Additional Directives from The Stonehill Group
Tax Transcripts
To date, we have not had any communication from the Agencies concerning Tax Transcripts. According to our Vendor and as per the IRS communication, the IRS is currently not processing the requests. We are still submitting the orders for clients who have us order tax transcripts, which will be processed once the IRS reopens their centers. At that time, we will make them available to our clients as evidence they were obtained. For clients that order the tax transcripts themselves we suggest you send in your files without them since the agencies have not extended timing requirements for your audits.
We are not delaying any reviews currently due to tax transcript impediments. The Stonehill Group will make notes on your QC audit reports in instances where we are unable to review.
We are continuing to monitor daily all updates and will notify our Clients once we have more information.
Alternative COVID-19 guidelines
Please keep in mind although the Agencies are providing alternative guidelines they should not be used if you are able to obtain the document, reverification, or field review as outlined in the agency guidelines. These are meant to be alternatives in the event you cannot obtain them due to the COVID-19 Pandemic.
FHA, VA, and USDA Temporary Guidelines
As a result of the COVID-19 pandemic, FHA, VA and USDA have issued temporary guidelines around certain areas as reflected below. At the end of the section, there are links directly to the Circulars issued by the Agencies for further review. In addition, you can always refer to AllRegs, or directly to the Agency’s websites to see updated information.
FHA:
As a result of the Presidentially declared COVID-19 national emergency, the Federal Housing Administration (FHA) is announcing the following policy changes:
- Re-verification of Employment, and Exterior-Only and Desktop-Only Appraisal Scope of Work Options for FHA Single Family Programs Impacted By COVID-19
- Temporary Waiver Provides Mailing Alternative for Condominium Project Approval Application Packages
- Temporary Waiver of Damage Inspection Reports in Presidentially Declared Major Disaster Areas due to COVID-19
- Updated Single Family COVID-19 Q&A
Re-Verification of Employment and Exterior-only and Desktop-only Appraisal Property Inspection Protocols:
Today, the Federal Housing Administration (FHA) published Mortgagee Letter (ML) 2020-05, “Re-verification of Employment and Exterior-Only and Desktop-Only Appraisal Scope of Work Options for FHA Single Family Programs Impacted By COVID-19.”
This ML announced alternatives that mortgagees can use to re-verify borrower’s employment for all FHA Single Family Title II forward mortgages and Home Equity Conversion Mortgages (HECMs) prior to settlement, where required, so long as certain other conditions are met.
Mortgagees can use the following alternatives to re-verify borrower’s employment:
- Year-to-date paystub or direct electronic verification of income dated immediately prior to the note date; or
- Bank statement showing a direct deposit from the borrower’s employer for the pay period that immediately precedes the settlement date.
For forward purchase transactions, the mortgagee must also provide documentation of a borrower’s cash reserves equaling a minimum of two months of principal, interest, taxes, and insurance (PITI).
Additionally, this ML provides guidance that permits FHA roster appraisers to use exterior-only or desktop-only appraisal inspections as a substitute for interior inspections for most forward mortgage and Home Equity Conversion Mortgage (HECM) purchase transactions and exterior-only appraisal inspections for most forward refinance and HECM traditional and refinance transactions.
This amended guidance, which affects both origination and servicing, is effective until May 17, 2020, as detailed in ML 2020-05.
Quick Links
Updated Single Family COVID-19 Q&A Posted:
FHA continues to revise its FHA Single Family COVID-19 Q&A as needed to keep stakeholders updated with the latest information about FHA’s response to the Presidentially-declared COVID-19 national emergency. Refer to the Single Family main page on hud.gov for updates.
Quick Links
Veterans Administration (VA)
Loan Origination, Closing and Guaranty
The policies outlined below and further outlined within VA Circular are effective for all loans closed on or after March 27, 2020 and will remain in effect until further notice or rescission of the Circular.
Income Verification Guidelines. Lenders should continue to use good judgment and flexibility when verifying stable and reliable income. Lenders should make every effort to satisfy VA’s longstanding requirements concerning Verification of Employment (VOE) as outlined in the VA Pamphlet 26-7, Chapter 4 Credit Underwriting.
