This Bulletin has been updated to extend the effective date of the temporary policies; refer to the highlight below
HUD issued Mortgagee Letter 20-47 December 17, 2020 which announced updated appraisal and employment verification policies due to COVID-19. These updated policies are effective immediately for new submissions and loans currently in the pipeline
Appraisal Policy Updates
Appraisal options are determined by transaction type as detailed below. This new policy is effective immediately and apply to appraisals completed on or before February 28, 2021 (previously December 31, 2020)
Purchase Transactions (does not apply to 203(k), new construction or construction-to-perm transactions)
- A traditional appraisal (interior/exterior inspection), or
- Exterior-Only appraisal
Rate/Term or Simple Refinance Transactions
- A traditional appraisal (interior/exterior inspection), or
- Exterior-Only appraisal
Traditional Appraisal
FHA continues to require a traditional appraisal on the following transactions:
- Cash-out refinance (1004D flexibilities eligible; see 1004D Completion Reports topic below)
- New construction (1004D also required; flexibilities not eligible)
- Construction-to-perm (1004D also required; flexibilities not eligible)
- 203(k) purchase and rate/term (1004D also required; flexibilities not eligible)
Form 1004D: Completion Reports
In lieu of a 1004D Completion Report, FHA will accept a letter, signed by the borrower, stating the work was completed. Additionally, one of the following must be provided and retained in the loan file:
- Photos of the completed work, or
- Paid invoices that indicate the work was completed, or
- Occupancy permits, or
- Other similar documentation that confirms work completed
NOTE: The above flexibilities do NOT apply to new construction, construction-to-perm and 203(k) transactions; a 1004D continues to be required
An FHA Appraisal Option Quick Reference Guide is attached (refer to PDF) and will be posted on the website on the Working with Us page under Miscellaneous
Employment Re-Verification – Purchase Transactions ONLY
The borrower’s employment is not required to be re-verified within 48 hours of funding on purchase transactions ONLY when the following applies subject to Homebridge management approval:
- The borrower has a minimum of 2 month’s verified PITI in reserves, AND
- A YTD paystub or direct electronic verification of income for the pay period that immediately precedes the Note date, OR
- A bank statement showing a direct deposit of payroll for the pay period that immediately precedes the Note date, AND
- There is no evidence the borrower has lost their employment
As a reminder, gift funds cannot be used to satisfy reserve requirements on manually underwritten loans and 3-4 unit transactions
NOTE: Previously issued guidance for re-verification of employment continues to apply to refinance transactions
The employment re-verification policy is effective immediately and will apply to loans funding on or before February 28, 2021
If you have any questions, please contact your Account Executive
