fannie mae covid-19 updates...appraisal was completed “subject to completion per plans and...

COVID-19 Updates:Fannie Mae LL2020-03 and LL2020-04

Updates through May 5, 2020

May 2020

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Fannie Mae COVID-19 ResourcesFannie Mae Updates, FAQs, Fannie Mae’s COVID 19 webpage‏

1Fannie Mae LL-2020-04 and LL-2020-03

https://singlefamily.fanniemae.com/

https://singlefamily.fanniemae.com/

Fannie Mae COVID-19 ResourcesFannie Mae Updates, FAQs, Fannie Mae’s COVID 19 webpage‏


https://singlefamily.fanniemae.com/originating-underwriting#selling-promo

https://singlefamily.fanniemae.com/originating-underwriting#selling-promo

Fannie Mae COVID-19 Updates Fannie Mae LL2020-03 and LL2020-04, both updated from their original‏

issuance.


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Fannie Mae appraisal policies are effective immediately and have been‏

extended for applications taken on or before June 30, 2020

– Temporary appraisal requirement flexibilities: Allowing exterior-only inspection

appraisal or desktop appraisals for certain transactions, see LL-2020-04 for full

details

– Desktop appraisals: allowing for purchase transactions when an interior and

exterior appraisal is not available

– Exterior only inspection appraisals: allowing for on purchases and limited cash-out

refinance of Fannie Mae-owned loans

– Identification of a Fannie Mae loan: reminding lenders and Sellers about the Loan

Lookup tool to identify a Fannie Mae-owned loan

– Desktop Underwriter messaging updated to identify when Fannie Mae owns an

existing loan on a limited cash-out refinance

– Revisions to the scope of work, statements of assumptions and limited conditions,

and appraiser’s certifications: requiring modified language to be used with exterior-

only and desktop appraisals

– No changes to CTP loans


Fannie Mae LL-2020-04 & LL-2020-03


extended for applications taken on or before June 30, 2020:

– New Construction: where appraisals are “subject to completion per plans and

specifications” and when properties are 100% complete but an interior and exterior

inspection appraisal cannot be completed, permitting a desktop appraisal form*

(applies to purchases only) see LL 2020-04 for list of acceptable forms based on

property type

• For new construction where construction has not yet begun or is partially complete and the

appraisal is made “subject to completion per plans and specifications” lenders must provide

the appraiser with required documentation per LL 2020-04

• For new construction where the property is 100% and the appraisal report is completed “as

is” the lender must provide the appraiser with required documentation per LL 2020-04

• Builder Certification form is required attesting that the information provided is true and

correct. This certification must be maintained in the loan file.

• Completion of Construction Certification form is required for new construction when the

appraisal was completed “subject to completion per plans and specifications” if the lender is

unable to obtain a completed Appraisal Update and/or Completion Report (Form 1004D)

*Fannie Mae permits a desktop appraisal on the forms identified in LL-2020-04 but lenders must also adhere to the LTV ratio requirements

in Temporary appraisal requirements flexibilities, including the requirement for second homes with LTVs greater than 85% require a

traditional appraisal (Excluded CTP)


Fannie Mae LL-2020-04 & LL-2020-03



– Appraisal waivers: encouraging lenders to accept waiver offers when eligible

– No changes to delivery at this time for either agency

– Completion report (Form 1004D): allowing a letter signed by the borrower

confirming that the work was completed for appraisal reports completed “subject to”

(excludes new construction)

– HomeStyle® Renovation loans in process, allowing “Completion of Construction

Certification” for draws when planned work has been completed. Additional

supporting evidence, including photographs, site videos, paid invoices must also be

provided to confirm work was completed per the renovation contract. These loans

require a traditional appraisal report and a Form 1004D Appraisal

Update/Completion Report is required when work is completed.

