FICO Less than 620 Requires Borrower Paid Compensation

April 9, 2020rashtonBulletin

Overview

Effective immediately, Carrington Mortgage Services, LLC (CMS) will require Borrower Paid Compensation for FHA and USDA Full Documentation loan submissions with FICO scores less than 620.  CMS will hold loans in loan set-up until the Broker supplies a Borrower Paid Fee Sheet, and then will proceed to disclosures. This requirement is in response to the high number of QM fails associated with Lender Paid Compensation, typically for discount points exceeding bona-fide limits.

As market conditions change, CMS will re-evaluate this requirement.

Contacts

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

Carrington thanks you for your business.

Closure of Recording Offices

April 3, 2020rashtonBulletin

Overview

Due to closure of recording offices, Carrington Mortgage Services, LLC (CMS) may not proceed with the closing or funding in counties with Recording Office Closures in a state that requires recording prior to disbursement. The states of Hawaii, North Carolina and Virginia have requirements to record before disbursement and Recording Office Closures are being monitored daily.

System enhancements have been implemented to prevent a file moving to the “Ready for Docs” milestone or a Funder from requesting a wire transfer in the impacted counties.

Current impacted counties are as follows:

State Counties
Virginia Accomack

Please note: Any changes to the impacted counties will be communicated to the Funding Managers and Operations Vice President to share with their sites.

IRS 4506T Services Temporarily Suspended

April 3, 2020rashtonBulletin

Overview

The IRS has announced a temporary suspension of their Income Verification Express Service (IVES) due to their COVID-19 procedures.  IVES is used by mortgage vendors to obtain IRS transcripts.  It appears that orders placed on and prior to March 26, 2020 will continue to be processed by the IRS, albeit with significant delays, and it is unclear when orders placed on and after March 27, 2020 will be processed.

During this time, CMS will follow our Government shutdown policy for all loan products with the exception of USDA, Chase Jumbo and Non-Agency.

Please note: This bulletin has been updated with additional guidance for USDA. Updates are shown in red.

Internal Revenue Service (IRS)

In the event a shutdown impacts the IRS issuing tax return transcripts the following guidance is applicable:

  • The Underwriter must condition for the processed 4506T tax transcripts in order to close the loan
  • All loans with income discrepancies must be resolves prior to delivery
  • Completed and 4506T forms are required at closing

Refer to the product specific underwriting guidelines for detailed requirements.

Operational Requirements:

  • If product specific guidelines require processed 4506T tax transcripts or upon Underwriter discretion, condition as PTP.
  • USDA, Chase Jumbo and Non-Agency will require processed 4506T tax transcripts PTD.
  • Account Managers and Loan Processors will continue to order the transcripts when the condition is placed on the approval.

As a reminder, CMS has the following policies related to IRS transcripts:

USDA – Updated 04/03/2020

USDA requires the lender to independently obtain two years of transcripts for all adult household members prior to loan closing.

However, in the event transcripts are not available from the IRS, USDA will permit the loan to proceed to closing when the lender documents their correspondence to and from the IRS in the loan file.  CMS will permit USDA loans to proceed to closing with the following documentation:

  • Proof transcripts were ordered for all adult household members, such as a screenshot of the IRS transcript vendor’s order page or confirmation,
  • A processor’s certification that the transcripts were not received by loan closing, and
  • Documentation supporting the IRS’s inability to provide the lender’s vendor with tax return transcripts as requested.

All supporting documentation must be contained in the loan file.

As a reminder, transcript results received with a “no record of return” or similar message are not acceptable if tax returns were required based on income type.  The underwriter must review deposits on bank statements for all adult household members to verify all sources of income are considered in the annual income analysis.

Non-Agency

As a reminder, CMS is not currently accepting new submissions or locks of non-agency loans.

For existing locked loans, the following products require verification of all full doc and 1-year alt doc income types using IRS transcripts:

  • Carrington Flexible Advantage
  • Carrington Flexible Advantage Plus
  • Carrington Prime Advantage

IRS transcripts are not required for Carrington Investor Advantage and borrowers qualified using 12- or 24-months bank statements.

FHA, VA, Fannie Mae, & Freddie Mac

CMS does not require IRS transcripts to validate income for FHA, VA, Fannie Mae, or Freddie Mac loans.

Underwriters may request IRS transcripts under circumstances such verifying recently-filed tax returns used for qualifying, the filing of amended tax returns, or when inconsistencies are revealed with income documentation during the underwriting process.  The following may be used as alternatives:

To evidence 2019 returns are filed:

  • Attempt obtaining a refund status printout fromhttps://sa.www4.irs.gov/irfof/lang/en/irfofgetstatus.jsp for borrowers receiving an income tax refund
  • Obtain alternate proof of filing (such as an e-file receipt, stamped return, letter from CPA, etc.) along with proof of payment of taxes or updated installment agreement for borrowers with tax liability
  • Have the borrower provide transcripts using the IRS information and links below

To verify amended returns:

  • Obtain a stamped 1040X and verify payment of additional taxes owed, if any
  • Have the borrower provide transcripts using the IRS information and links below
  • As a reminder, tax returns may not be amended for qualifying purposes

When inconsistencies are revealed during the underwriting process, Underwriting Supervisors and Managers will continue to use the “Request Suspicious Activity Review” function in Encompass so that QC may review on a case-by-case basis.

Resources

The following resources and FAQ provided by the IRS may be helpful for borrowers when borrower-provided transcripts are requested to verify current tax return and amended tax return filings: https://www.irs.gov/individuals/get-transcript-faqs

Q9. How long must I wait before a transcript is available for my current year tax return?

If you filed your tax return electronically, IRS’s return processing takes from 2 to 4 weeks before a transcript becomes available. If you mailed your tax return, it takes about 6 weeks. If you didn’t pay all the tax you owe, your transcript may not be available until mid-May or a week after you pay the full amount owed. Refer to transcript availability for more information. 

Once your transcript is available, you may use Get Transcript Online, you may order a tax return transcript and/or a tax account transcript using Get Transcript by Mail or call 800-908-9946. Please allow 5 to 10 calendar days for delivery. You may also request any transcript type listed below by faxing/mailing Form 4506-T, Request for Transcript of Tax Return as instructed on the form. The time frame for delivery is the same for all available tax years.

