In order to facilitate liquidity in the mortgage market during the Coronavirus pandemic, the Federal Housing Finance Agency (FHFA) has directed Fannie Mae and Freddie Mac
to provide alternative flexibilities to satisfy appraisal requirements and employment verification requirements through May 17, 2020.
To allow for homes to be bought, sold and refinanced as the nation deals with the challenges of the Coronavirus, the GSEs will leverage appraisal alternatives to reduce the need for appraisers to inspect the interior of a home for eligible mortgages.
“The GSE’s response will support mortgage originations. However it will also raise the risk of lenders originating weaker collateral for RMBS," said Moody’s Vice President Lima Ekram. "Risks include the challenge of implementing sound processes to identify coronavirus-related income disruptions and relying on valuations which do not include an interior inspection. Credit quality of GSE loans will also vary across sellers with some lenders implementing more conservative overlays than others.“
In addition, in the event lenders cannot obtain verbal verification of the borrower's employment before loan closing, the GSEs will allow lenders to obtain verification via an e-mail from the employer, a recent year-to-date paystub from the borrower, or a bank statement showing a recent payroll deposit. Lenders should continue to utilize sound underwriting judgment to ensure these alternatives are appropriate to the borrower's circumstances.
The announcement is the latest action that FHFA has taken to ensure the GSEs fulfill their mission of providing market liquidity during the Coronavirus pandemic. Other actions include a suspension of foreclosures and evictions
for at least 60 days and offering forbearance for borrowers facing hardship due to the Coronavirus.