If their propriety method is impacted due to temporary business closures, the lender should use the guidelines below:
- The lender may utilize employment and income verification third party services. Additional fees associated with these services cannot be charged to the Veteran
- If the lender is not able to utilize a third-party service to verify employment and income a VOE can be met with evidence of direct deposit from a bank statement and paystubs covering at least one full month of employment within 30 days of the closing date. Lenders should reconcile payment amounts between the paystubs and direct deposit listed on the bank statement.
- If the required VOE documentation cannot be obtained by evidence of bank statements and paystubs, and the borrowers have cash reserves totaling at least 2 months mortgage payments (PITI) post-closing, the loan is eligible for guaranty. The lender’s efforts to obtain the VOE must be documented.
In the event lenders utilize option 2 or 3 as verification, they must document in box 47 of the remarks section on VA Form 26-6393, Loan Analysis, the option they selected and the supporting documentation.
Underwriting Loans:
For income analysis purposes, as outlined in VA Pamphlet 26-7, Chapter 4 Credit Underwriting, VA guidelines generally require income to be stable and reliable for 2 years
If the applicant was impacted by COVID-19 (i.e. furlough, curtailment of income, etc.),that period should not be considered a break in employment or income provided they have returned, or are anticipated to return, to work in the same capacity and income levels. In addition to standard verification documentation, applicants should provide furlough letters where applicable.
VA continues to encourage lenders to take proactive measures in documenting and uploading evidence of their analysis and justifications for all borrowers, especially for “borderline” cases. This may proactively address questions that VA may otherwise ask and prevent a loan level audit of that loan.
Electronic Mortgages (eMortgages), Electronic Notes and the use of Allonges:
VA anticipates an increase in eMortgages consistent with VA’s longstanding policy, established in VA Pamphlet 26-7, Chapter 9, Legal Instruments, Liens, Escrows, and Related Issues. VA is actively working with other federal housing agencies and Government National Mortgage Association (GNMA) to increase the accessibility of eMortgages. Lenders are reminded to comply with investor and/or GNMA guidance. It is important to clarify that an eMortgage package may or may not include an electronic note (eNote). VA loans for which the promissory note is an eNote are eligible for guaranty.
Promissory Note Requirements:
eClosing transactions, for all closings executed as of the date of this Circular may not include the use of an allonge. Any eClosing transaction including the use of an allonge is ineligible for guaranty and subject to the removal of the guaranty. While VA does not publish a standard Note or eNote as a template, VA encourages industry and technology partners alike, to review eNote templates to remove clauses referencing the possible inclusion of allonge.
Closing transactions including allonge(s) that would otherwise modify the terms of an eNote, are required to be closed using traditional, paper-based closing procedures. eClosings transactions are permissible for both, mortgages where the resulting promissory is an eNote and mortgage where the resulting promissory note is a paper note bearing a wet signature.
Valuation Practices:
VA will change the long-standing practice of requiring access to the interior of the home for certain types of loans and characteristics of those loans. Appraisers will still follow the same procedures of the VA appraisal process and are still required to meet USPAP and state requirements for delivering an appraisal that meets those qualifications but are allowed the broader use of exterior inspection. Considering the health and safety of Veterans and VA Appraiser Fee Panel members during this national emergency, valuations may come in a form of an Exterior-Only appraisal with enhanced assignment conditions or in limited instances, a Desktop appraisal. On page 1 of the Uniform Residential Appraisal Report (URAR), Subject section, “Map Reference” appraisers are to state “Exterior-Only” or “Desktop.” These procedures are temporary in nature and VA will return to normal operations after the national emergency.
