FHA Extends Exterior-Only Appraisals to End of 2020, Ends Desktop-Only Option

In what has become a recurring theme for the Federal Housing Administration (FHA) relief measures stemming from the COVID-19 coronavirus pandemic, the agency on Wednesday announced that previously-extended relief for both property appraisals and re-verification of employment requirements is now extended through December 31, 2020.

The provision related to desktop-only appraisals will still expire in just a few days at the end of October. This is according to the publication of Mortgagee Letter (ML) 2020-37.

Exterior-only appraisals, re-verification of employment extended to December 31

“Today’s ML further extends the re-verification of employment guidance initially announced in ML 2020-05,” FHA said in an informational notice announcing the ML. “It also extends the appraisal scope of work inspection option providing for Exterior-Only appraisals that limit in-person contact for certain transactions affected by the COVID-19 National Emergency.”

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The guidance specified in the new Mortgagee Letter applies to extensions for exterior-only appraisals, but not to desktop-only appraisals. Previously, the allowance for desktop and curbside appraisals was in place through May 17 per ML 2020-05 published in late March, extended through August 31 with ML 2020-20 and most recently extended through October 31 in ML 2020-28. All previous extensions applied to both exterior-only and desktop-only appraisals, but the desktop-only option will now expire on October 31. 

“The Desktop-Only appraisal scope of work option originally announced in ML 2020-05 and last extended in ML 2020-28, is not being extended and will expire on October 31, 2020,” FHA said in an informational notice. “It has been determined that with the effectiveness of the Exterior-Only option, provided in ML 2020-05, for certain purchase transactions without any Appraiser visual observation of the property, is no longer necessary.”

Re-verification of employment guidance has also been extended commensurately with the relaxed appraisal requirements, and is being extended once again with the publication of the latest ML.

“The re-verification of employment guidance is effective immediately for cases closed on or before December 31, 2020,” the notice reads. “The updated appraisal guidance is effective November 1, 2020. It is applicable to appraisals with an effective date on or before December 31, 2020.”

Removal of desktop-only option, state of the pandemic

FHA specified that the removal of the desktop-only appraisal option is largely due to material data indicating that it is not required to continue in pursuit of its original purpose, which was to mitigate the spread of COVID-19 as much as possible.

“Appraisal inspection scope of work usage from ML 2020-05 guidance has been monitored and the Exterior-Only Appraisal option has been demonstrated as effective in support of initiatives to combat the spread of COVID-19 by limiting face-to-face contact across all eligible program transactions,” the ML reads in part. “With the effectiveness of the Exterior-Only option, the availability of a Desktop-Only option provided in ML 2020-05, for certain purchase transactions without any Appraiser visual observation of the property, is no longer necessary.”

The new ML’s guidance applies to traditional HECM loans, HECM-to-HECM refinance and HECM for Purchase (H4P) transactions in addition to multiple applications on the forward mortgage side.

The latest guidance from FHA comes as the United States is seeing a new wave of coronavirus infections sweeping across the country. Hospitalization rates from COVID-19 are reportedly up an estimated 46% over the last month straining the capacity of hospitals, and the stock market on Wednesday suffered its worst single-day losses since the beginning of the summer according to reporting at the New York Times.

Read the FHA-INFO notice and Mortgagee Letter 2020-37 at FHA.

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