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Financial Services Law Insights and Observations

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  • FHA issues mortgagee letter extending guidance on employment reverification and appraisals

    Federal Issues

    On June 29, the FHA issued Mortgagee Letter 2020-20, which re-extends the effective date of Mortgagee Letter 2020-05, previously covered here and here. The re-extension of appraisal guidance in Mortgagee letter 2020-05 and of re-verification of employment guidance in Mortgagee Letter 2020-05 are effective immediately for cases closed on or before August 31, 2020.

    Federal Issues Covid-19 FHA Appraisal Mortgages

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  • Washington state issues Phase 2 guidance for real estate industry

    State Issues

    On May 19, Washington issued guidelines for the real estate industry during Phase 2 of the state’s reopening plan. Among other things, the guidelines prohibit in-person meetings with customers except when necessary to view a property or sign documents and limit attendance at on-site activities—such as such as appraisals, viewings, or walkthroughs — to three people.

    State Issues Covid-19 Washington Real Estate Consumer Finance Appraisal Mortgages

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  • FHA issues mortgagee letter extending guidance on employment reverification and appraisals

    Federal Issues

    On May 14, the FHA issued Mortgage Letter 2020-14, which extends the effective period of the guidance in Mortgagee Letter 2020-05 allowing for flexibility relating to employment reverification and appraisal protocols for FHA single family programs affected by Covid-19 until June 30.

    Federal Issues Covid-19 FHA Mortgages Appraisal

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  • Freddie Mac issues bulletin regarding selling requirements and guidance related to Covid-19

    Federal Issues

    On May 5, Freddie Mac issued Bulletin 2020-14 to Freddie Mac sellers to provide guidance relating to selling requirements in light of Covid-19. The bulletin sets out temporary requirements related to mortgage purchase eligibility and self-reporting requirements for mortgages in Covid-19 related forbearance. It also extends certain previously announced temporary requirements for credit underwriting, and appraisal, condominium project, and power of attorney flexibilities until June 30. Further, Freddie Mac provided guidance and reminders relating to, among other things, furloughs and layoffs, unemployment compensation, and automated income assessment with Loan Product Advisor using tax return data.

    Federal Issues Covid-19 Freddie Mac Mortgages Forbearance Underwriting Appraisal

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  • Fannie Mae updates Lender Letter 2020-04 to extend relief relating to appraisals

    Federal Issues

    On May 5, Fannie Mae updated Lender Letter 2020-04, extending certain previously issued flexibilities until June 30, 2020. The extended flexibilities relate to, among other things, condominium project reviews, new construction loans, HomeStyle Renovation loans, and appraisal requirements.

    Federal Issues Covid-19 Fannie Mae Mortgages Appraisal

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  • Pennsylvania State Department extends appraiser testing deadlines

    State Issues

    On May 4, the Pennsylvania Department of State announced that it extended the deadline for individuals whose applications to become certified real estate appraisers have been approved to take and pass the appraiser certification examination. Previously, approved applicants had one year to take and pass the examination. The department waived the one-year limitation for applicants whose one-year approval is in danger of expiring due to the closure of testing sites. Impacted applicants now have two years to sit for the examination.

    State Issues Covid-19 Pennsylvania Appraisal Real Estate

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  • Illinois Department of Financial and Professional Regulation issues guidance to credit unions regarding deferral of an appraisal or written estimate of market value

    State Issues

    On May 1, the Illinois Department of Financial and Professional Regulation issued guidance to credit unions regarding the deferral of an appraisal or written estimate of market value to allow credit unions to continue to extend loans to households and businesses during the Covid-19 crisis. The guidance notes that the National Credit Union Administration (NCUA) Board promulgated an interim final rule allowing a federal credit union to temporarily defer certain appraisals and written estimates of market value for up to 120 days after closing when other alternatives are not available and when the appraisal or evaluation would delay the closing of the transaction, and states its intention to promulgate a substantially similar rule. Until the rule has been promulgated and finalized, the department does not intend to take adverse supervisory or enforcement action against an Illinois state-chartered credit union for deferring the appraisal or written estimate of market value for appropriate transactions up to 120 days from the date of closing, subject to certain exceptions. The guidance provides additional requirements for credit unions to follow when seeking to take advantage of this exemption.