USPAP Standards Rule 1-2, Standards Rule 2-2, and Advisory Opinion 2 does not require an inspection unless necessary to produce credible assignment results. Although an interior inspection would customarily be part of the scope of work for a VA appraisal assignment, health or other emergency conditions may require an appraiser to make an Extraordinary Assumption (EA) about the interior of a property. This is permitted by USPAP if the appraiser has a reasonable basis for the EA and still results in a credible analysis. The appraisers will always determine the scope of work for the assignment. All EA will be boldly noted in the Reconciliation section of the report. The report will be competed “AS IS” unless there are MPR requirements the appraiser observed in the review of the property. Without an interior review of the property, the appraiser can make an EA concerning MPRs with the information available.
The appraiser will continue to gain access to view the interior property in the instances outlined below.
Purchase Transaction (vacant property). When the appraiser’s assigned geographic jurisdiction does not have restrictions imposed by authorities prohibiting individuals leaving their domicile, such as mandatory quarantine or shelter-in-place.
Purchase or Refinance Transaction (property occupied). When the appraiser’s assigned geographic jurisdiction does not have restrictions imposed by authorities prohibiting individuals leaving their domicile, such as mandatory quarantine or shelter-in-place. In addition, all parties must agree to the interior inspection and meet the following:
- Either party has not been instructed by health authorities to stay home or practice social distancing; or
- Does not have flu-like symptoms (such as fever, cough, or shortness of breath); or
- Has not been quarantined under direction of public health authorities; and
- No parties are within the CDC guidance of high risk found at https://www.cdc.gov/coronavirus/2019-ncov/specific-groups/high-risk-complications.html.
If either party does not wish to move forward with the interior inspection or do not meet the criteria listed above, the appraiser may move forward with an Exterior Only appraisal with enhanced assignment conditions. Lenders may not direct the appraiser to conduct an interior inspection.
Exterior-Only Appraisal. This report option with enhanced assignment conditions will be completed on the FNMA 2055/1075 URAR form. For manufactured homes and multi-unit (2- to-4 unit) properties, appraisers will use the 1004C or 1025 form. Appraisers are to boldly and inconspicuously state “Per Department of Veterans Affairs, no interior inspection was provided due to COVID-19.” Exterior-Only Appraisal with enhanced assignment conditions will be limited to the maximum 2020 Freddie Mac Conforming Loan Limit for a one-unit limit for the county or county-equivalent area.
Purchase or Refinance transactions. When an area may be restricting personal contact or when either party are in or have others that reside with them that are categorized as high risk according to the CDC, the appraiser must make every effort to complete the enhanced assignment conditions listed below.
- The appraiser will review the full exterior of the property and provide photos of all sides of the property with detailed notes of the exterior and any visible MPRs. In instances of obstructed or restricted view and access is unable to be granted or allowed, Multiple Listing Service (MLS) photos of these areas may be utilized. If MLS photos are utilized, it must be explained in the appraisal report.
- A measurement of the footprint of the home should be provided if accessible. This is not to determine the gross living area (GLA) but for the appraiser to reconcile with public records.
- The appraiser will conduct a detailed interview over the phone with the occupant, Veteran, or real estate professional regarding the property. It is the appraiser’s responsibility to obtain sufficient information to provide a creditable report. Interview questions should be noted and kept in the appraiser’s work file. Key items that may impact market value should be noted in the appraisal report with details about what was provided and by whom.
- The appraiser may utilize any and all photos available from MLS, provided by the occupant, Veteran, or real estate professional.
Desktop Appraisal Valuations. This report option will be completed on the FNMA 1004, 1073, 1004C, 2025 and the appraiser will be required to attach a copy of the provided Scope of Work (SOW) Exhibit A, certifications, and assumptions in all reports. Appraisers are to boldly and inconspicuously state “Per Department of Veterans Affairs, no interior inspection was provided due to COVID-19”.
Desktop valuations will be limited to the maximum 2020 Freddie Mac Conforming Loan Limit for a one-unit limit for the county or county-equivalent area. The lender will address this at the time of the assignment.
Desktop appraisals will be conducted when the appraiser’s assigned geographic jurisdiction has restrictions imposed by authorities prohibiting individuals leaving their domicile, such as mandatory quarantine or shelter-in-place. Lenders must state in both in “public” notes in WebLGY and by e-mail to the appraiser if they will accept a Desktop appraisal. If the lender will not accept a Desktop appraisal, the appraiser will place the assignment on hold for 30 days and then subsequently cancel, if the status has not changed. The appraiser will annotate “public” notes in WebLGY updates on a weekly basis.