Simplified Verification of Employment Requirements

April 3, 2020rashtonBulletin

Overview

Here is a simplified guide to handle employment, income and asset documentation and verification during the COVID-19 crisis.  These procedures are effective indefinitely until we issue further direction.

Employment Verification Requirements

The below guidance applies to ALL Loan Products and Documentation Types (except CMS-to-CMS FHA Streamline and VA IRRRL non-credit qualifying refinances):

Documentation Description Aging
Verbal Verification CMS Employee obtains verbal employment verification on an approved VVOE form confirming borrower still working Conversation Dated Within 5 Business Days of Note Date
Written Verification Obtain fully completed VOE form from an HR title or Management Title (Manager, Director, VP, etc.).

Email verifications are only valid for Conventional loans:  must be received from a work email (e.g.JaneDoe@BusinessName.com) that identifies the name and title of the verifier (same requirements apply per VOE form) and the borrower’s name and current employment date.

Form Dated Within 5 Business Days of Note Date (or Email Date for Conv. loans)
The Work Number We will continue to accept automated verifications such as those from The Work Number, although the last date of employment verified must meeting aging requirements.

Note:  In situations where the automatic database upload has not been refreshed within the required aging, we will have to wait for the next refresh period.

Email or Signature Date Within 5 Business Days of Note Date
Paystub Provide most recent year-to-date paystub. If using this method, if note date not within aging requirement, next closing date may be delayed based on payroll cycles. Dated Within 5 Business Days of Note Date
Bank statement Provide a bank statement evidencing the automatic payroll deposit reflecting the employer’s name. Deposit Dated Within 5 Business Days of Note Date
Self-Employment See below for list of self-employment verification options. Dated Within 5 Business Days of Note Date

IMPORTANT NOTE:  Borrowers on Furlough:  If a company verifies the borrower is still employee but is on furlough, we won’t be able to close the loan. If they are not receiving income, we can’t meet continuity of income requirements.

Verification of Self-Employment

Below are examples of methods the Lender may use to confirm the borrower’s business is currently operating:

  • Evidence of current work (executed contracts or signed invoices that indicate the business is operating on the day the lender verifies self-employment) dated within 5 business days of note date;
  • Evidence of current business receipts within 5 business days of the note date (payment for services performed);
  • Lender certification the business is open and operating (lender confirmed through a phone call or other means) within 5 business days of note date; or

NOTE:  The prior guidance indicating that using a business website demonstrating activity supporting current business operations (timely appointments for estimates or service can be scheduled) is no longer a valid and acceptable verification method and should not be used.

How to Calculate 5 Business Day Requirement

The 5 business day requirement includes the date of the verification and the Note Date.  For example, if a verification is dated on Monday, then the Note Date must be Friday or earlier provided there are not holidays in that week.  Saturday, Sundays and company holidays are excluded from being counted as business days.

Agency Verbal Verification of Employment Requirements

April 3, 2020rashtonBulletin

Overview

Carrington Mortgage Services, LLC (CMS) is actively monitoring the spread of COVID-19 (coronavirus) throughout the United States and we understand there may be concerns about its potential impact to our borrowers and loan originations. Our ability to continue to serve our customers is a top priority. This bulletin has been updated with additional guidance for Borrowers on Furlough and new 5-business day requirements for documentation. Updates are shown in red.

Conventional VVOE Requirements:

Effective Date: These temporary employment and income verification flexibilities are effective immediately for all Conventional product only loans in process and remain in place for loans with application dates on or before May 17, 2020. Note that the Guidelines/ Matrices and AUS messages will not be updated to reflect these temporary policies.

Verbal Verification of Employment

In cases where there is difficulty in obtaining the verbal verification of employment (VVOE) due to disruption to operations of the borrower’s employer, the following temporary process applies:

  • Written VOE: Obtain an email directly from the employer’s work email address that identifies the name and title of the verifier and the borrower’s name and current employment date within 5 business days of the note date.
  • The Work Number: We will continue to accept automated verifications such as those from The Work Number, although the last date of employment verified must be within 5 business days of the note date. In situations where the automatic database upload has not been refreshed within the last 5 business days, we will have to wait for the next refresh period.
  • Paystub: Provide a year-to-date paystub dated within 5 business days of the note date.
  • Bank statements: Provide a bank statement evidencing the automatic payroll deposit reflecting the employer’s name within 5 business days of the note date. (The 5 business days is calculated from the date of the payroll deposit, not the bank statement date.)
  • Self-Employment: Verification of self-employment will follow existing guidance, but must be dated within 5 business days of the note date.

Continuity of Income

It is important to remind our Associates of ensuring sustainable homeownership for our borrowers in light of recent events.

Given the current economic climate associated with the COVID-19 pandemic and its impact on employment and income, our Underwriting team will practice additional due diligence to verify the most recent information is obtained. This will ensure any disruption to borrowers’ employment (or self-employment) and/or income due to the COVID-19 pandemic is not expected to negatively impact their ability to repay the loan.

Borrowers on Furlough

If a company verifies the borrower is still employee but is on furlough, we won’t be able to close the loan. If they are not receiving income, we can’t meet continuity of income requirements.

Verification of Self-Employment

Effective Dates: Lenders are encouraged to apply these updates to existing loans in process; however, they must be applied to loans with application dates on or after Apr. 14, 2020 through May 17, 2020.

Currently, when a Borrower is using self-employment income to qualify, the Lender must verify the existence of the Borrower’s business no more than 120 days prior to the Note Date. Due to the impact the COVID-19 pandemic and the various social distancing measures implemented by different jurisdictions are having on many businesses across the country, Lenders must take additional steps to confirm that the borrower’s business is open and operating. The Lender must confirm this within 5 business days of the note date (or after closing but prior to delivery).

Below are examples of methods the Lender may use to confirm the borrower’s business is currently operating:

  • Evidence of current work (executed contracts or signed invoices that indicate the business is operating on the day the lender verifies self-employment);
  • Evidence of current business receipts within 5 business days of the note date (payment for services performed);
  • Lender certification the business is open and operating (lender confirmed through a phone call or other means); or
  • Business website demonstrating activity supporting current business operations (timely appointments for estimates or service can be scheduled).

