FHA issues COVID19 guideline changes in the latest Mortgage Letter in an effort to assist the mortgage industry in continuing operations. FHA is the latest agency to adjust its appraisal and employment verification guidelines as the chaos from the the COVID19 pandemic continues.
With many states, such as California, issuing shelter in place orders, conducting face to face business is not allowed with the exception of industries which are considered to be essential services.
Let’s talk about appraisers
No one would think of appraisers as being an essential service for the general public during this COVID19 crisis but appraisals are essential for the mortgage process.
Though the U.S. Department of Homeland Security Cybersecurity and Infrastructure Security Agency (CISA) updated its list of essential services during the coronavirus (COVID-19) crisis to include residential real estate, notary, settlement services etc, the list does not include appraisers.
The temporary guideline which is effective until May 17,2020 will allow for an exterior only appraisal to be used on FHA loans intended for a purchase, rate and term refinance or reverse mortgage. Cash out refinances are not part of this temporary guidelines.
How about employment verifications?
As you may or may not know, the verification of employment is typically required to be dated within 10 days from when your new note is prepared. The temporary guideline will allow lenders to skip the 10 day verification if:
- The lender is not aware of any loss of employment
- The borrower has at least 2 months of cash reserves
- Has a year to date pay stub o direct deposit notice for the pay period immediately preceding the note date or a bank statement showing direct deposit for that pay period.
If the timing works right, this change could help those that may have had hours cut or have been temporarily laid off but want to continue with their transaction.
I do want to stress that these are temporary guidelines that apply to FHA loans only. FannieMae or FreddieMac made a similar announcement last week which you can read about here.
So there you have it, a quick wrap up as FHA issues COVID19 guideline changes.
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