Agency Appraisal Requirements

Overview

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

FNMA Temporary Appraisal Requirement Flexibilities

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

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

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

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

Desktop appraisal

Exterior-only appraisal

≤ 85% Second home Investment Traditional appraisal

Desktop appraisal

Exterior-only appraisal

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

Exterior-only appraisal

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

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

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

Desktop appraisals

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

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

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

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

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

Exhibits for Desktop Appraisals

Each desktop appraisal report must include the following exhibits:

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

Exterior-only Inspection Appraisals

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

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

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

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

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

Exhibits for Exterior-only Inspection Appraisals

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

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

FHLMC Temporary Appraisal Requirement Flexibilities

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

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

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

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

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

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

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

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

Appraisals with Exterior-only Inspections

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

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

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

Exhibits for Exterior-only Inspection Appraisals

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

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

For Purchase Transaction Desktop Appraisals

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

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

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

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

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

Exhibits for Desktop Appraisals

Each desktop appraisal must include the following exhibits:

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

VA Guidance for Property inspections

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

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

FHA Guidance for Property inspections

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

USDA Guidance for Property inspections

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

Contacts

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

Carrington thanks you for your business.

Carrington Temporarily Suspending Non-QM Lending

Non-QM Update

Carrington Mortgage Services remains committed to the Non-QM market as one of the key leaders in the industry. Unfortunately, we have to temporarily discontinue offering Non-QM loans due to current secondary market conditions. We’re happy to say that any approved loans that are locked will be honored through the remaining locked term. Unfortunately, we will not be accepting any new Non-QM submissions for our Carrington Flexible Advantage, Flexible Advantage Plus, Investor Advantage, and Prime Advantage products.

Non-QM Loans that have been submitted or approved without rate lock cannot proceed under this program. For locked loans, we are not offering lock extensions at this time.

As the market stabilizes, Carrington will be at the forefront and will re-introduce our Non-QM product line.

We sincerely apologize for the temporary inconvenience this may cause and look forward to serving your Non-QM borrowers in the near future.

On the Brighter Side

Carrington continues to offer its full suite of government loans including FHA, VA & USDA loans full doc and streamlines. And don’t forget about our conventional Fannie/Freddie loan products.

  • FICOs down to 500
  • Manual underwriting (for those out of the box borrowers)
  • Expanded DTI on FHA loans available
  • So much more…

See Our Loan Products

Revised CMS Lock Policy

Overview

Due to current market conditions, effective March 20, 2020 and until further notice, Carrington Mortgage Services, LLC (CMS) will temporarily no longer permit a lock until the loan is Approved and the appraisal (where applicable) has been received by CMS.  Please see revised lock policy below.

Loan Type Available Lock Terms Additional Requirements
Non-QM Loans 45-days Loan must be Approved with appraisal in file
Conventional Full Document Loans 45-days, 60-days Loan must be Approved with appraisal in file
Government Full Document Loans 45-days, 60-days Loan must be Approved with appraisal in file (loans with Appraisal Waivers are exempt)
Government Streamline/IRRRL 45-days, 60-days Loan must be Approved

Lock Extensions:

  • Maximum of up to two extensions
  • Maximum extension period of 15 days in the aggregate
  • Current extension fee charges remain in place (see rate sheet)

Contacts

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

Carrington thanks you for your business.

Temporary Suspension of 30-Day Locks

Overview

Due to current market conditions, effective March 13, 2020 and until further notice, Carrington Mortgage Services, LLC (CMS) will temporarily suspend offering 30-day locks. CMS will still offer 15-day, 45-day, and 60-day lock terms in accordance with the revised guidelines for available lock terms outlined below.

Loan Type Available Lock Terms Additional Requirements
Non-QM Loans 45-days Loan must be Approved
Conventional/Government Full Document Loans 45-days and 60-days None
Conventional/Government Full Document Loans 15-days Loan must have all Underwriting Conditions submitted and sent for Clear to Close
Government Streamline/IRRRL 45-days and 60-days None
Government Streamline/IRRRL 15-days Loan must be Approved

Contacts

Please contact your Account Executive or Account Manager with any questions. Carrington thanks you for your business.

North Carolina Bona Fide Discount Points Assessment

Overview

In the state of North Carolina, borrowers may be charged bona fide discount points for the purpose of reducing their interest rate. For Owner Occupied Loans with a balance of $300,000 or less, up to 2.25% (Agency products) or 0.25% (Non-agency products) may be charged as Discount Points under the North Carolina Max Fee Rule if the bona fide assessment is met.

Determining Maximum Discount Points

North Carolina does not use the Average Prime Offer Rate (APOR) like the QM Test does. They use the Fannie Mae Average Rate.

The Fannie Mae Average Rate can be accessed on the following website:

https://www.fanniemae.com/singlefamily/historical-daily-required-net-yields

In this example the Fannie Mae Rate is used for bona fide discount point assessment.

3.34 + 1 = 4.34

If the Starting Adjusted Rate does not exceed 4.34, you can exclude 2.00 points, and have a maximum of 2.25% in Discount Points charged.

3.34 + 2 = 5.34

If the Starting Adjusted Rate does not exceed 5.34, you can exclude 1.00 point, and have a maximum of 1.25% in Discount Points charged.

If the Starting Adjusted Rate is greater than the comparable rate +2.00, no points are eligible for exclusion, and the maximum Discount Points are 0.25%.

Starting Adjusted Rate is the Rate closest to PAR.