FNMA Age of Documentation

Effective Dates: Lenders are encouraged to apply these updates to existing loans in process; however, they must be applied to loans with application dates on or after Apr. 14, 2020 through May 17, 2020.

In order to ensure that the most up-to-date information is being considered to support the borrower’s ability to repay, FNMA is updating their age of documentation requirements for all loans (existing and new construction) as follows:

  • FNMA is modifying age of document requirements from four months (120 days) to two months (60 days) for most income and asset documentation. If an asset account is reported on a quarterly basis, the lender must obtain the most recently issued quarterly statement.
  • When the Lender receives employment and income verification directly from a third-party employment verification vendor, FNMA is are now requiring that the information in the vendor’s database be no more than 60 days old as of the note date.
  • There are no changes to the age of documentation requirements for military income documented using a Leave and Earnings Statement, Social Security, retirement income, long-term disability, mortgage credit certificates, public assistance, foster care, or royalty payments, and the Lender can continue to apply standard age of document requirements as stated in the Selling Guide.
  • Due to the federal income tax filing extension granted through Jul. 15, 2020, FNMA is eliminating the following documentation requirements. These normally apply for income types that require copies of federal income tax returns when the mortgage has an application or disbursement date between Apr. 15th and Jul. 15th:

o   A copy of the IRS Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Tax Return), and

o   IRS Form 4506-T (Request for Transcript of Tax Return) transcript confirming “No Transcript Available” for the 2019 tax year.

All other requirements contained in FNMA Seller Guide B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns, continue to apply.

FHLMC Age of Documentation

FHLMC is implementing the following temporary requirements for age of income and assets documentation.

All income and asset documentation must be dated no more than 60 days prior to the Note Date, except as follows:

  • If an asset account is reported on a quarterly basis, the Lender must obtain the most recently issued quarterly statement
  • For electronic income verifications obtained from third-party verification service providers, the information from the electronic data base reflected on the third-party verification must now be dated no more than 60 days prior to the Note Date
  • The FHLMC standard Guide requirements for age of documentation continue to apply to the following income types:

o   Military income documented on Leave and Earnings Statements

o   Retirement income

o   Survivor and dependent benefit income

o   Long-term disability income

o   Social Security Supplemental Security Income (SSI)

o   Public assistance income

o   Homeownership Voucher Program payments

o   Foster-care income

o   Trust income (fixed)

o   Royalty payments

o   Mortgage Credit Certificates (MCC)

FNMA Market-Based Assets

Effective Dates: Lenders are encouraged to apply these updates to existing loans in process; however, they must be applied to loans with application dates on or after Apr. 14, 2020 through May 17, 2020.

Stocks, Stock Options, and Mutual Funds

In light of current market volatility, FNMA is making the following updates when the borrower is using stocks, stock options, or mutual funds for assets:

  • When used for down payment or closing costs, evidence of the borrower’s actual receipt of funds realized from the sale or liquidation must be documented in all cases.
  • When used for reserves, only 70% of the value of the asset must be considered, and liquidation is not required.

See FNMA Seller Guide B3-4.3-01, Stocks, Stock Options, Bonds and Mutual Funds for existing FNMA requirements.

FHLMC Market-Based Assets

Stocks, Stock Options and Mutual Funds

Due to the continuing market volatility of certain asset types, FHLMC is implementing the following temporary requirements applicable to accounts with stocks, stock options and mutual funds:

  • Evidence of liquidation, including Borrower receipt of funds, is required when using any funds from these accounts for Down Payment and/or Closing Cost
  • The Lender must use no more than 70% of the balance in the accounts in order to meet the reserves requirements in Seller Guide Section 5501.2

FHA VVOE Requirements

Effective Date: The re-verification of employment guidance in Mortgagee Letter 2020-05 is effective immediately for cases closed on or before May 17, 2020. Please note: the Policy updates outlined in the Mortgagee Letter are temporary and will not be incorporated into the HUD Single-Family Housing Policy Handbook 4000.1.

Verification of Employment

FHA will allow flexibilities related to the Lender’s process of completing re-verification of employment, which includes verbal verification of employment. This is applicable for all FHA programs, where re-verification of employment is required.

CMS will follow the Conventional VVOE requirements described above to document and verify the borrower’s employment and annual and repayment income.

Please note: CMS requires VVOEs for Streamline loan refinance transactions; however, CMS to CMS Streamline loan refinances are exempt.

VA VVOE Requirements

The VA Guidance for Borrowers affected by the COVID-19 pandemic is as follows:

Effective Date. The policy outlined is effective for all loans closed on, or after, 3/27/2020 and until further notice or the rescission of VA Circular 26-20-10.

VA may only guarantee a loan when it is possible to determine that the Veteran is a satisfactory credit risk and has present or verified anticipated income that bears a proper relation to the anticipated terms of repayment as outlined in the VA Pamphlet 26-7, Chapter 4 Credit Underwriting.

Verification of Employment

Lenders should continue to use good judgment and flexibility when verifying stable and reliable income. Lenders should make every effort to satisfy VA’s longstanding requirements concerning verification of employment as outlined in the VA Pamphlet 26-7, Chapter 4 Credit Underwriting.

CMS will follow the same guidance for VVOE’s, pay stubs and bank statement payroll deposits within 5 business days of the note date, as described above in the Conventional VVOE requirements.

If the verification method is impacted due to temporary business closures, the lender should use the guidelines listed below

(1) The lender may utilize employment and income verification third-party services. Additional fees associated with these services cannot be charged to the Veteran, as stated in VA Pamphlet 26-7, Chapter 8, Section 2 Fees and Charges the Veteran-Borrower Can Pay.

(2) If the lender is not able to utilize a third-party service to verify employment and income, a VOE can be met with evidence of direct deposit from a bank statement and paystubs covering at least one full month of employment within 5 business days of the note date. Lenders should reconcile payment amounts between the paystubs and direct deposit listed on the bank statement.

In the event lenders utilize option (2) as verification, they must document in box 47 of the remarks section on VA Form 26-6393, Loan Analysis, the option they selected and the supporting documentation.

Underwriting Loans

For income analysis purposes, as outlined in VA Pamphlet 26-7, Chapter 4 Credit Underwriting, VA guidelines generally require income to be stable and reliable for 2 years.

