October 29, 2020
When the FHA and HUD began adjusting policies to accommodate social distancing requirements meant to mitigate COVID-19, one of the measures it started was the use of desktop-only and exterior-only appraisals.
This meant that an FHA appraiser conducting a home inspection was no longer required (temporarily) to step into the home to perform the appraisal. The appraisal could be accomplished in person from the exterior only (hence the name of the “exterior-only” appraisal) or by using a computer in a desktop-only type of review of the property.
These measures were meant to be strictly temporary and had expiration dates when these modifications to FHA policy would expire. But later, the FHA and HUD decided to extend the deadlines in light of the fact that coronavirus emergency did not abate in spite of the beliefs of some that the virus would “disappear like magic”.
COVID-19 did NOT disappear like magic, and as a result, federal agencies such as the FHA and HUD have made announcements to re-extend their deadlines for exterior-only appraisals and other temporary measures enacted to help the mortgage loan process continue in the era of the global pandemic.
In fact, the coronavirus pandemic has forced the federal government to re-extend the deadlines THREE TIMES before the latest announcement.
And the latest announcement from the FHA and HUD is that these agencies continue allowing exterior-only appraisals to continue, “effective on November 1, 2020 and is applicable to appraisals with an effective date on or before December 31, 2020” according to the HUD official site.
But there’s an important modification announced on the HUD official site has particular significance–the FHA appraisal modifications will no longer include desktop-only appraisals. These are no longer deemed necessary.
“…the Exterior-Only Appraisal option has been demonstrated as effective in support of initiatives to combat the spread of COVID-19by limiting face-to-face contact across all eligible program transactions. With the effectiveness of the Exterior-Only option, the availability of a Desktop-Only option provided in ML 2020-05, for certain purchase transactions without any Appraiser visual observation of the property, is no longer necessary.”
FHA appraisals will no longer use a desktop-only approach. An FHA Mortgagee Letter issued this week by HUD announces additional measures in conjunction with the end of the desktop-only appraisal:
“Most Single Family forward and HECM for Purchase transactions may continue to utilize an optional Exterior-Only Appraisal inspection scope of work” and HECM, HECM refinances, rate-and-term refi loans, and FHA Simple Refinance loans “…may continue to utilize an optional Exterior-Only inspection scope of work”.
Borrowers who aren’t sure how these changes may affect their FHA loan transactions should contact their loan servicers to ask questions. And it’s crucial to remember that an FHA appraisal is NOT a home inspection and should never be used in place of the home inspection.
The FHA and HUD both routinely warn house hunters, “For Your Protection, Get A Home Inspection” which is the name of an FHA publication advising borrowers never to skip the optional (but critical) home inspection process.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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