The Federal Housing Finance Agency announced it will continue to allow for alternative appraisals and employment verifications on government-backed loans until Feb. 28 to prevent settlement delays.
The relaxed lending and appraisal standards for mortgage financing giants Fannie Mae and Freddie Mac were first put into place by the FHFA in response to the COVID-19 pandemic in March 2020. They allow for alternative verifications of employment and appraisals. The standards were originally set to expire on Jan. 31.
“The changes are to ensure continued support for borrowers during the COVID-19 national emergency,” the FHFA said in a statement on Thursday. “FHFA will continue to monitor the coronavirus situation and update policies as needed.”
During the initial stages of the COVID-19 outbreak, lenders reported struggles in being able to obtain an appraisal based on a full interior and exterior inspection of the property. The government-sponsored enterprises were directed to permit drive-up appraisals or desktop appraisals in certain situations so that appraisals could move forward and not delay settlements.
Also, as businesses closed during the pandemic, lenders reported struggling with being able to verify borrowers’ employment. In response, the GSEs began accepting alternative forms of employment verification, such as a recent pay stub.
In a release, the FHFA said the extension applies to allowing alternative methods for documenting income and verifying employment before a loan closes; alternative appraisals on purchase and rate term refinance loans; and expanding the use of power of attorney to assist with loan closings.
The FHFA has issued a request for public input on policies and practices regarding the home appraisal process as it weighs a series of proposals moving forward. Read more: FHFA Seeks Comment on Overhauling Appraisal Process