  1. If the applicant was impacted by COVID-19 (i.e. furlough, curtailment of income, etc.),that period should not be considered a break in employment or income provided they have returned, or are anticipated to return, to work in the same capacity and income levels. In addition to standard verification documentation, applicants should provide furlough letters where applicable.
  2. VA continues to encourage lenders to take proactive measures in documenting and uploading evidence of their analysis and justifications for all borrowers, especially for “borderline” cases. This may proactively address questions that VA may otherwise ask and prevent a loan level audit of that loan.

USDA VVOE Requirements

The USDA Single Family Housing Guaranteed Loan Program (SFHGLP) temporary exceptions to VVOE in relation to COVID-19 Pandemic are as follows:

Effective immediately, the following temporary exceptions to HB-1-3555 are in effect for a period of 60-days.

Verification of Employment

Lenders must document and verify the borrower’s annual and repayment income in accordance with Agency regulations. Lenders should use due diligence in obtaining the most recent income documentation to re-verify the borrowers repayment ability prior to closing. When the lender is unable to obtain a VVOE within 5 business days of loan closing due to a temporary closure of the borrower’s employment, alternatives should be explored. In the case of a reduction of income, the borrower’s reduced income must be sufficient to support the new loan payment and other non-housing obligations. Borrowers with no income at the time of closing are not eligible for SFHGLP loans regardless of available cash reserves.

CMS will follow the Conventional VVOE requirements described above to document and verify the borrower’s employment and annual and repayment income.

Expiration of Temporary Exceptions

These temporary exceptions will expire 60 days from the date of this notice.

CMS Lock Desk Hours in Observance of Good Friday

April 2, 2020rashtonBulletin

Overview

In observance of Good Friday, the Carrington Mortgage Services, LLC (CMS) Lock Desk will be closed Friday, April 10, 2020. In addition, the Lock Desk will be closing early on Thursday, April 9, 2020 at 11:00 AM PST (early market closure of 2:00 PM EST). Normal Lock Desk hours will resume on Monday, April 13, 2020.

As a reminder, pursuant to the Lock Policy all lock extensions must be requested prior to expiration. If a lock expires on Friday, April 10th, 2020 it will need to be extended no later than Thursday, April 9th, 2020.

Issues related to locks should be sent via email to lockdesk@carringtonms.com.

Contacts

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

Carrington thanks you for your business.

Agency Appraisal Requirements – Revised

April 2, 2020rashtonBulletin

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 and this bulletin will be updated as additional Agency guidance is received. This announcement has been updated with additional Agency guidance for New Construction Loans.

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
Loan purpose LTV ratio Occupancy Ownership of loan being refinanced Permissible appraisals

(in order of preference)

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.

FNMA Temporary Flexibilities for New Construction Loans Updated 4/1/20

For new construction properties where the appraisal is “subject to completion per plans and specifications,” and also when the property is 100% complete but an interior and exterior inspection appraisal cannot be completed, FNMA will permit a desktop appraisal on the forms identified in the following table. These requirements apply to purchase transactions only and exclude all construction-to-permanent loans.

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)
Two- to four-unit property Small Residential Income Property Appraisal Report (Form 1025)
Manufactured home Manufactured Home Appraisal Report (Form 1004C)

To accommodate the desktop appraisal on the existing Fannie Mae forms, the revised scope of work, statement of assumptions and limiting conditions, and certifications must accompany the form. Additionally, as noted below, the appraiser must identify a desktop appraisal was performed by populating the Map Reference field on the appraisal with “desktop.”

Documentation Requirements for New Construction Loans

If construction of the property has not yet begun or is partially complete, and the appraisal report will be completed “subject to completion per plans and specifications,” the Lender must provide the appraiser with, or ensure that the builder has provided the appraiser with the following:

  • Plans and specifications
  • Survey and/or plot plan
  • Current photos of the subject property
    • If construction has not yet begun, a photograph of the site and down the street in both directions
    • If construction is partially complete, a photograph is required of the following:
      • A front view of the subject property
      • A rear view of the subject property
      • A street scene (i.e., a photograph down the street in both directions)
  • The following interior photos are required when construction is at a stage in which they are available
    • The kitchen of the subject property
    • All bathrooms of the subject property
    • The main living area of the subject property
    • Basement, including all finished rooms
  • A copy of the complete, ratified sales contract, and all addenda

If construction of the property is 100% complete, and the appraisal report will be completed “as is,” the Lender must provide the appraiser with, or ensure that the builder has provided the appraiser with the following:

  • Plans and specifications
  • Survey and/or plot plan
  • Current photos of the subject property
    • A front view of the subject property
    • A rear view of the subject property
    • A street scene (i.e., a photograph down the street in both directions)
    • The kitchen of the subject property
    • All bathrooms of the subject property
    • The main living area of the subject property
    • Basement, including all finished rooms
  • A copy of the complete, ratified sales contract, and all addenda

Builder Certification

The Lender must obtain a signed  Builder Certification attesting that the information provided is true and correct. This certification must be included in the loan file.

Completion Reports for New Construction Properties

For new construction properties where the appraisal report was completed “subject to completion per plans and specifications,” if the Lender is unable to obtain a completed Appraisal Update and/or Completion Report (Form 1004D) as a result of COVID-19 related issues, FNMA will accept the Completion of Construction Certification.

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.

FHLMC Temporary Appraisal Flexibilities for New Construction Properties (Purchase Transactions) – Updated 4/1/20

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.

For new construction properties, where the appraisal was completed “subject to completion per plans and specifications,” including properties that were fully completed after the effective date of the appraisal, and an interior and exterior inspection appraisal cannot be completed, Freddie Mac will permit a desktop appraisal on the forms identified in the following table:

Property type Acceptable appraisal form
1-unit property, including a unit in a Planned Unit Development (PUD) or a Detached Condominium Unit Guide 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

To accommodate the desktop appraisal using the existing Freddie Mac forms, the revised scope of work, statements of assumptions and limiting conditions provided as Attachment A to Bulletin 2020-5 must accompany the form. Additionally, as stated in Bulletin 2020-5, the appraiser must identify that a desktop appraisal was performed by populating the Map Reference field on the appraisal with “desktop.”

