Fannie Mae COVID-19 Frequently Asked Questions – Selling Updated: Apr. 08, 2020
From Dave Towne:
On Wed, April 8, 2020, FNMA issued a new FAQ bulletin regarding mortgage lending and appraisals during the Covid-19 “modification” period.
Q54 – Q60 have ‘new’ info appraisers should review.
NOTE: While this FAQ is written by FNMA, it also applies to reports which will be sold to FreddieMac – because both GSE’s are working cooperatively in terms of how appraisal reports are to be completed.
NOTE 2: If you are doing an assignment for FHA, USDA or VA, you need to follow THEIR instructions because they have different guidelines for report completion.
Appraiser/Educator Bryan Reynolds is recovering from COVID-19
I had a bit of a difficult time with this podcast. We like to think we’re invincible, immune, unaffected, but that’s silly. We are, at the end of the day, all vulnerable. This chat with my long time friend and partner, Bryan Reynolds, brought that realization home, in stark reality and made it tangible and personal.
People, we damn near lost Bryan. Please give this podcast a listen. I’ve posted it here, largely unedited. This podcast is the epitome of authentic.
Partner Appraiser eLearning
Listen to this podcast!! I saw the last podcast live on March 26. Hal Humphreys was the moderator, speaking from his front yard. He said that Dave had coronavirus. I am so glad that he is recovered! To watch his webinars, go to https://www.youtube.com/channel/UClb6iDQvzQqj4GOiKSCp8EA
Are appraisers Essential Businesses?
Most appraisers, and others, have been assuming we are essential because “financial services” and some “real estate services” are exempt.
The only way to definitely know is if your state, county or city specifically lists appraisers in their Orders.
Only one state, Vermont, says appraisers are not essential businesses. Very recently, Pennsylvania made some changes, but it is not clear what they mean. Have to work from home? Desktops only? Can’t find a link to the info. Only getting excerpts by email.
Appraisal Institute Documents Statewide Orders for Staying Home, Non-essential Business Closures
The Appraisal Institute on March 31 posted on its coronavirus page a document listing statewide stay-at-home, shelter-in-place and non-essential business closure orders. Appraisers are advised to consult local governments to determine what restrictions may be in place for their area. AI updates the document as new information becomes available.
My comment: Very interesting. About 23 states include the words “appraiser” or “appraisal” as essential businesses. Maybe my state, California, will do something. Not very likely though with too many other businesses, such as construction companies, are trying to get exempted.
Advice on “how to prove” you are essential.
A possible scenario: Appraiser asks homeowner not to be there when doing inspection. Starts the inspection. Located in a strict shelter-in-place area and/or a paranoid neighbor who calls the police. Of course, it depends on how aggressive your police at investigating and has fines people who are required to be at home.
You could have:
– Copy of appraisal license
– Appraisal order from client
– The Order that applies to where you are doing the appraisal, highlighting the relevant section that relates to appraiser.
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Appraisal Institute and four Valuation organizations ask FHFA to Rethink Non-GSE Appraisal Requirements
Excerpt: With more of the country ordered to shelter in place, we are hearing from our membership they are increasingly not being allowed to enter the house by the homeowner or are declining to enter the house out of an abundance of caution,” the organizations’ letter stated.
While most states have treated appraisers as essential workers under stay-at-home orders, some have issued guidance that is unclear and may not allow in-person business operations, including inspections,” the letter stated. “This may deprive homeowners from entire states of opportunities to refinance their mortgage into a lower rate and reduce monthly housing costs, consolidate debt or tap into equity that might tide them over during this crisis.
To read more, plus the letter click here
Risky Business: Why Lenders Continue to
Demand Interior Inspections – Cash out Refi Mania!!
By Isaac Peck
Excerpts: With such broad guidelines that allow for alternatives to interior inspections, appraisers across the country are asking: Why are lenders still demanding interior inspections on the majority of appraisal assignments despite the risk involved to appraisers, their families and the occupants?
The answer is cash-out refinances.
Tapping Home Equity
While cash-out refinances represented just a small fraction of the mortgage market as recently as a few years ago, Freddie Mac’s Quarterly Refinance Report (March 13, 2020), indicates that “cash-out” borrowers- those who increase their loan balance by at least five percent, represented 83 percent of all conventional refinance loans. Freddie writes that this is the “the highest share since the third quarter of 2007.”
In other words in the current climate, cash-out refinances are booming. And despite broad flexibilities for purchases and no-cash-out refinances, both Fannie Mae and Freddie Mac require a traditional interior-inspection appraisal for cash-out refinances…
Lenders and AMCs are echoing appraiser concerns, according to Smith, and clamoring for relief on interior inspections for cash-out refis. “One way to mitigate the GSEs concerns would be to cap the LTV on cash-out refis; up to that cap, they could allow full appraisal flexibilities,” says Smith.
