The Appraisal Institute (AI), along with the American Society of Appraisers (ASA), American Society of Farm Managers (ASFMRA) and Rural Appraisers and the Massachusetts Board of Real Estate Appraisers (MBREA) urged the Federal Housing Finance Agency (FHFA) on April 6 to re-evaluate its current policies on interior and exterior inspection appraisals for refinance transactions not currently held by the government-sponsored enterprises.
In the organizations’ letter to FHFA Director Mark Calabria, they thanked the FHFA for its recent directive to Fannie Mae and Freddie Mac providing appraisers the temporary flexibility to provide exterior-only or desktop appraisals during the COVID-19 pandemic for purchase mortgages, and certain refinance transactions. But the associations asked that the FHFA expand the temporary flexibility to a broader range of refinance transactions.
“The swift decision to provide flexibility to appraisers will be helpful to homebuyers, homeowners, and appraisers during these uncertain times,” the organizations wrote. “As you know, the existing flexibility for refinance transactions is restricted to loans currently owed by Fannie Mae and Freddie Mac. The balance of refinance transactions still requires a full interior inspection as part of an appraisal, putting the appraiser and everyone in the home at risk of either contracting or transmitting coronavirus.
“Further, loan sellers have also expressed concern about rep and warranty provisions that lean against the use of exterior-only appraisal assignments, favoring two extreme options – the interior-inspection appraisal or desktop appraisal. Our members report a natural gravitation to the interior-inspection assignment request as lenders seek cover from repurchase risk,” they added.
The appraisal organizations also noted in the letter to Calabria that with more of the country ordered to shelter in place, they are hearing from membership that appraisers 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. Although most states have treated appraisers as essential workers under stay-at-home orders, some have issued guidance that is unclear and might not allow in-person business operations, including inspections, they said.
“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,” the organizations wrote. “We recognize there is a concern about loan sellers transferring balance sheet risk to the GSEs at a time FHFA is seeking to release the GSEs from conservatorship. However, we do not believe it is appropriate to utilize interior inspection appraisals as a policy tool to help blunt this concern. There are reasonable enhancements that can be made to the exterior-only inspection appraisal to give additional comfort to the GSEs in purchasing new balance sheet refinance loans.”
With virtual inspection technological tools now available widely, the letter went on to say, appraisers and homeowners can work together to provide an interior view of the property without putting anyone at risk, leaving fewer unable to refinance their homes. Other enhanced protocols could be developed by the GSEs to further help illuminate the interior quality and condition.
“For example, the Veterans Administration requires enhanced assignment conditions for exterior inspection appraisals in their COVID-19 protocol,” the organizations stated. “We recognize the VA has a different risk profile than the GSEs, but this illustrates a range of options exist.”
For AI’s current updates and information appraisers should be aware of during COVID-19, go to https://www.appraisalinstitute.org/news/coronavirus/