Discussing the Impact of Appraising in a COVID-19 World
Prompt Action Safeguards Loan Closings
By Michael Dresden, President, Dart Appraisal
This article originally appeared in Scotsman Guide, October 2020
The novel coronavirus pandemic already has had a profound impact on the U.S. economy and society. With the ebb and flow of the virus apparently set to last for some time, it’s impossible to predict the long-term implications on home valuations or overall mortgage lending volumes, with respect to both new- and existing-home sales as well as refinancing.
These may be unprecedented times with never-seen-before circumstances. Still, mortgage industry professionals have the experience and skill needed to handle these challenges in an orderly, positive manner. Since this past spring, when the chilling impact of the virus became clear, all parties involved in mortgage lending have played a strong part in restoring order and a sense of calm. Freddie Mac and Fannie Mae provided an important foundation and boost when they introduced flexibilities for the loan origination process.
For mortgage originators, it is important to understand the nature and impact of these procedural adjustments. Appraisal management companies are working with lenders and appraisers, in their consultory and supervisory capacities, to help implement these new procedures. Doing so will help all sides adapt while maintaining respectable closing times.
In response to social distancing and other realities of life during the coronavirus outbreak, Fannie Mae and Freddie Mac changed their loan origination requirements. This includes alternate methods for verifying employment before loan closing; flexibility for borrowers to provide documentation rather than requiring an inspection prior to renovation loan disbursements; and alternate appraisals for purchase loans and rate-and-term refinances.
The government-sponsored enterprises (GSEs) understood that, due to the COVID-19 pandemic there will be instances in which a lender is unable to obtain an interior inspection of a subject property. This could be due to homeowners not wanting to allow visitors inside, an appraiser who does not want to enter someone’s home, or a local stay-at-home order or travel restrictions.
Although the full 1004 Uniform Residential Appraisal Report is the gold standard in the loan origination process, the GSEs published temporary flexibilities to property eligibility and appraisal requirements. This temporary guidance, which has the potential to be extended or reinstated as market conditions warrant, allows appraisal companies to authorize and process desktop and exterior-only appraisals for certain mortgage transactions…