– Fannie Mae will allow draws on a HomeStyle® Renovation Loan while in

forbearance, all other program requirements, including the flexibilities applicable to

HomeStyle loans in this lender letter, continue to apply

– Form Instructions: Map Reference field will be used when a “desktop” or “exterior”

only appraisal report is completed on a form for an interior and exterior inspection


Fannie Mae LL-2020-04 & LL-2020-03



– Condo Waiver of Project review for loans with LTV ratios greater than 80% and up

to 90% for Fannie Mae-owned, limited cash-out refinance owner occupied units only

• Lenders must confirm the project meets the following existing requirements

– The litigation requirements described in Selling Guide B4-2-1-03, Ineligible Projects and

– All policies in the Selling Guide B4-2.1-02, Waiver of Project Review, for all loans with LTV ratios

greater than 80% using the waiver of review for Fannie Mae-owned limited cash-out refinance

transactions

– Lenders must deliver the loans with Project Type Code “V” in loan delivery data file

– Condo Projects where there is a delay in ratifying their 2020 budgets, lenders may

use 2019 budget when a budget review is required.

• To use this flexibility, lenders must confirm the project currently meets the HOA dues

delinquency requirements in Selling Guide B4-2.-02, Full Review Process.

• All other project standards requirements in Selling Guide B4-2, continue to apply

• New projects are excluded from this flexibility


Fannie Mae LL-2020-04 & LL-2020-03



– Reminder: Lenders may use other sources of condo project data to complete their

project reviews, including, but not limited to appraisals, MLS records, plat map and

site surveys, public records, state laws or local ordinances, and tax searches

– Reminder: If a lender completed a project review for an established condo project,

that project review may be used for additional condo unit loans in the same condo

project for up to one year (measured to the note date of the subsequent loans).

• For new condo projects, the timeframe is 180 days prior to the note date

– CPM (Fannie Mae’s Condo Project Manager) can be used to help track and

communicate project review status and review dates within your organization

– Appraisal flexibilities announced in LL-2020-04 may be combined with existing

lender variances unless Fannie Mae notifies the lender that it may not combine

negotiated terms with these flexibilities


Fannie Mae LL-2020-04 & LL-2020-03

Fannie Mae LL-2020-04 & LL-2020-03 Fannie Mae appraisal policies are effective immediately and have been‏


– Virtual inspections:

• Appraisers may use virtual inspection methods to augment the data and imagery that is

used for either a desktop or exterior-only appraisal.

• Traditional appraisals require the appraiser to perform a complete onsite interior and

exterior inspection of the property; Virtual inspections cannot be used to substitute for the

onsite interior and exterior inspection.

• Virtual inspections using video and photographs provided by the borrower or contractor can

be used to evidence renovation progress to disburse renovation funds. See LL-2020-04 for

all requirements



Continuity of Income*: Effective March 23, 2020 to June 30, 2020

– Verbal VOE

• Lenders may obtain a written VOE confirming the borrower’s current

employment status within the same timeframe as the verbal VOE

requirements.

• An email directly from the employer’s work email address that identifies the

name and title of the verifier and the borrower’s name and current employment

status may be used in lieu of a verbal VOE. In addition, the lender may obtain

the VOE after loan closing, up to the time of loan delivery

• Paystubs: Lenders may obtain a year-to-date paystub from the pay period that

immediately precedes the note date.

• Bank Statements: The lender can provide bank statements (or other

alternative documentation as permitted by the Selling Guide (B3-4.2-01)

evidencing the payroll deposit from the pay period that immediately precedes

the note date.

*If employment has been validated by the DU validation service, the validation will remain eligible for representation and warranty relief on employment provided the lender

complies with the “close by” date in the DU message

Fannie Mae LL-2020-04 & LL-2020-03


Effective for applications taken April 14, 2020 through June 30, 2020

– Age of Documents

• For most income and asset documents age requirements is reduced from four

months to two months or 60 days from the note date. If an asset statement is

issued quarterly, lenders must obtain the most recently quarterly statement.

• Employment and income verification received directly from a third-party

verification vendor, the information in the vendor’s database cannot be more than

60 days old as of the note date.

• No change to age of documentation requirements for Military income using and

LES, Social Security, retirement income, long-term disability, MCC, public

assistance, foster care or royalty payments.