Documentation requirements

If construction of the property has not yet begun or is partially completed, and as a result the appraisal report will be completed “subject to completion per plans and specifications,” the Lender must provide the appraiser with, or ensure that the builder has provided the appraiser with the following:

  • Plans and specifications
  • Survey and/or plot plan
  • Current photos of the subject property
    • If construction has not yet begun a photograph of the site and street scene (i.e., a photograph of the street view in both directions) are required
    • If construction is partially complete, the Lender must provide, or ensure that the builder has provided, the appraiser with all of the following photographs:
  • A front view of the subject property
  • A rear view of the subject property
  • A street scene (i.e., a photograph of the street view in both directions)
  • The following interior photos are required when construction is at a stage in which they are available
  • The kitchen of the subject property
  • All bathrooms of the subject property
  • The main living area of the subject property
  • Basement, including all finished rooms
  • Fully executed sales contract, including any addenda

If the property is fully completed, and as a result the appraisal report will be completed “as is,” the Lender must provide the appraiser with, or ensure that the builder has provided the appraiser with the following:

  • Plans and specifications
  • Survey and/or plot plan
  • Current photos of the subject property, including:
    • A front view of the subject property
    • A rear view of the subject property
    • A street scene (i.e., a photograph of the street view in both directions)
    • The kitchen of the subject property
    • All bathrooms of the subject property
    • The main living area of the subject property
    • Basement, including all finished rooms
  • Fully executed sales contract including any addenda

Builder certification

The Lender must obtain a builder signed certification, Attachment A, Builder/Contractor Certification, attesting that the information provided is true and correct. This certification must be included in the Mortgage file.

Completion reports for new construction properties

For new construction properties where the appraisal report was completed “subject to completion per plans and specifications,” if the Lender is unable to obtain a completion report on Form 442, Appraisal Update and/or Completion Report, as a result of COVID-19 related issues, Freddie Mac will accept the warranty of completion form, which is provided as Attachment B, Completion of Construction Certification.

FHA Guidance for Property inspections – Updated 03/30/20

Effective Date

The FHA Appraisal guidance in Mortgagee Letter 2020-05 is effective immediately for appraisal inspections completed on or before May 17, 2020.

Please note: The policy changes in the Mortgagee Letter are temporary and will not be incorporated into the HUD Single-Family Housing Policy Handbook 4000.1.

HUD Single Family Housing Appraisal Policy

When applicable, as described below, the appraiser may amend the scope of work to perform an Exterior-Only (viewing from the street) or Desktop-Only. 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.

The Exterior-Only and Desktop-Only Appraisal options must continue to be reported on the current FHA approved appraisal forms with amended certifications and scope of work disclosures.

Appraisal Forms and Amended Certifications

The optional Exterior-Only and Desktop-Only appraisals must be reported on the existing Acceptable Appraisal Reporting Forms by Property and Assignment Type. These forms will require amended certifications and clear scope of work disclosures. Lenders are reminded that Exterior Appraisal forms Fannie Mae 2055 and Fannie Mae 1075 are not FHA approved forms and are not compatible with FHA’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-Only scope of work.

Exterior-Only Option

The required protocols and exhibits under the Exterior-Only 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.

Desktop-Only Option

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.

FHA Purchase Transactions

FHA will accept appraisals for Purchase transactions with an optional Exterior-Only or Desktop-Only scope of work by the Appraiser. These flexibilities are not permitted on New Construction, Construction to Permanent, and 203(k) purchases.

FHA Refinance

FHA will accept appraisals for Rate and Term Refinance and Simple Refinance with an optional Exterior-Only scope of work by the Appraiser. These flexibilities are not permitted on Cash out Refinances and 203(k) refinances.

Form 1004D Part B Completion Report

When an Appraisal Update and/or Completion Report (Form 1004D) Part B is required to evidence the completion of required repairs, FHA will permit a letter signed by the borrower affirming that the work was completed with further evidence of completion, which may include 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 are not permitted on New Construction, Construction to Permanent, and 203(k) transactions.

VA Guidance for Property inspections – Updated 03/27/20

Effective Date

The VA policy outlined below is effective for all loans closed on, or after, 3/27/2020 and until further notice or the rescission of the VA 20-26-11 Circular.

Valuations may come in a form of an Exterior-Only appraisal with enhanced assignment conditions or in limited instances, a Desktop appraisal.

On page 1 of the Uniform Residential Appraisal Report (URAR), Subject section, “Map Reference” appraisers are to state “Exterior-Only” or “Desktop.” These procedures are temporary in nature and VA will return to normal operations after the national emergency

The report will be competed “AS IS” unless there are MPR requirements the appraiser observed in the review of the property. Without an interior review of the property, the appraiser can make an Extraordinary Assumption (EA) concerning MPRs with the information available.

The appraiser will continue to gain access to view the interior property in the instances outlined below.

(1) Purchase Transaction (vacant property). When the appraiser’s assigned geographic jurisdiction does not have restrictions imposed by authorities prohibiting individuals leaving their domicile, such as mandatory quarantine or shelter-in-place.

(2) Purchase or Refinance Transaction (property occupied). When the appraiser’s assigned geographic jurisdiction does not have restrictions imposed by authorities prohibiting individuals leaving their domicile, such as mandatory quarantine or shelter-in-place. In addition, all parties must agree to the interior inspection and meet the following:

  1. either party has not been instructed by health authorities to stay home or practice social distancing; or
  2. does not have flu-like symptoms (such as fever, cough, or shortness of breath); or
  3. has not been quarantined under direction of public health authorities; and
  4. no parties are within the CDC guidance of high risk found at: https://www.cdc.gov/coronavirus/2019-ncov/specific-groups/high-risk-complications.html.

If either party does not wish to move forward with the interior inspection or do not meet the criteria listed above, the appraiser may move forward with an Exterior-Only appraisal with enhanced assignment conditions. Lenders may not direct the appraiser to conduct an interior inspection.

Exterior-Only Appraisal

This report option with enhanced assignment conditions will be completed on the FNMA 2055/1075 URAR form. For manufactured homes and multi-unit (2- to-4 unit) properties, appraisers will use the 1004C or 1025 form. Appraisers must boldly and inconspicuously state “Per Department of Veterans Affairs, no interior inspection was provided due to COVID-19.”  Exterior-Only Appraisal with enhanced assignment conditions will be limited to the maximum 2020 Freddie Mac Conforming Loan Limit for a one-unit limit for the county or county-equivalent area.

