MPF Announcement 2020-14

Impact of COVID-19 on Appraisals

Effective Date: Immediately (unless otherwise noted)

The MPF Program is actively monitoring reports about the potential impact of COVID-19 (coronavirus) on borrowers, PFIs and Servicers.  During this COVID-19 national emergency, in many cases Originators are unable to obtain an appraisal based on a full interior and exterior inspection of the subject property. In response, we are communicating temporary policies in this MPF Announcement to enable PFIs to better assist MPF Traditional Conventional loan borrowers impacted by COVID-19.

Effective date: The policies in this Announcement are effective immediately for all loans in process and remain in place for loans with application dates on or before May 17, 2020.

PFIs and Servicers are expected to abide by any/all federal or state laws or proclamations that may affect borrowers or loans affected by COVID-19. 

In addition, PFIs and Servicers originating, delivering or servicing:

• MPF Government loans and MPF Government MBS loans must follow relief policies and guidance issued by the applicable Government Agencies.

• MPF Xtra loans must follow relief policies and guidance issued by Fannie Mae.

• MPF Direct loans must follow relief policies and guidance issued by the product’s investor, Redwood Trust.

The MPF Program will continue to evaluate the situation to determine whether this Announcement or MPF Guide provisions should be modified to provide additional relief.

MPF Traditional

PFIs and Servicers of MPF Traditional (Conventional) loans should be familiar with previous COVID-19 related announcements:

• MPF Announcement 2020-12 - Impacts of COVID-19 on Servicing

• MPF Announcement 2020-10 - Impact of COVID-19 on Mortgage Loan Originations

• MPF Announcement 2020-9 - Servicing Updates on the Impacts of COVID-19

• MPF Announcement 2020-7 - Important Seller/Servicer Information on Potential Impacts of COVID-19

The following guideline updates for MPF Traditional (Conventional) loans are in addition to, and supersede the previous announcements where they conflict.

Temporary appraisal requirements

Effective immediately, the MPF Program will accept a desktop appraisal or an exterior-only inspection appraisal in lieu of the interior and exterior inspection appraisal (i.e., traditional appraisal) currently required under MPF Traditional Selling Guide, when an interior inspection is not feasible because of COVID-19 concerns. The MPF Program suggests that Originators relying on such desktop appraisals or exterior-only inspection appraisals consider working with the appraiser to obtain current exterior and interior photos supplied by the borrower to support the exterior and interior condition of the property.  The chart below details the temporary policy.

If a traditional appraisal is not obtained and there is insufficient information about the property for an appraiser to be able to complete an appraisal assignment with a desktop or exterior-only inspection appraisal, the loan will not be eligible for delivery to the MPF Program.

Loan purpose	LTV ratio	Occupancy	Permissible appraisals (in order of preference)
Purchase*	Per MPF Program Eligibility	Principal residence	Traditional appraisal Desktop appraisal Exterior-only appraisal
	≤ 85%	Second home	Traditional appraisal Desktop appraisal Exterior-only appraisal
	> 85%	Second home	Traditional appraisal
Rate and term refinance	Per MPF Program Eligibility	All	Traditional appraisal Desktop appraisal Exterior-only appraisal
Cash out refinance	Per MPF Program Eligibility	All	Traditional appraisal

*Excludes new construction and construction-to-permanent loans.

For all loans with LTV ratios greater than 80%, mortgage insurance continues to be required in accordance with the MPF Traditional Selling Guide. PFIs are required to confirm with the applicable MI company the coverage for mortgages using one of the temporary types of appraisals.

Desktop appraisals

For purchase money transactions when an interior and exterior appraisal is not available, Originators are encouraged to obtain a desktop appraisal rather than an exterior-only appraisal.

The minimum scope of work for a desktop appraisal does not include an inspection of the subject property or comparable sales. The appraiser relies on public records, multiple listing service (MLS) information, and other third-party data sources to identify the property characteristics.

When a desktop appraisal is performed, the applicable form, as indicated in the chart below, must be retained in the Mortgage Loan File. With desktop appraisals, for added risk management and efficiency benefits, Originators have the option of using Collateral Underwriter (CU) to aid in the appraisal review process.

The table below provides the appraisal report form that must be used to complete the desktop appraisal for each property type.

 

Property Type	Acceptable Appraisal Form
One-unit property, including a unit in a planned unit development (PUD) or a detached condominium unit	Uniform Residential Appraisal Report (Form 1004)
Condominium unit	Individual Condominium Unit Appraisal Report (Form 1073)
2-4 Unit Property	Small Residential Income Property Appraisal Report (Form 1025)
Manufactured Home	Manufactured Home Appraisal Report (Form 1004C)

As described below, the modified appraisal report language for the scope of work, statement of assumptions and limiting conditions, and certifications must be used with these appraisal forms.