However, Freddie Mac’s latest guidelines indicate that an automated collateral evaluation (ACE) appraisal waiver can be offered on cash-out refinances of primary residences where the LTV is 70 percent or less, but that LTV amount clearly isn’t satisfying many borrowers.
To see lots of appraiser comments click here
My comments: Many thanks to Workingre for figuring it out. I had all the data but did not make the connection! I hope Fannie and Freddie can reduce the inspection requirement and help appraisers be safe.
VERY FUNNY VIDEO
The Family Lock Down Boogie
TAKE A SHORT ESCAPE FROM DOING YOUR APPRAISALS
YOU WILL SMILE! I DID… A LOT!!!
1.4 million downloads.
Just four regular people. Young and old.
Don’t forget to watch the fun ending!!
A few comments from viewers:
- You really gotta appreciate the dad going along with this, as he is clearly contemplating his life decisions that led to this.
- This is best tribute to Corona that I’ve seen! You sure brightened a lot of people’s days!
- Whenever the news gets to be too much now, I watch this, get up, dance along, and laugh and laugh. It’s just great. Thanks!
- My absolute favorite! I’ve watched a ton of Covid music videos but this is a standout! Great groove and choreography, makeup and wardrobe too. Great pet cameo across the bed! Well done!
Analysis of appraiser surveys in Wednesday’s free email newsletter.
I have been getting emails and reading online about these issues, but they are all stories from individual appraisers. This data lets you see what other appraisers are doing for comparison.
Note: The facebook survey only asked about doing interior inspections. 250 responses.
The Bradford software and ICAP survey had over 1,000 resposes each and had more questions. ICAP has 12 questions. Bradford had 3 questions
Have you been been accepting new appraisal assignments from lenders using new Fannie requirements? (check all that apply)
Desktop – 29%
Drive-bys – 49%
Traditional 1004 – 66%
Not doing appraisals during the pandemic crisis 11%
My comment: Drive-bys are preferred over desktops. But, the results are close to traditional 1004s.
Interior inspection lender requests
Are you doing interior inspections?
Yes 66%, 59%, 59%
Most appraisers are still doing them.
Are you being pressured by any clients to conduct interior inspections? Yes 31% No 69%
If the borrowers/owners/tenants will not allow interior access to the property what is the lender’s primary reaction and guidance?
Change order to an alternative appraisal format (drive-by or desktop) 21%
Place order on hold 37%
Cancel order 12%
Other 30% (specific data not supplied in survey results)
Are high or low percentage of borrowers/owners/tenants refusing to allow access to their properties to perform an interior inspection? High 16% Low 84%
Do you think the state and federal government should intervene and stop requiring appraisers to perform interior residential inspections? Yes 58% No 42%
My comments: Although appraisers are doing full appraisals, the majority want regulations to stop requiring them. See question above.
On the other side, many appraisers want lenders to keep doing interior inspections as they are afraid lenders will drop full appraisals whenever possible and shift more loans to desktops and drivebys when the pandemic is over.
Drivebys and desktops
Are lenders or AMCs asking you to accept lower fees when assigning the new GSE’s alternative formats, i.e. drive-by and desktop appraisals?
Yes 40% No 48%
My comments: They are living in the Past, when drivebys took less time and appraisers had lower fees. Now they take lots of time – interviewing, getting photos from owner, etc.
CHARGE THE SAME FEE FOR FULL, DRIVEBY AND DESKTOP APPRAISALS!
Are clients ordering drive-by and desktop appraisals based on the recent Fannie/Freddie alternative single-family guidelines?
Yes 36% No 64%
My comments: Driveby and desktop appraisal requests will increase eventually. Full appraisals will decrease.
Would you do an appraisal with interior photos from homeowner if you could verify the photos were taken inside the home?
Personal health and safety
Are you concerned for your safety and the safety of your family when you are required to perform interior inspections.
– No 14%
Are you asking the borrower any questions about their potential exposure to COVID-19 before scheduling an inspection?
Yes 79% No 21%
My comment: Of course, there is no way to know unless the person has been tested and has the virus. I regularly read and get emails from appraisers who asked and the homeowner said no, but had virus symptoms. During the inspection, the owner said she had been feeling sick for a week or so. The appraiser left. The homeowner got tested. Or, the owner stayed outside but came in to tell the appraiser about the deck and stood very close to the appraiser. Just two of the many examples.
What type of protective wear are you using during property inspections (check all that apply)
Disposable gloves 84%
Protective face masks 46%
Disposable booties 21%
Medical scrubs 0
Other 17% (specific data not supplied in survey results)
“other” may include hand sanitzers and disinfectants, for example.