Purchase or Refinance transactions

When an area may be restricting personal contact or when either party are in or have others that reside with them that are categorized as high risk according to the CDC, the appraiser must make every effort to complete the enhanced assignment conditions listed below.

(1) The appraiser will review the full exterior of the property and provide photos of all sides of the property with detailed notes of the exterior and any visible MPRs. In instances of obstructed or restricted view and access is unable to be granted or allowed, Multiple Listing Service (MLS) photos of these areas may be utilized. If MLS photos are utilized, it must be explained in the appraisal report.

(2) A measurement of the footprint of the home should be provided if accessible. This is not to determine the gross living area (GLA) but for the appraiser to reconcile with public records.

(3) The appraiser will conduct a detailed interview over the phone with the occupant, Veteran, or real estate professional regarding the property. It is the appraiser’s responsibility to obtain sufficient information to provide a creditable report. Interview questions should be noted and kept in the appraisers work file. Key items that may impact market value should be noted in the appraisal report with details about what was provided and by whom.

(4) The appraiser may utilize any and all photos available from MLS, provided by the occupant, Veteran, or real estate professional.

Desktop Appraisal Valuations

This report option will be completed on the FNMA 1004, 1073, 1004C, 2025 and the appraiser will be required to attach a copy of the provided Scope of Work (SOW) Exhibit A, certifications, and assumptions in all reports. Appraisers must boldly and inconspicuously state “Per Department of Veterans Affairs, no interior inspection was provided due to COVID-19”.

  1. Desktop valuations will be limited to the maximum 2020 Freddie Mac Conforming Loan Limit for a one-unit limit for the county or county-equivalent area. The lender will address this at the time of the assignment.
  2. Desktop appraisals will be conducted when the appraiser’s assigned geographic jurisdiction has restrictions imposed by authorities prohibiting individuals leaving their domicile, such as mandatory quarantine or shelter-in-place. Lenders must state in both in “public” notes in WebLGY and by e-mail to the appraiser if they will accept a Desktop appraisal. If the lender will not accept a Desktop appraisal, the appraiser will place the assignment on hold for 30 days and then subsequently cancel, if the status has not changed. The appraiser will annotate “public” notes in WebLGY updates on a weekly basis.

Purchase transactions: The appraiser defines the scope of the work and will annotate in the appraisal report concerning the source of information provided.

Cash-Out Refinance Transactions: The appraiser will prioritize assignments based on purchase transactions first and determine if sufficient information is publicly available and verifiable. Appraisers are not required to proceed on the assignment if information is not available to provide a credible report. In the event the appraiser is not able to complete the assignment, the lender may choose to cancel the request or have the VA Regional Loan Center (RLC)  suspend the assignment until the national emergency is lifted and a more detailed report can be produced.

Additional Notes

VA understands that there may be insufficient data available to produce a creditable report. Appraisers are not required to accept a Desktop valuation order. In addition, the use of Assisted Appraisal Processing Program (AAPP) is not authorized for Desktop appraisals. When an appraiser believes the scope of work required to develop a credible report is not capable in a Desktop appraisal, the appraiser must contact the RLC to place the assignment on hold.

Reconsideration of Value

In times of uncertainty, the housing market strengths may be less predictable to report. Appraisers will have comparable sales that took place prior to the President declaring a national emergency and active and pending sales can be less predictable. During this time, it is important to ensure that Veterans continue to be able to purchase a home. VA, the lender, and the appraiser will work together during this time to assist in the best possible outcome for the Veteran.

Purchase Transactions: Reconsideration of Values (ROV) for purchase transactions will be restricted to no greater than 5 percent from the appraiser’s opinion of value. The same criteria is required as outlined in VA Pamphlet 26-7, Chapter 10 Appraisal Process (NEW), Section 22. In addition, a field review by RLC staff will not be a completed in conjunction with the ROV request.

Cash-Out Refinance Transactions: VA will suspend ROV requests for cash-out refinance loans until further notice.

Memorandum of Values

In extreme cases when an appraiser is not available to complete an appraisal assignment for a purchase, VA has the authority and ability to issue a Memorandum of Value (MOV). This will be completed on a case-by-case basis.

Termite Inspections

VA Pamphlet 26-7, Chapter 12 Minimum Property Requirements (NEW), Section 33, Topic b, requires a wood inspection report if the property is located in an area on the Termite Infestation Probability Map where the probability of termite infestation is “very heavy” or “moderate to heavy”. If there is no known or visible evidence of termite infestation present, the seller and realtor must provide a certification to that fact. If there is known or visible evidence of termite infestation, a clear termite report must be provided within one year of close of escrow.

Any Additional NOV Conditions

Any additional items that need to be met on the Notice of Value (NOV) to comply with VA requirements will have to be met in 180 days from the date of the NOV issuance. All conditions must be completed before the loan will be guaranteed by VA. The Veteran must acknowledge and accept any and all conditions not met prior to closing

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.

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.

USDA Guidance for Property inspections – Updated 03/30/20

The USDA Single Family Housing Guaranteed Loan Program (SFHGLP) temporary exceptions pertaining to appraisals and repair inspections in relation to COVID-19 Pandemic are as follows:

Effective immediately, the following exceptions to HB-1-3555 are in effect for a period of 60-days.

Residential Appraisal Reports of Existing Dwellings

For purchase and non-streamlined refinance transactions, when an appraiser is unable to complete an interior inspection of an existing dwelling due to concerns associated with the COVID-19 pandemic, an Exterior-Only Inspection Residential Appraisal Report (FHLMC 2055/FNMA 2055) will be accepted. In such cases, appraisers are not required to certify that the property meets HUD HB 4000.1 standards. The appraisal must be completed in accordance with the Uniform Standards of Professional Practice (USPAP) and the Uniform Appraisal Dataset (UAD).

This exception is not applicable to new construction properties or construction to permanent loans. As a reminder, appraisals are not required for streamlined and streamlined-assist refinance transactions.

