Temporary Exceptions for USDA Appraisals, Inspections and Employment Verification
On March 27, 2020, the USDA published guidance on how to handle certain exceptions to USDA appraisals, inspections and employment verification prior to closing.
While today’s video is longer than usual, we have received a high amount of questions regarding this topic and as a result, I will walk through the recent exceptions provided by USDA for appraisals, inspections, and employment verifications. This will help keep you in the know about critical requirements.
Additionally, because Metroplex is a lender, we are included within the Essential Critical Infrastructure Workforce for the financial services sector and have a responsibility to maintain our normal work schedule which includes processing loans, maintaining a consistent workflow, closing loans, and working on new pre-qualification requests during the COVID-19 crisis.
Remember, as an approved USDA lender, we take pride in our USDA experience and would like to share that knowledge with you through our FREE USDA guides and fact sheets. These are available to help both home buyers and realtors understand the USDA process. You can download them all here!
USDA Temporary Exceptions
USDA Rural Development has issued exceptions that are effective as of March 27, 2020, and are in effect for a period of 60-days.
For the complete excerpt click here.
USDA Appraisal Reports – Existing Dwelling
For purchase and non-streamlined refinance transactions, when an appraiser is unable to complete an interior inspection of an existing dwelling due to concerns associated with the COVID-19 pandemic, an “Exterior-Only Inspection Residential Appraisal Report”, will be accepted.
In such cases, appraisers are not required to certify that the property meets HUD Handbook 4000.1 standards. The USDA appraisal must be completed in accordance with the Uniform Standards of Professional Practice (USPAP) and the Uniform Appraisal Dataset (UAD).
This exception is not applicable to new construction properties or construction to permanent loans. As a reminder, USDA appraisals are not required for streamlined and streamlined-assist refinance transactions.
USDA Repair Inspections – Existing Dwelling
Loans for which a completion certification is not available due to issues related to the COVID-19 pandemic, a letter signed by the borrower confirming that the work was completed is permitted.
Lenders must also provide further evidence of completion, which may include photographs of the completed work, paid invoices indicating completion, occupancy permits, or other substantially similar documentation. All completion documentation must be retained in the loan file.
This exception is not applicable to rehabilitation and repair loans noted in section 12.28 of the 3555 Handbook.
USDA Verbal Verification of Employment
Lenders must document and verify the borrower’s annual and repayment income in accordance with USDA guidelines. Diligence must be used in obtaining the most recent income documentation to re-verify the borrower’s repayment ability prior to loan closing.
When the lender is unable to obtain a Verbal Verification of Employment (VVOE) within 10 business days of loan closing due to a temporary closure of the borrower’s employment, alternatives should be explored.
For example, email correspondence with the borrower’s employer is an acceptable alternative to a VVOE. If the lender is unable to obtain a VVOE or acceptable alternative, the requirement will be waived when the borrower has a minimum of 2-months cash reserves.
In the case of a reduction of income, the borrower’s reduced income must be sufficient to support the new loan payment and other non-housing obligations. Borrowers with no income at the time of closing are not eligible regardless of available cash reserves.
As you can see, these updated exceptions provide both flexibility and additional guidance during these unprecedented times.
Remember, let our USDA expertise go to work for you!
Just call or email if you have any qualifying questions, want to discuss a new scenario, or would just like to take advantage of our free 2nd opinion service… which is great for those existing transactions.
800-806-9836 Ext. 280
Most importantly stay safe, and as always I look forward to seeing you right here for the next tip of the week!