Compliance Fails

Locks with non-bona fide Discount Points will encounter Compliance Fails in BrokerIQ, and the interest rate will need to be raised in order to reduce the Discount Points to proceed. If a higher rate with lower Discount Points is not available, Brokers should contact their Account Executive to review.

2020 Martin Luther King Jr Holiday Lock Desk Hours

Overview

The Lock Desk at Carrington Mortgage Services, LLC (CMS) will be closed on Monday, January 20, 2020 for Martin Luther King Jr. Day, which is a Federal Holiday. Normal lock hours will resume on Tuesday, January 21, 2020.

Rate Locks that expire on the holiday will automatically roll to the next business day.  In addition there are some important disclosure considerations associated with the holiday:

  • Monday January 20, 2020 cannot be included in the rescission period for refinance transactions.
  • Monday January 20, 2020 cannot be included in the seven (7) business day waiting period between the between the date the initial Loan Estimate (LE) was provided to the borrower and the consummation of the loan.
  • When re-disclosure of the LE is required, Monday January 20, 2020 cannot be included in the three (3) day business waiting period between the date the revised LE was provided to the borrower and the consummation of the loan.
  • When re-disclosure of the CD is required, Monday January 20, 2020 cannot be included in the three (3) business day waiting period between the date the revised CD was provided to the borrower and the consummation of the loan.

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

New Carrington Prime Advantage Product

Overview

Carrington Mortgage Services, LLC (CMS) is pleased to announce effective Thursday, December 5, 2019, CMS will introduce the new Carrington Prime Advantage program with Fixed, ARM and Interest-only ARM options. Carrington Prime Advantage allows alternative income documentation along with competitive pricing and loan amounts up to $2,500,000 and is designed for higher-credit-quality, non-agency borrowers who fall between the Carrington Flexible Advantage Plus (CFA+) program and conventional or jumbo loans.

Prime Advantage has the following features:

  • Improved Pricing: Pricing is 125-150 basis points more favorable than CFA+
  • Higher LTVs: 75% – 90% LTV available depending upon loan amounts (see matrix for details)
  • Maximum Cash-out: $1,000,000
  • Debt Ratio: Standard 43% and expanded up to 50% (see guidelines for details)
  • Occupancy: Primary residence and second homes
  • Amortization Types: Fixed, ARM and Interest-only ARM options
  • Loan Purpose: Purchase, Rate/Term Refinances and Cash-Out Refinances
  • Terms Available: 30 Year Fixed, 5/1 ARM, 7/1 ARM, 10/1 ARM, 5/1 ARM-IO, 7/1 ARM-IO, and 10/1 ARM-IO
  • Doc Types: Full Doc, 1-Year Alt Doc, 12 or 24 Month Bank Statements (Business or Personal) and Asset Depletion
  • Rural Properties Eligible: 80% Max LTV

Not available in all states. Refer to the Carrington Prime Advantage Program underwriting matrix and guidelines for additional information.

2019 Thanksgiving Holiday Lock Desk Hours

Overview

The Carrington Mortgage Services, LLC (CMS) Lock Desk, will be closed Thursday, November 28, 2019 in observance of Thanksgiving, which is a federal holiday.  Due to the holiday, the Lock Desk will be closing early on Friday, November 29, 2019 at 11:00 AM PST (early market closure of 2:00 PM EST).  Normal Lock Desk hours will resume on Monday, December 2, 2019.

Locks that expire on the holiday will automatically roll to the next business day.  In addition, there are some important disclosure considerations associated with the holiday:

  • Thursday, November 28, 2019 cannot be included in the rescission period for refinance transactions.
  • Thursday, November 28, 2019 cannot be included in the seven (7) business day waiting period between the date the initial Loan Estimate (LE) was provided to the borrower and the consummation of the loan
  • When re-disclosure of the LE is required, Thursday, November 28, 2019 cannot be included in the four (4) business day waiting period between the date the revised LE was provided to the borrower and the consummation of the loan.
  • When re-disclosure of the CD is required, Thursday, November 28, 2019 cannot be included in the three (3) business day waiting period between the date the revised CD was provided to the borrower and the consummation of the loan.

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

New Carrington Flexible Advantage Plus 85% Expanded Cash-Out LTV Enhancement

Overview

Effective November 14, 2019, Carrington Mortgage Services, LLC (CMS) is pleased to introduce a new 85% Expanded Cash-Out LTV option for the Carrington Flexible Advantage Plus program.

The 85% Expanded Cash-Out LTV option is perfect for borrowers looking to pull out cash, consolidate debt, pay for college tuition, home improvements, etc.  We are excited to offer a product that allows creditworthy borrowers the ability to access higher loan to values with a 620 minimum FICO; especially when many other lenders have recently pulled back to 80% LTV.

Eligibility Requirements for LTVs 80.01-85% and FICOs 620-679

  • Applies to Carrington Flexible Advantage Plus only
  • Full Documentation
  • Detached Single Family Residence and Detached PUD Only (No Condos)
  • Maximum 45% DTI
  • Minimum Loan Amount = $100,000
  • Maximum Loan Amount = $600,000
  • Maximum Cash-in-Hand to borrower = $50,000

Note: All payoffs, which are excluded from the Cash-in-Hand limit must be reflected on the Closing Disclosure and paid off through closing.  Payoffs include, but are not limited to, IRS debt, tax liens, business debt, or paying off a spouse or partner to come off title.

  • Residual Income = $3000 plus $150 per dependent

Contact your Account Executive for details.

Resources

Refer to the Carrington Flexible Advantage Plus Program Matrix for additional information.

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