    State Issues Covid-19 Illinois Credit Union NCUA Appraisal Bank Compliance

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  • Texas regulator relaxes certain appraisal requirements for credit unions

    State Issues

    On April 22, the Texas Credit Union Department announced the temporary waiver of certain appraisal requirements. The waivers allow credit unions to defer certain appraisals and evaluations for up to 120 days after closing and raise the threshold level when an appraisal is not required for residential real-estate transactions from $250,000 to $400,000.

    State Issues Covid-19 Texas Appraisal Credit Union Real Estate

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  • Agencies defer real estate appraisals and evaluations affected by Covid-19

    Federal Issues

    On April 14, the FDIC, Federal Reserve Board (Fed), CFPB, NCUA, and OCC (agencies), in consultation with the CSBS, issued an interagency statement addressing challenges related to appraisals and evaluations for real estate financial transactions impacted by the Covid-19 pandemic. The statement outlines flexibilities for physical property inspections and appraisals of residential properties underwritten to Fannie Mae and Freddie Mac (covered by InfoBytes here). The agencies also remind financial institutions of existing exceptions outlined in appraisal regulations previously issued by the OCC, Fed, and FDIC. “The agencies encourage financial institutions to make use of these exceptions,” the statement stresses. “The use of an existing appraisal or evaluation for subsequent transactions may be particularly relevant during the COVID-19 emergency.”

    The same day, the OCC, Fed, and FDIC also issued an interim final rule to amend and temporarily defer interagency regulations that require real estate appraisals for certain transactions. Specifically, regulated financial institutions will be allowed to defer completion of appraisals and evaluations for all residential and commercial real estate transactions, with the exception of those involving the acquisition, development, and construction of real estate. Financial institutions will be allowed up to 120 days from the closing date to obtain the required appraisal or evaluation in order to expedite the liquidity needs of borrowers during the Covid-19 pandemic. However, the OCC, Fed, and FDIC expect financial institutions to “make best efforts to obtain a credible valuation of real property collateral before the loan closing, and otherwise underwrite loans consistent with the principles in the agencies’ Standards for Safety and Soundness and Real Estate Lending Standards.” The interim final rule takes effect upon publication in the Federal Register and will expire December 31, 2020.

    Federal Issues FDIC Federal Reserve OCC CFPB NCUA CSBS Covid-19 Appraisal Agency Rule-Making & Guidance

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  • VA, FHA issue valuation and appraisal guidance

    Federal Issues

    On March 27, the Department of Veterans Affairs (VA) issued guidance on valuation and appraisal practices during the Covid-19 crisis. Effective on March 27 and until modified or rescinded, VA home loan appraisers may utilize exterior-only appraisals and, in certain limited situations, desktop appraisals, for purchase and refinance transactions. When the appraiser does not inspect the interior of the property, additional sources may be used to inform the appraisal, including public records, MLS listing information, and other reliable third-party sources. The VA also issued Exhibit A to the valuation and appraisal practices circular. This document provides a statement of assumptions and limiting conditions and certifications for Desktop-only appraisals, in addition to instructions and a scope of work to be used by the appraiser.

    On the same day, the FHA issued similar guidance in Mortgagee Letter 2020-05 regarding appraisals and employment reverifications. Modifications to FHA single-family employment reverifications requirements include allowing verbal employment reverifications. The modifications also remove employment reverification requirements in certain situations, such as when certain criteria are met in forward purchase transactions, including, among other things: (i) where the mortgagee is not aware of loss of employment by the borrower; (ii) the mortgagee has year-to-date paystubs or electronic income verification for the borrower; (iii) the mortgagee has the borrower’s bank statement from immediately prior to the note date showing a direct deposit from an employer; and (iv) the mortgagee has evidence that the borrower has the equivalent of at least two months of the new payment amount, inclusive of principal, interest, taxes, and insurance. Modifications to appraisal protocols allow for exterior or desktop-only appraisals, and appraisers may utilize additional reliable information. Also, the FHA will require appraisals to include a signed certification that no interior appraisal was performed. FHA model certification forms can be found here and here.

    Federal Issues Covid-19 FHA Department of Veterans Affairs Appraisal Refinance Mortgage Lenders Mortgages

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