• Due to the federal income tax filing extension grated through July 15,2020,

eliminating the following documentation requirements.– A copy of the IRS Form 4868 (Application for Automatic Extension of Time to File US Individual Tax Return)

– IRS Form 4506-T (Request for Transcript of Tax Return) transcript confirming “No Transcript Available” for the 2019

tax year

• CTP Single Close transactions require income and asset documentation to be

dated within 60 days of the original closing

Fannie Mae LL-2020-04 & LL-2020-03


Effective for applications taken April 14, 2020 through June 30, 2020

unless noted

– Self-Employment

• Lenders must confirm that the borrower’s business is open and operating within 10 business

days of the note date (or after closing but prior to delivery). See LL 2020-03 for examples to

confirm the business open and operating.

– Market-based assets

• When using stocks, stock options or mutual funds for down payment or closing costs,

evidence of the borrower’s actual receipt of funds from the sale or liquidation must be

documented in all cases

• When used for reserves, only 70% of the value of the asset must be considered

– Powers of Attorney

• More flexibility, See LL 2020-03, FAQs, POA Job Aid and Fannie Mae Selling Guide B8-5-05

for full details

– Remote online notarization (RON) Effective immediately and remain in place until

further notice, requirements will be added to the Selling Guide

• Lenders may sell loans with remotely notarized documents if they meet the requirements of

LL 2020-03 and Selling Guide Chapter A2-5.1-03 Electronic Records, Signatures, and

Transactions, including specific state locations

Fannie Mae LL-2020-04 & LL-2020-03


Age of Documents: Effective for applications taken April 14, 2020

through June 30, 2020

– Lender Quality Control

• QC processes are designed to inform organizations of the level of quality risk they are

incurring and are extremely important. Fannie Mae recognizes the unique challenges in

the market today and will allow temporary post-closing flexibilities related to reverifications

and appraisal field reviews. See LL 2020-03 for Lender options

– Notes, electronic records, signatures reminder

• Electronic signatures are permitted under the terms of the Selling Guide but promissory

notes may not be signed electronically unless the promissory note is an electronic note

(eNote) sold in accordance with A2-5.1-03

– Title Insurance

• Lenders must comply with requirements in Selling Guide B7-2 but with recording offices

closing this presents challenges for lenders

• Fannie Mae accepts lender’s policies of title insurance written on the 2006 ALTA loan title

insurance form or equivalent. Covered Risk 14 in the 2006 ALTA form includes “gap

coverage” for matters arising between the loan closing date and the mortgage recording

date. This is acceptable so long as there is no exception for this coverage under Schedule

B of the policy

Fannie Mae LL-2020-04 & LL-2020-03


Reminders and Suspension of Employment Validation Service

– Reminder that unemployment may only be used if it clearly is associated with

seasonal employment reported on the signed federal tax returns and lenders

verified the income by following B3-3.1-09 of the Selling Guide.

• The CARES Act allows for unemployment for furloughed and unemployed individuals but it

is considered short-term income in nature and not a reliable and predictable source of

income

– Furloughed borrowers are workers who are suspended from active employment

and do not typically have a guarantee of when they will return to work; therefore

use of this income is “ineligible” under Fannie Mae’s Temporary Leave Income

Policy B3-3.1-09

– New Casefiles created May 4, 2020 through June 30, 2020 Fannie Mae is

suspending Rep and Warrant Relief for employment validation with the DU

validation service. Lenders must perform a Verbal Verification of Employment

current Fannie Mae policies per the Selling Guide or applicable Lender Letter

Fannie Mae LL-2020-04 & LL-2020-03


Sale of Loans to Fannie Mae Effective Immediately

– Fannie Mae is suspending bulk transactions and requires that loans sold on a flow

basis be no more than six months old to be eligible for sale to Fannie Mae.

– The loans age will be based on

Fannie Mae LL-2020-04 & LL-2020-03

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Announcements


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Genworth Underwriting Guidelines

Fannie Mae LL-2020-04 and LL-2020-03 17

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