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- Purchase transactions. The appraiser defines the scope of the work and will annotate in the appraisal report concerning the source of information provided.
- Cash-Out Refinance Transactions. The appraiser will prioritize assignments based on purchase transactions first and determine if sufficient information is publicly available and verifiable. Appraisers are not required to proceed on the assignment if information is not available to provide a credible report. In the event the appraiser is not able to complete the assignment, the lender may choose to cancel the request or have the RLC suspend the assignment until the national emergency is lifted and a more detailed report can be produced.
- Liquidation Transactions. Desktop valuations will not be utilized for liquidation purposes.
VA understands that there may be insufficient data available to produce a creditable report. Appraisers are not required to accept a Desktop valuation order. In addition, the use of Assisted Appraisal Processing Program (AAPP) is not authorized for Desktop appraisals. When an appraiser believes the scope of work required to develop a credible report is not capable in a Desktop appraisal, the appraiser must contact the RLC to place the assignment on hold.
Reconsideration of Value
Purchase Transactions. Reconsideration of Values (ROV) for purchase transactions will be restricted to no greater than 5 percent from the appraiser’s opinion of value. The same criteria is required as outlined in VA Pamphlet 26-7, Chapter 10 Appraisal Process (NEW), Section 22. In addition, a field review by VA Regional Loan Center (RLC) staff will not be a completed in conjunction with the ROV request.
Cash-Out Refinance Transactions. VA will suspend ROV requests for cash-out refinance loans until further notice
Memorandum of Values. In extreme cases when an appraiser is not available to complete an appraisal assignment for a purchase, VA has the authority and ability to issue a Memorandum of Value (MOV). This will be completed on a case-by-case basis.
Renovation and Repair Loans. Appraisers are to suspend any renovation and repair assignments until further notice.
Repair Inspections. Due to the lack of verification of completion by the appraiser or inspector that repair items have been completed, lenders have one of the two following options to supply to VA.
Lenders have the authority and are encouraged to certify repairs, especially repairs performed by licensed personnel, instead of an appraiser certification as outlined in the VA Pamphlet 26-7, Chapter 10 Appraisal Process (NEW), Section 23, Topic b. Repair certifications which may involve lead-based paint must still be completed by a fee appraiser; however, the lender can escrow for future inspection and costs with a third-party. Lenders may hold funds in escrow for repairs to be completed after closing.
All repairs must be completed and escrowed funds distributed before the loan may be guaranteed by VA as outlined in the VA Pamphlet 26-7, Chapter 12 Minimum Property Requirements (NEW), Section 44, Topic e. In addition, there must be adequate assurance that the work will be completed timely and satisfactorily (up to 180 days).
Termite Inspections. VA Pamphlet 26-7, Chapter 12 Minimum Property Requirements (NEW), Section 33, Topic b, requires a wood inspection report if the property is located in an area on the Termite Infestation Probability Map where the probability of termite infestation is “very heavy” or “moderate to heavy”. If there is no known or visible evidence of termite infestation present, the seller and realtor must provide a certification to that fact. If there is known or visible evidence of termite infestation, a clear termite report must be provided within one year of close of escrow.
Any additional NOV conditions. Any additional items that need to be met on the NOV to comply with VA requirements will have to be met in 180 days from the date of the NOV issuance. All conditions must be completed before the loan will be guaranteed by VA. The Veteran must acknowledge and accept any and all conditions not met prior to closing.
Appraiser Information. The appraiser defines the scope of the work and they must have enough information to provide a creditable report. The appraiser will need to rely upon all publicly discoverable records, MLS photos and commentary, real estate professionals and homeowners. It is imperative this information is documented and retained. Key items that may impact market value should be noted in the appraisal report with details about what was provided and by whom. When relying upon photos provided by another party or from the MLS, it should be noted in the report. When the appraiser believes that the assignment is too complex to be completed by a Desktop or Exterior-Only appraisal, the appraiser is to contact the RLC and the lender to place the assignment on hold.
