FHA/USDA/VA Appraisal Guidance

Per recently announced guideline updates from HUD and VA, the following appraisal relief applies to all FHA/VA & USDA loans, unless otherwise notated, that close on or before May 17,2020

FHA: Effective immediately, for appraisal inspections completed on or before May 17,2020, LoanStream will allow either a desktop appraisal or an exterior-only inspection appraisal, as outlined below, in lieu of the interior and exterior inspection appraisal (i.e. traditional appraisal) as long as there is sufficient information for the appraiser to complete the assignment.  The optional Exterior-Only and Desktop-Only appraisals must be reported on the existing Acceptable Appraisal Reporting Forms by Property and Assignment Type.  These forms will require amended certifications and clear scope of work disclosures.  The appraisal report must include a signed certification indicating whether the Appraiser did or did not personally inspect the subject property and the extent of the inspection.  Forms 2055/1075 are not acceptable.

• FHA Purchase Transactions: LSM will accept appraisals on Purchase transactions with an optional exterior-only or desktop-only scope of work by the appraiser.
• FHA Refinance Transactions: LSM will accept appraisals for rate/term refinance with an optional exterior-only or desktop-only scope of work provided by the appraiser.
• The following are excluded from the optional guidance:
  • Cash-out refinances
  • CalHFA or Chenoa DPA programs
• Cut and paste the below link for copies of the FHA provided model appraisal certificates
  • hud.gov/program_offices/housing/sfh/model_documents
• Completion Reports (1004D): For all loans for which a completion certification is not available due to issues related to COVID-19, with the exception of New Constructions transactions, LoanStream will permit a letter signed by the borrower confirming that the work was completed along with photographs of the completed work, paid invoices indicating completion, occupancy permits, or other substantially similar documentation.

USDA: Effective immediately, with exception to New Construction Properties, LoanStream will allow an exterior-only inspection appraisal (FHLMC 2055/FNMA1075) in lieu of the interior and exterior inspection appraisal (i.e. traditional appraisal) as long as there is sufficient information for the appraiser to complete the assignment.  In such cases, appraisers are not required to certify that the property meets HUD HB 4000.1 standards.

• USDA Purchase Transactions: LSM will accept appraisals on Purchase transactions with an optional exterior-only or desktop-only scope of work by the appraiser.
• USDA Refinance Transactions: LSM will accept appraisals for rate/term refinance with an optional exterior-only or desktop-only scope of work provided by the appraiser.
• The following are excluded from the optional guidance:
  • Cash-out refinances
• Completion Reports (1004D): For all loans for which a completion certification is not available due to issues related to COVID-19, LoanStream will permit a letter signed by the borrower confirming that the work was completed along with photographs of the completed work, paid invoices indicating completion, occupancy permits, or other substantially similar documentation.

VA: Effective immediately, with exception to those outlined below, an Exterior Only appraisal with enhanced assignment conditions or in limited instances, a Desktop appraisal is allowed.

• Use of Exterior or Desktop appraisal is limited to the maximum 2020 FHLMC Conforming Loan Limit for a one unit for the county area.
• Appraiser must state on page 1 of the appraiser report under Map Reference, whether the report was completed as an Exterior Only or Desktop.  Appraisers must boldly and inconspicuously state “Per Department of Veterans Affairs, no interior inspection was provided due to COVID-19.”
• A Full Appraisal is still required when:
  • VA Purchase Transaction on a Vacant Property, when the appraiser’s assigned geographic jurisdiction does not have restrictions imposed by authorities prohibiting individuals from leaving their home.
  • VA Purchase or Refinance Transaction on a borrower occupied property, when the appraiser’s assigned geographic jurisdiction does not have restrictions imposed by authorities prohibiting individuals from leaving their home.  As long as the following criteria is met:
    • Either party has not been instructed by health authorities to stay home or practice social distancing or
    • Does not have flu like symptoms 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/need-extra-precautions/people-at-higher-risk.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.  LoanStream may not direct the appraiser to conduct an interior inspection.
  • Exterior Appraisals should be form #2055 and for 2-4 Units, form #1025
    • Desktop Appraisals must be on forms #1004, 1073 or #1025 for units
  • Termite Inspection Report and Clearances are required in “very heavy” or “moderate to heavy” areas per VA’s Infestation probability map.
    • https://benefits.va.gov/ROSTPAUL/images/TermiteMapAppraisalFeeSchedule.pdf
  • All NOV conditions must be cleared prior to closing
• Completion Reports (1004D): 
  • A 1004D is required for all work required 
    • Borrower certifications are not acceptable
    • Escrow Holdbacks are not acceptable

Should you have any additional questions, please contact your manager.