Fannie Mae has made some updates to the guidance provided in recent Lender Letters related to the Coronavirus (COVID-19) outbreak. In lieu of issuing new Lender Letters, Fannie Mae will continue to revise the existing letters with modifications. Doeren Mayhew has outlined modifications to Lender Letters as of March 31, 2020 below.

Appraisals

Lender Letter LL-2020-04, which is related to temporary flexibilities to the appraisal inspection and reporting requirements has been modified to include the new guidance:

  • For purchase transactions only on new construction properties where the appraisal is “subject to completion per plans and specifications” and the property is 100% complete, but an interior and exterior inspection cannot be completed, a desktop appraisal will be permitted on the forms identified in a table within the Lender Letter. Construction to permanent loans are excluded.
  • Documentation requirements for new construction loans have also been updated and can be found within the Lender Letter.
  • HomeStyle Renovation Loans with inspection requirements in process are now permitted to use a Completion of Construction Certification in lieu of the inspection. Supporting evidence such as photographs, site videos or other proof of completion, like paid invoices, must accompany the certificate and must be maintained within the loan file.

Originations

Lender Letter (LL-2020-03) encourages lenders to apply these updates to existing loans in process, however they MUST be applied to loans with application dates on or after April 14, 2020 through May 17, 2020.

  • Age of documentation requirements has been modified from four months (120 days) to two months (60 days) for most income and asset documentation.
    • Quarterly assets must be from the most recently issued quarter.
    • Third-party income verifications must be no more than 60 days old as of the note date.
    • No changes to military income documented using a Leave and Earnings statement, SSI, retirement income, long-term disability, mortgage credit certificates, public assistance, foster care or royalty payments.
    • For income types normally requiring tax returns, the following documentation requirement has been eliminated:
    • Conversion of construction-to-permanent single closing transactions must meet the 60-day documentation requirements listed above from the original closing date.
  • When a borrower is using self-employment income, the lender must verify the existence of the borrower’s business within 10 days of the note date. Additional flexibilities have been identified of methods the lenders may use to confirm the borrower’s business.
    • Evidence of current work.
    • Evidence of current business receipts within 10 days of the note date.
    • Lender certification that the business is open and operating (phone call or other means).
    • Business website demonstrating activity supporting current business operations.
  • Market-based assets such as stocks, stock options and mutual funds may be used for down payment, closing costs and reserves.
  • Additional requirements for use of Power of Attorney has been detailed within the Lender Letter for all application dates on or before May 17, 2020.
  • New policies for remote online notarization have been made effective immediately and are intended to remain in effect until further notice. These revisions will be incorporated into the Selling Guide in future updates. The Lender Letter contains many details and should be read in its entirety.
  • Lender quality control requirements for reverifications typically mailed can now be completed verbally or electronically. If the reverification cannot be completed verbally or electronically, the lender can complete the review without the reverification as long as they:
    • Internally track loans with unsuccessful reverification during this time.
    • Conduct a special discretionary sample of such mortgages and perform the reverification on the sample population upon expiration of these flexibilities.
    • Field reviews on 10% of the post-close random sample – lender may leverage Collateral Underwriter and other third-party tools.

Should you have any questions on the guidance in the Lender Letters, contact one of our specialists in our Financial Institutions Group below:

Heather Feltner | Lending and Compliance Specialist | feltner@doeren.com 

Lindsey Becker | Internal Audit and Compliance Manager | becker@doeren.com

Jeni Butler | Senior Compliance Specialist | butler@doeren.com

Marcia Baker | Senior Compliance Specialist | baker3@doeren.com

Debbie Rodriguez | Senior Compliance Specialist | drodriguez@doeren.com

Joe Zito | Shareholder | zito@doeren.com

Author

Heather Feltner, Lending and Compliance Specialist – Financial Institutions Group