Repair Inspections of Existing Dwellings

Loans for which a completion certification is not available due to issues related to the COVID-19 pandemic, a letter signed by the borrower confirming that the work was completed is permitted. Lenders must also provide further evidence of completion, which may include photographs of the completed work, paid invoices indicating completion, occupancy permits, or other substantially similar documentation. All completion documentation must be retained in the loan file.

Contacts

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

Carrington thanks you for your business.

Verbal Verification of Employment Requirements – Revised

April 2, 2020rashtonBulletin

Overview

Carrington Mortgage Services, LLC (CMS) is actively monitoring the spread of COVID-19 (coronavirus) throughout the United States and we understand there may be concerns about 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 guidance, this bulletin will be updated and republished.

Conventional VVOE Requirements:

Effective: These temporary employment and income verification flexibilities are effective immediately for all Conventional product only loans in process and remain in place for loans with application dates on or before May 17, 2020. Please note that the Guidelines/ Matrices and AUS messages will not be updated to reflect these temporary policies.

Verbal Verification of Employment

In cases where there is difficulty in obtaining the verbal verification of employment (VVOE) due to disruption to operations of the borrower’s employer, the following temporary process applies:

  • Written VOE: Obtain an email directly from the employer’s work email address that identifies the name and title of the verifier and the borrower’s name and current employment date within 10 calendar days of the note date.
  • The Work Number: We will continue to accept automated verifications such as those from The Work Number, although the last date of employment verified must be within 10 calendar days of the note date. In situations where the automatic database upload has not been refreshed within the last 10 calendar days, we will have to wait for the next refresh period.
  • Paystub: Provide a year-to-date paystub dated within 10 calendar days of the note date.
  • Bank statements: Provide a bank statement evidencing the automatic payroll deposit reflecting the employer’s name within 10 calendar days of the note date. (The 10 calendar days is calculated from the date of the payroll deposit, not the bank statement date.)
  • Self-Employment: Verification of self-employment will follow existing guidance, but must be dated within 10 calendar days of the note date.

Continuity of Income:

It is important to remind our Associates of ensuring sustainable homeownership for our borrowers in light of recent events.

Given the current economic climate associated with the COVID-19 pandemic and its impact on employment and income, our Underwriting team will practice additional due diligence to verify the most recent information is obtained. This will ensure any disruption to borrowers’ employment (or self-employment) and/or income due to the COVID-19 pandemic is not expected to negatively impact their ability to repay the loan.

Verification of Self-Employment – Updated 4/1/20

Effective Dates: Lenders are encouraged to apply these updates to existing loans in process; however, they must be applied to loans with application dates on or after Apr. 14, 2020 through May 17, 2020.

Currently, when a Borrower is using self-employment income to qualify, the Lender must verify the existence of the Borrower’s business no more than 120 days prior to the Note Date. Due to the impact the COVID-19 pandemic and the various social distancing measures implemented by different jurisdictions are having on many businesses across the country, Lenders must take additional steps to confirm that the borrower’s business is open and operating. The Lender must confirm this within 10 business days of the note date (or after closing but prior to delivery).

Below are examples of methods the Lender may use to confirm the borrower’s business is currently operating:

  • Evidence of current work (executed contracts or signed invoices that indicate the business is operating on the day the lender verifies self-employment);
  • Evidence of current business receipts within 10 days of the note date (payment for services performed);
  • Lender certification the business is open and operating (lender confirmed through a phone call or other means); or
  • Business website demonstrating activity supporting current business operations (timely appointments for estimates or service can be scheduled).

Conventional VVOE Requirements (continued)

FNMA Age of Documentation – Updated 4/1/20

Effective Dates: Lenders are encouraged to apply these updates to existing loans in process; however, they must be applied to loans with application dates on or after Apr. 14, 2020 through May 17, 2020.

In order to ensure that the most up-to-date information is being considered to support the borrower’s ability to repay, FNMA is updating their age of documentation requirements for all loans (existing and new construction) as follows:

  • FNMA is modifying age of document requirements from four months (120 days) to two months (60 days) for most income and asset documentation. If an asset account is reported on a quarterly basis, the lender must obtain the most recently issued quarterly statement.
  • When the Lender receives employment and income verification directly from a third-party employment verification vendor, FNMA is are now requiring that the information in the vendor’s database be no more than 60 days old as of the note date.
  • There are no changes to the age of documentation requirements for military income documented using a Leave and Earnings Statement, Social Security, retirement income, long-term disability, mortgage credit certificates, public assistance, foster care, or royalty payments, and the Lender can continue to apply standard age of document requirements as stated in the Selling Guide.
  • Due to the federal income tax filing extension granted through Jul. 15, 2020, FNMA is eliminating the following documentation requirements. These normally apply for income types that require copies of federal income tax returns when the mortgage has an application or disbursement date between Apr. 15th and Jul. 15th:
  • A copy of the IRS Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Tax Return), and
  • IRS Form 4506-T (Request for Transcript of Tax Return) transcript confirming “No Transcript Available” for the 2019 tax year.

All other requirements contained in FNMA Seller Guide B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns, continue to apply.

FHLMC Age of Documentation – Updated 4/1/20

FHLMC is implementing the following temporary requirements for age of income and assets documentation.

All income and asset documentation must be dated no more than 60 days prior to the Note Date, except as follows:

  • If an asset account is reported on a quarterly basis, the Lender must obtain the most recently issued quarterly statement
  • For electronic income verifications obtained from third-party verification service providers, the information from the electronic data base reflected on the third-party verification must now be dated no more than 60 days prior to the Note Date

Conventional VVOE Requirements (continued)

FHLMC Age of Documentation – Updated 4/1/20 (continued)

  • The FHLMC standard Guide requirements for age of documentation continue to apply to the following income types:
  • Military income documented on Leave and Earnings Statements
  • Retirement income
  • Survivor and dependent benefit income
  • Long-term disability income
  • Social Security Supplemental Security Income (SSI)
  • Public assistance income
  • Homeownership Voucher Program payments
  • Foster-care income
  • Trust income (fixed)
  • Royalty payments
  • Mortgage Credit Certificates (MCC)

FNMA Market-Based Assets – Updated 4/1/20

Effective Dates: Lenders are encouraged to apply these updates to existing loans in process; however, they must be applied to loans with application dates on or after Apr. 14, 2020 through May 17, 2020.

