FHFA tells GSEs to grant flexibilities for appraisal requirements, employment verification

The Federal Housing Finance Agency (FHFA), along with the two government-sponsored enterprises (GSEs) under its purview, is continuing to authorize measures designed to help the housing market as coronavirus continues to spread.

The FHFA announced that it has directed Fannie Mae and Freddie Mac to provide “alternative flexibilities” for satisfying appraisal requirements and employment verification requirements through May 17.

Those flexibilities include Fannie and Freddie using “appraisal alternatives” for certain mortgages in lieu of appraisers inspecting the interior of homes for eligible mortgages. Such alternatives, according to letters sent to lenders by Fannie and Freddie on Monday, include either a desktop appraisal — which evaluates a property based on listing service information and other public records— or an exterior-only inspection.

Both Fannie and Freddie specify that a traditional appraisal is still preferred. If a traditional appraisal is not obtained and there is insufficient information about a property for a desktop appraisal or exterior-only inspection appraisal to be completed, the loan will not be eligible for GSE backing, per the GSEs’ Monday bulletins.

Cutting down on in-person, interior appraisals limits the potential transmission of COVID-19 via appraisers getting in contact with the virus in people’s homes, addressing a big concern for the real estate industry. The move also potentially allows inspection alternatives to be performed even while appraisers comply with various lockdown and shelter-in-place orders being enacted throughout the country.

Additionally, Fannie and Freddie will temporarily allow lenders to get employment verification through a recent year-to-date pay stub from the borrower, a bank statement using a recent payroll deposit or an e-mail from a borrower’s employer. Such an email must come directly from the employer’s work email address and identify the verifier’s name and title. Another pair of lender bulletins from Fannie and Freddie specifies that lenders are permitted to obtain employment verification after loan closing (but prior to delivery to Fannie or Freddie), although the GSEs “strongly encourage” getting verification before the loan’s note date.

“Today’s announcement is the latest action that FHFA has taken to ensure the Enterprises fulfill their mission of providing market liquidity during the coronavirus national emergency,” the FHFA’s announcement said. The agency has enacted several other measures to facilitate mortgage market liquidity during the pandemic, including authorizing Fannie and Freddie to enter into additional dollar roll transactions to provide liquidity to investors of mortgage-backed securities.

The FHFA on Monday also granted mortgage forbearance for owners of multifamily properties, in exchange for suspending evictions. Such forbearance is available to all multifamily properties backed by Fannie Mae and Freddie Mac, provided renters are unable to pay rent due to the impact of coronavirus.

“Renters should not have to worry about being evicted from their home, and property owners should not have to worry about losing their building, due to the coronavirus,” said FHFA director Mark Calabria. “The multifamily forbearance and eviction suspension offered by [the GSEs] should bring peace of mind to millions of families during this uncertain and difficult time. [The GSEs] are working with mortgage servicers to ensure that these programs are implemented immediately so that property owners and renters experiencing hardship because of the coronavirus can get the assistance they need.”

The FHFA, along with Department of Housing and Urban Development, suspended evictions and foreclosures for single-family homes with government-backed mortgages last week.


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