporary Appraisal Requirement Flexibilities

These temporary flexibilities are effective immediately for all Mortgages in process and remain in place for Mortgages with Application Received Dates on or before May 17, 2020.

Freddie Mac understands that due to the COVID-19 pandemic there may be instances where a Lender is unable to obtain an interior inspection of the subject property. As a result, Freddie Mac is allowing temporary exceptions to their property eligibility and appraisal requirements.

Freddie Mac is revising its appraisal inspection and reporting requirements. As described in detail below, for certain Mortgages, when a Lender cannot obtain an appraisal with an interior inspection as a result of the COVID-19 pandemic, Freddie Mac will accept either an appraisal with an exterior-only inspection or a desktop appraisal (as described below) in lieu of the interior and exterior inspection appraisal required under Section 5601.5(a).

There may be instances where there is insufficient information about the property for an appraiser to complete an appraisal assignment with a desktop appraisal or an appraisal with an exterior-only inspection. In these instances, the Mortgage will not be eligible for sale to Freddie Mac until the appraiser has sufficient information to complete the desktop appraisal or an appraisal with an exterior-only inspection, or an appraisal with an interior and exterior inspection is obtained.

The following table provides appraisal requirements based on Mortgage purpose, loan-to-value (LTV) ratio, occupancy type and Mortgage ownership.

Permissible appraisal requirements
Mortgage purpose LTV ratio Occupancy type Ownership of Mortgage being refinanced Permissible appraisals
Purchase transaction* Up to 97% Primary Residence N/A Interior and exterior inspection appraisal, desktop appraisal or exterior-only appraisal
≤85% Second homes and Investment Properties N/A Interior and exterior inspection appraisal, desktop appraisal or exterior-only appraisal
˃85% Second homes N/A Interior and exterior inspection appraisal
No cash-out refinance As permitted in the Guide All Mortgage being refinanced owned by Freddie Mac Interior and exterior inspection appraisal or exterior-only inspection
Mortgage being refinanced not owned by Freddie Mac Interior and exterior inspection appraisal
Cash-out refinance As permitted in the Guide All Mortgage being refinanced owned or not owned by Freddie Mac Interior and exterior inspection appraisal

*These flexibilities are not permitted for Construction Conversion, Renovation or new construction properties.

Note: For all Mortgages with LTV ratios greater than 80%, FHLMC will require mortgage insurance in accordance with Guide requirements. Lenders must consult with their mortgage insurance companies to confirm coverage for Mortgages using one of the temporary appraisal flexibilities.

Appraisals with Exterior-only Inspections

The table below provides the appraisal report form that must be used to complete an appraisal with an exterior-only inspection for each property type. Because there are not appropriate exterior-only appraisal report forms available for 2- to 4-unit properties and Manufactured Homes, FHLMC will accept an exterior-only appraisal scope of work completed using the applicable forms listed below.

Property type Acceptable appraisal form
1-unit property, including a unit in a Planned Unit Development (PUD) or a Detached Condominium Unit Guide Form 2055, Exterior-Only Inspection Residential Appraisal Report
Attached Condominium Unit Form 466, Exterior-Only Inspection Individual Condominium Unit Appraisal Report
2- to 4-unit property Form 72, Small Residential Income Property Appraisal Report
Manufactured Home Form 70B, Manufactured Home Appraisal Report

Mortgages with appraisals with exterior-only inspections will not receive the appraised value representation and warranty relief described in Section 5601.9(b).

Exhibits for Exterior-only Inspection Appraisals

Lenders are reminded that the following are required in connection with an appraisal with an exterior-only inspection:

  • A street map that shows the location of the subject property and of all comparables that the appraiser used
  • Clear, descriptive photographs (either in black and white or color) that show the front of the subject property, and that are appropriately identified. (Photographs must be originals that are produced either by photography or electronic imaging); and
  • Any other data (as an attachment or addendum to the appraisal report form) that are necessary to provide an adequately supported opinion of market value

For Purchase Transaction Desktop Appraisals

Lenders are encouraged to obtain a desktop appraisal in lieu of an appraisal with an exterior-only inspection when an interior and exterior inspection is not available.

The minimum scope of work for a desktop appraisal does not include an inspection of the subject property or comparable sales. The appraiser relies on public records, multiple listing service (MLS) information or other third party data sources to identify the property characteristics.

When a desktop appraisal is obtained using Form 70, Uniform Residential Appraisal Report, or Form 465, Individual Condominium Unit Appraisal Report, and submitted to the Uniform Collateral Data Portal® (UCDP®), the appraisal will be assessed for valuation representation and warranty relief in Loan Collateral Advisor®. All appraisals with a risk score of 2.5 or less that meet the requirements in Section 5601.9(b) will receive valuation representation and warranty relief and Lenders will have the added risk management and efficiency benefit of being able to use Loan Collateral Advisor to aid in the appraisal review process

The table below provides the appraisal report form that must be used to complete the desktop appraisal for each property type.

Property type Acceptable appraisal form
1-unit property, including a unit in a Planned Unit Development (PUD) or a Detached Condominium Unit Form 70, Uniform Residential Appraisal Report
Condominium Unit Form 465, Individual Condominium Unit Appraisal Report
2- to 4-unit property Form 72, Small Residential Income Property Appraisal Report
Manufactured Home Form 70B, Manufactured Home Appraisal Report

Exhibits for Desktop Appraisals

Each desktop appraisal must include the following exhibits:

  • Photographs of the subject property. Freddie Mac recognizes it may be challenging in some instances to obtain photographs; however, it is expected that the appraiser utilize available means to obtain relevant pictures of the subject
  • A location map indicating the location of the subject and comparables.

VA Guidance for Property inspections

Appraisers should continue to conduct business as outlined in Chapter 10 of the Lender’s Handbook.

Appraisers should contact the RLC of jurisdiction if they have been impacted by COVID-19 and are unable to complete an appraisal assignment. The email addresses for each of the RLCs are available at: https://www.benefits.va.gov/HOMELOANS/contact_rlc_info.asp.

FHA Guidance for Property inspections

The FHA is continuing to require Appraisals with Property inspections for Single Family Programs. The FHA Roster Appraiser must complete all required appraisals in accordance with acceptable Appraisal Reporting Forms and Protocols.  Appraisers should stay informed of CDC Coronavirus updates, and incorporate prudent measures in their business practice regarding personal contact with the borrower and/or occupants. FHA is closely monitoring the situation and will provide updated guidance, as needed.

USDA Guidance for Property inspections

USDA has not announced any temporary guidance as of 3/24/20.

Contacts

Please contact your Account Executive or Account Manager with any questions.

Carrington thanks you for your business.