Stocks, Stock Options, and Mutual Funds

In light of current market volatility, FNMA is making the following updates when the borrower is using stocks, stock options, or mutual funds for assets:

  • When used for down payment or closing costs, evidence of the borrower’s actual receipt of funds realized from the sale or liquidation must be documented in all cases.
  • When used for reserves, only 70% of the value of the asset must be considered, and liquidation is not required.

See FNMA Seller Guide B3-4.3-01, Stocks, Stock Options, Bonds and Mutual Funds for existing FNMA requirements.

Conventional VVOE Requirements (continued)

FHLMC Market-Based Assets – Updated 4/1/20

Stocks, Stock Options and Mutual Funds

Due to the continuing market volatility of certain asset types, FHLMC is implementing the following temporary requirements applicable to accounts with stocks, stock options and mutual funds:

  • Evidence of liquidation, including Borrower receipt of funds, is required when using any funds from these accounts for Down Payment and/or Closing Cost
  • The Lender must use no more than 70% of the balance in the accounts in order to meet the reserves requirements in Seller Guide Section 5501.2

FHA VVOE Requirements

Effective Date: The re-verification of employment guidance in Mortgagee Letter 2020-05 is effective immediately for cases closed on or before May 17, 2020. Please note: the Policy updates outlined in the Mortgagee Letter are temporary and will not be incorporated into the HUD Single-Family Housing Policy Handbook 4000.1.

Verification of Employment

FHA will allow flexibilities related to the Lender’s process of completing re-verification of employment, which includes verbal verification of employment. This is applicable for all FHA programs, where re-verification of employment is required.

CMS will follow the Conventional VVOE requirements described above to verify and document the borrower’s employment and annual and repayment income.

Please note: CMS requires VVOEs for Streamline loan refinance transactions; however, CMS to CMS Streamline loan refinances are exempt.

VA VVOE Requirements

The VA Guidance for Borrowers affected by the COVID-19 pandemic is as follows:

Effective Date. The policy outlined is effective for all loans closed on, or after, 3/27/2020 and until further notice or the rescission of VA Circular 26-20-10.

VA may only guarantee a loan when it is possible to determine that the Veteran is a satisfactory credit risk and has present or verified anticipated income that bears a proper relation to the anticipated terms of repayment as outlined in the VA Pamphlet 26-7, Chapter 4 Credit Underwriting.

VA VVOE Requirements (continued)

Verification of Employment

Lenders should continue to use good judgment and flexibility when verifying stable and reliable income. Lenders should make every effort to satisfy VA’s longstanding requirements concerning verification of employment as outlined in the VA Pamphlet 26-7, Chapter 4 Credit Underwriting.

CMS will follow the same guidance for VVOE’s, pay stubs and bank statement payroll deposits within 10 calendar days of the note date, as described above in the Conventional VVOE requirements.

If the verification method is impacted due to temporary business closures, the lender should use the guidelines listed below

(1) The lender may utilize employment and income verification third-party services. Additional fees associated with these services cannot be charged to the Veteran, as stated in VA Pamphlet 26-7, Chapter 8, Section 2 Fees and Charges the Veteran-Borrower Can Pay.

(2) If the lender is not able to utilize a third-party service to verify employment and income, a VOE can be met with evidence of direct deposit from a bank statement and paystubs covering at least one full month of employment within 10 calendar days of the note date. Lenders should reconcile payment amounts between the paystubs and direct deposit listed on the bank statement.

In the event lenders utilize option (2) as verification, they must document in box 47 of the remarks section on VA Form 26-6393, Loan Analysis, the option they selected and the supporting documentation.

Underwriting Loans

For income analysis purposes, as outlined in VA Pamphlet 26-7, Chapter 4 Credit Underwriting, VA guidelines generally require income to be stable and reliable for 2 years.

  1. If the applicant was impacted by COVID-19 (i.e. furlough, curtailment of income, etc.),that period should not be considered a break in employment or income provided they have returned, or are anticipated to return, to work in the same capacity and income levels. In addition to standard verification documentation, applicants should provide furlough letters where applicable.
  2. VA continues to encourage lenders to take proactive measures in documenting and uploading evidence of their analysis and justifications for all borrowers, especially for “borderline” cases. This may proactively address questions that VA may otherwise ask and prevent a loan level audit of that loan.

USDA VVOE Requirements

The USDA Single Family Housing Guaranteed Loan Program (SFHGLP) temporary exceptions to VVOE in relation to COVID-19 Pandemic are as follows:

Effective immediately, the following temporary exceptions to HB-1-3555 are in effect for a period of 60-days.

Verification of Employment

Lenders must document and verify the borrower’s annual and repayment income in accordance with Agency regulations. Lenders should use due diligence in obtaining the most recent income documentation to re-verify the borrowers repayment ability prior to closing. When the lender is unable to obtain a VVOE within 10 business days of loan closing due to a temporary closure of the borrower’s employment, alternatives should be explored. In the case of a reduction of income, the borrower’s reduced income must be sufficient to support the new loan payment and other non-housing obligations. Borrowers with no income at the time of closing are not eligible for SFHGLP loans regardless of available cash reserves.

CMS will follow the Conventional VVOE requirements described above to verify and document the borrower’s employment and annual and repayment income.

Expiration of Temporary Exceptions

These temporary exceptions will expire 60 days from the date of this notice.

Contacts

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

Carrington thanks you for your business.

CMS Client Services Call Option

April 2, 2020rashtonBulletin

Overview

During the current telecommuting work arrangement Carrington Mortgage Services, LLC (CMS) is operating under, the Carrington Client Services Department will not be taking inbound phone calls and will request that Wholesale Brokers email all inquiries to ClientAdministration@CarringtonMS.com. The team will respond to email inquiries by phone and email as soon as possible.

The phone tree options for Wholesale Brokers at (866) 453-2400 (Option #2) has been updated with the following temporary message when the Client Service option is selected:

You’ve asked to speak with someone from our Client Services department. As our Associates are telecommuting temporarily due to the COVID-19 situation, we cannot take your call at this time. Please email your inquiry to ClientAdministration@CarringtonMS.com and we’ll respond back by email or phone as soon as possible.”

Contacts

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

Carrington thanks you for your business.

Agency Appraisal Requirements

March 24, 2020rashtonBulletin, News

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.