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FHFA Extends Alternative Appraisal, Employment Verifications

March 12, 2021

The Federal Housing Finance Agency announced Thursday it was extending its relaxed lending and appraisal standards for Fannie Mae– and Freddie Mac–backed loans by a month. The eased standards were originally put in place due to the COVID-19 pandemic, as lenders and appraisers tried to keep loans on track while navigating new social distancing measures and delays in verifications.

The relaxed standards include alternative verifications for employment and appraisals. The standards have been extended to April 30. They were originally set to expire on March 31.

More specifically, the extended measures include:

  • Alternative appraisals on purchase and rate term refinance loans
  • Alternative methods for documenting income and verifying employment before loan closing
  • Expanding the use of power of attorney to assist with loan closings.

As more people work from home, employment verification has been challenging as businesses work with limited staff. Any delays could further delay closing on a home loan, however, The government-sponsored enterprises will continue to accept verification of employment using alternative forms, such as an email from an employer, a recent year-to-date pay stub from the borrower, or a bank statement showing a recent payroll deposit.

Eased policies over employment verification, condo project reviews, and expanded power of attorney are expected to expire on April 30, the FHFA said in a statement.

But the alternative appraisal policy could prove to be more long term. In January, the FHFA issued a request for public input on policies and practices regarding home appraisals. Learn more: FHFA Seeks Comments on Overhauling Appraisal Process

During the early stages of the COVID-19 outbreak, lenders reported difficulties being able to obtain an appraisal based on a full interior and exterior inspection of the property. The GSEs were directed to permit drive-up appraisals or desktop appraisals in certain situations so that appraisals could move forward and not delay settlements.

“As health and safety conditions improve, FHFA will actively monitor mortgage market participants’ use of all temporary measures and retire those that are no longer needed or not extensively used,” the FHFA said.