My comment: None is not good. You can always use a cloth mask, bandanna, etc. and re-use disposable gloves. Or use gloves that are waterproof and wash with soap and water for 20 seconds. I use one disposable glove from my first aid kits. I use alcohol wipes, available at many stores. You can easily make your own disinfectants. It is very important to wash your hands with soap and water when you get home, which is more effective than hand sanitizers. Use hand santizers or disinfectants if you are using the gloves more than once or going to more than one property.
Why I am opposed to doing interior inspections
I assume that myself and everyone else is infected. No one knows unless they have been tested. Even if someone says they are okay, the incubation time is 5-8 days and even then some don’t ever show symptoms. I never want to be responsible for giving a person the virus.
For appraisers, going into someone’s home is a significant health and safety risk for the appraiser, the homeowner, their family members, and anyone else they contact. It is not worth the money. Lenders hopefully will shifting to drivebys and desktops. There is considerable concern from lenders about appraisers’ health and safety.
I am not letting anyone into my home, including my long time cleaning person. (I am continuing to pay her.) A few times a week my assistant and I go to my office to get paperwork. We are not in the office at the same time as it is small and difficult to maintain 6 ft. distance. My assistant’s husband had heart surgery a few years ago. Their children and grandchildren do not go inside their house.
When my assistant comes by to drop off checks to be signed and bills to pay we speak through my glass front door. She puts the paperwork on the front steps, backs up, and I pick it up.
If still doing lender work, I would do drivebys and desktops and wait until more lenders offer them. I prefer drivebys as I did many of them back in the 80s and 90s. I don’t like desktops. I tried doing “comp checks” but was always way to far off when I did the inspection. I much prefer interior inspections as I have been doing them for 45 years. I became an appraiser because I could work in the field and didn’t like doing drivebys or desktops. I have savings I can use.
However, I am not exempt from stay at home orders as I don’t do lender work, so I don’t have the option of interior inspections or drive-bys. I can only do desktops.
HOW TO USE THE NUMBERS BELOW. Appraisals are ordered after the loan application. These numbers tell you the future for the next few weeks. For more information on how they are compiled, go to www.mbaa.org
Mortgage applications decreased 17.9 percent from one week earlier
WASHINGTON, D.C. (April 8, 2020) – Mortgage applications decreased 17.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 3, 2020.
The Market Composite Index, a measure of mortgage loan application volume, decreased 17.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 18 percent compared with the previous week. The Refinance Index decreased 19 percent from the previous week and was 144 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 12 percent from one week earlier. The unadjusted Purchase Index decreased 12 percent compared with the previous week and was 33 percent lower than the same week one year ago.
“Mortgage applications fell last week, as economic weakness and the surge in unemployment continues to weigh heavily on the housing market. Purchase activity declined again, with the index dropping to its lowest level since 2015 and now down 33 percent compared to a year ago,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “With much less liquidity and tighter credit in the jumbo market, average loan sizes declined, and mortgage rates for jumbo loans increased to a high last seen in January.”
Added Kan, “Refinance applications dropped 19 percent, reversing a 25 percent increase the week before. Given the ongoing rate volatility, along with the persistent lack of liquidity in certain sectors of the MBS market, we expect to see continued weekly swings in refinance activity.”
The refinance share of mortgage activity decreased to 74.2 percent of total applications from 75.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 3.3 percent of total applications. Looking at the impact at the state level, here are results showing the non-seasonally adjusted, week-over-week percent change in the number of purchase applications from Washington, California and New York:
The FHA share of total applications increased to 10.6 percent from 9.1 percent the week prior. The VA share of total applications increased to 14.3 percent from 12.5 percent the week prior. The USDA share of total applications remained unchanged from 0.4 percent the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) increased to 3.49 percent from 3.47 percent, with points decreasing to 0.28 from 0.33 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate remained unchanged from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400) increased to 3.87 percent from 3.84 percent, with points decreasing to 0.26 from 0.31 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.54 percent from 3.57 percent, with points decreasing to 0.19 from 0.28 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.04 percent from 3.05 percent, with points decreasing to 0.25 from 0.27 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 5/1 ARMs increased to 3.39 percent from 3.35 percent, with points increasing to -0.02 from -0.03 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
If you would like to purchase a subscription of MBA’s Weekly Applications Survey, please visit www.mba.org/WeeklyApps, contact email@example.com or click here.
The survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100.
NOTE: NEW POSTAL ADDRESS
Ann O’Rourke, MAI, SRA, MBA
Appraiser and Publisher Appraisal Today
1826 Clement Ave. Suite 203 Alameda, CA 94501
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