USDA:
SFHGLP – Temporary Exceptions to Interior Inspection Appraisals and Verbal Verification of Employment:
The purpose of this announcement is to inform lenders of temporary exceptions pertaining to appraisals, repair inspections, and income verification for the Single-Family Housing Guaranteed Loan Program (SFHGLP) due to the COVID-19 pandemic. Effective immediately, the following exceptions to Agency guidance found at HB-1-3555 are in effect for a period of 60-days.
Residential Appraisal Reports – Existing Dwelling
For purchase and non-streamlined refinance transactions, when an appraiser is unable to complete an interior inspection of an existing dwelling due to concerns associated with the COVID-19 pandemic, an “Exterior-Only Inspection Residential Appraisal Report”, (FHLMC 2055/FNMA 2055) will be accepted. In such cases, appraisers are not required to certify that the property meets HUD HB 4000.1 standards. The appraisal must be completed in accordance with the Uniform Standards of Professional Practice (USPAP) and the Uniform Appraisal Dataset (UAD).
This exception is not applicable to new construction properties or construction to permanent loans. As a reminder, appraisals are not required for streamlined and streamlined-assist refinance transactions.
Repair Inspections – Existing Dwelling
Loans for which a completion certification is not available due to issues related to the COVID-19 pandemic, a letter signed by the borrower confirming that the work was completed is permitted. Lenders must also provide further evidence of completion, which may include photographs of the completed work, paid invoices indicating completion, occupancy permits, or other substantially similar documentation. All completion documentation must be retained in the loan file.
This exception is not applicable to rehabilitation and repair loans noted in section 12.28 of HB-1-3555.
Verbal Verification of Employment
Lenders must document and verify the borrowers annual and repayment income in accordance with Agency regulations. Lenders should use due diligence in obtaining the most recent income documentation to reverify the borrowers repayment ability prior to closing. When the lender is unable to obtain a Verbal Verification of Employment (VVOE) within 10 business days of loan closing due to a temporary closure of the borrower’s employment, alternatives should be explored. For example, email correspondence with the borrower’s employer is an acceptable alternative to a VVOE. If the lender is unable to obtain a VVOE or acceptable alternative, the requirement will be waived when the borrower has a minimum of 2 months cash reserves.
In the case of a reduction of income, the borrower’s reduced income must be sufficient to support the new loan payment and other non-housing obligations. Borrower’s with no income at the time of closing are not eligible for SFHGLP loans regardless of available cash reserves.
Expiration of Temporary Exceptions
These temporary exceptions will expire 60 days from the date of this notice.
Questions regarding program policy and this announcement may be directed to the National Office Division at sfhgld.program@usda.gov or (202) 720-1452.
SFHGLP Lending Partner Webpage: https://lnks.gd/l/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDEsInVyaSI6ImJwMjpjbGljayIsImJ1bGxldGluX2lkIjoiMjAyMDAzMjcuMTk0MjUwMTEiLCJ1cmwiOiJodHRwczovL3d3dy5yZC51c2RhLmdvdi9wYWdlL3NmaC1ndWFyYW50ZWVkLWxlbmRlciJ9.CAcqNqhGx0SZTB5KKEschH9hOBkSAkv1WV2q1AZjbcQ/br/76743471871-l
SFHGLP webpage: https://lnks.gd/l/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDIsInVyaSI6ImJwMjpjbGljayIsImJ1bGxldGluX2lkIjoiMjAyMDAzMjcuMTk0MjUwMTEiLCJ1cmwiOiJodHRwczovL3d3dy5yZC51c2RhLmdvdi9wcm9ncmFtcy1zZXJ2aWNlcy9zaW5nbGUtZmFtaWx5LWhvdXNpbmctZ3VhcmFudGVlZC1sb2FuLXByb2dyYW0ifQ.1fmK0XQy48-cFwVMR5EhL49gxgQ6HmNoiNTSPGpebmY/br/76743471871-l
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