March 18, 2020
Appraisal Institute Seeks Guidance from Policy Makers
The Appraisal Institute announced March 18 that it is aggressively engaging all primary appraisal policy makers to help guide appraisers during the coronavirus pandemic. AI expects some guidance to be released as early as this week about exterior-only and/or desktop appraisals for loans sold to Fannie Mae and Freddie Mac.
Representatives of the Appraisal Institute have raised appraisers’ concerns regarding property inspections and appraisal waivers and exemptions, seeking a measured or balanced approach to risk mitigation.
So far, most policy discussions have focused on credit issues over collateral concerns and on servicing over loan purchasing issues to keep people who will be facing financial hardship in their homes during the coming weeks and months. The Federal Housing Finance Agency, which oversees Freddie Mac and Fannie Mae, has begun to engage on appraisal-related issues with many additional issues requiring solutions, including determining how loans will close in areas where courthouses are closed and there are no e-closing procedures, a situation that reportedly affects 20% of the country.
The government-sponsored enterprises appear to be evaluating allowances for exterior-only inspection appraisals. The Appraisal Institute also expects that appraisal waivers will be suggested by some users of appraisal services, particularly in refinance applications where there is previous information on file and reduced risk to the loan.
The Appraisal Institute also is working with the Federal Housing Administration and the Department of Veterans Affairs on similar concerns. The federal financial institution regulatory agencies – the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Federal Reserve – have a host of policy options at their disposal, including advisories on issues such as property inspections and disaster declarations.
Commercial appraisal questions abound as well, including similar inspection concerns. Several major banks recently have released polices to provide options to appraisers and customers relating to property inspection processes.
The Appraisal Institute expects some users of appraisal services to request appraisal waivers and exemptions in the short term. As market conditions change, the Appraisal Institute’s representatives continue to remind policy makers that market conditions may have changed significantly. While there may be a place for waivers in low-risk situations, that collateral risk should also not be ignored.
The Appraisal Institute said it will continue to seek answers to appraisers’ questions and will update AI professionals and others in the real estate valuation professionals as agencies and the GSEs respond to the Appraisal Institute’s ongoing inquiries.