What the new RELAXED EMPLOYMENT &APPRAISAL REQUIREMENTS mean for your real estate investments

In an effort to “facilitate liquidity in the mortgage market during the coronavirus national emergency,” the FHFA will direct Fannie Mae and Freddie Mac to ease standards for property appraisals and employment verification for the foreseeable future.

That unusual move will have a direct effect on the housing market’s ability to “get on with it,” as many real estate investors are clearly trying to do, despite social distancing parameters and other concerns about the COVID-19 coronavirus. Many appraisers have expressed concerns that the virus could still be living in a property after it has otherwise been vacated or even if it is just empty for the appraisal process[1]. This is due in large part to new research indicating it can live for “several hours or day in aerosols and on surfaces,” making it risky for an appraiser or inspector to conduct a physical inspection[2].

To accommodate this concern, the GSEs will begin using both drive-by and desktop appraisals in an attempt to avoid holding up the mortgage process.

“Effective immediately, we are allowing temporary flexibilities to our appraisal inspection and reporting requirements,” Fannie Mae told lenders on Monday.

The GSE noted that the traditional appraisal is still the “preferred appraisal method.” Alternatives include desktop appraisals, which rely on public records, MLS information, and third-party data services to create a picture of the property’s value, and drive-by appraisals, which only inspect the exterior of the property.

Employment Verification Changes

In addition to creating more lenient guidelines for inspections and appraisals, the FHFA listed a number of alternative forms of employment verification that could be submitted in order to garner loan approval.

“In the event lenders cannot obtain verbal verification of the borrower’s employment for a loan closing…lenders can obtain verification via an email from the employer, a recent year-to-date paystub from the borrower, or a bank statement showing a recent payroll deposit,” the FHFA statement read.

However, the FHFA emphasized lenders should continue to “utilize sound underwriting judgment to ensure these alternatives are appropriate to the borrower’s circumstances.”

Do you think this is a good thing for the real estate industry? Does it make it more or less likely that housing could collapse as the year progresses?

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[1] https://www.housingwire.com/articles/fannie-mae-freddie-mac-relax-appraisal-employment-verification-standards-in-wake-of-coronavirus/

[2] https://www.nih.gov/news-events/news-releases/new-coronavirus-stable-hours-surfaces

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