Exhibits for desktop appraisals

Each desktop appraisal report must include the following exhibits:

• a location map indicating the location of the subject and comparables, and

• photographs of the subject property. Appraisers are expected to utilize available means to obtain relevant pictures of the subject property.

Exterior-only inspection appraisals

An exterior-only inspection appraisal may be obtained in lieu of an interior and exterior inspection appraisal for the following transactions:

• Purchase money loans

• Term and rate refinances

The table below shows the appraisal report form that must be used to complete an exterior-only inspection appraisal for each property type. Because there are not appropriate exterior-only appraisal report forms available for two-four unit properties and manufactured homes, an exterior appraisal scope of work completed using the applicable forms listed below will be acceptable.

Property Type	Acceptable Appraisal Form
One-unit property, including a unit in a planned unit development (PUD) or a detached condominium unit	Exterior-Only Inspection Residential Appraisal Report (Form 2055)
Attached condominium unit	Exterior-Only Inspection Individual Condominium Unit Appraisal Report (Form 1075)
Two-four unit property	Small Residential Income Property Appraisal Report (Form 1025)
Manufactured home	Manufactured Home Appraisal Report (Form 1004C)

As described below, the modified appraisal report language for the scope of work, statement of assumptions and limiting conditions, and certifications must be used with these appraisal forms.

Exhibits for exterior-only inspection appraisals

The Following exhibits to the appraisal report are required for an exterior-only inspection appraisal:

• a street map that shows the location of the subject property and of all comparable sales that the appraiser used;

• clear, descriptive photographs (either in black and white or color) that show the front of the subject property, and that are appropriately identified (photographs must be originals that are produced either by photography or electronic imaging); and

• any other data−as an attachment or addendum to the appraisal report form−that are necessary to provide an adequately supported opinion of market value.

Revisions to the scope of work, statements of assumptions and limited conditions, and appraiser’s certification

In recognition of the fact that existing appraisal report forms do not accommodate the revised scope of work, statement of assumptions and limiting conditions, and certifications for some of the scenarios presented, Fannie Mae has issued documents that include modified language to be used with desktop appraisal reports and exterior-only appraisal reports:

• Modified Set of Instructions, Scope of Work, Statement of Assumptions and Limiting Conditions and Certification for Desktop Appraisals

• Modified Set of Instructions, Scope of Work, Statement of Assumptions and Limiting Conditions and Certification for Appraisals with Exterior-only Inspection

These documents include modified language for the scope of work, statement of assumptions and limiting conditions, and certifications. Of note is certification #10 which has been removed in recognition of fact that the appraiser may have relied on information from an interested party to the transaction (borrower, realtor, property contact, etc.) and additional verification may not have been feasible. Appraisal reports using the temporary policies provided in this Announcement must include these documents with the modified language for scope of work, statement of assumptions and limiting conditions, and certifications.

PFIs are responsible for ensuring Appraisers comply with these modifications as they may be updated by Fannie Mae and Freddie Mac.

Additional form instructions for appraisals

For a desktop appraisal or an appraisal with an exterior-only inspection that is completed on a form for an interior and exterior inspection (e.g., Form 2055) as permitted above, the appraisal report must include, in the “Map Reference” field, the corresponding text identifier that reports the type of appraisal completed: “desktop” or “exterior.”

Appraisal waivers

MPF Bank and MPF Traditional Selling Guide requirements pertaining to appraisal waivers continue to apply.  No changes are being made to these provisions. Please note, not all MPF Banks accept delivery of loans with appraisal waivers, and some MPF Banks may impose additional restrictions therefore, PFIs should contact their local MPF Bank before delivery of any loans with an Appraisal Waiver offer, to ensure eligibility and compliance with MPF Bank specific requirements. See MPF Traditional Selling Guide Section 4.2.1.1.2 Appraisal Waivers.

Delivery requirements

At this time, PFIs are not required to make any changes to the data they submit in connection with the temporary policies announced in this Announcement.  The MPF Program will notify PFIs if changes are required at a future date.

Completion reports (Form 1004D)

The MPF Program requires the Appraisal Update and/or Completion Report (Form 1004D) to evidence completion when the appraisal report has been completed “subject to.” For all loans for which a completion certification is not available due to issues related to COVID-19, a letter signed by the borrower confirming that the work was completed will be acceptable. PFIs 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.

General resources

The MPF Program is pleased to continue providing support to PFIs/Servicers in these difficult times. Please contact the MPF Service Center with any questions or concerns (877-FHLB-MPF).