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The Federal Housing Agency (FHA) recently released guidance in response to the COVID-19 pandemic related to employment and appraisal verifications, and loss mitigation options. Doeren Mayhew has outlined the highlights below.
On March 27, 2020 the FHA released Mortgagee Letter (2020-05) addressing re-verification of employment, and exterior-only and desktop-only appraisal scope of work options for single-family programs impacted by COVID-19.
The changes are effective immediately for appraisal inspections and re-verifications of employment completed on or before May 17, 2020. These changes are temporary and will not be incorporated into the SF Handbook 4000.1.
The FHA will allow mortgagees to waive the requirement related to the mortgagee’s process of completing re-verification of employment 10 days prior to closing for forward and home equity conversion mortgages (HECM) transactions if the mortgagee is not aware of any loss of employment by the borrower and has obtained the following:
Additionally, temporary changes to the appraisal protocols for most single-family forward, HECM purchases and refinance transactions were announced. Furthermore, all appraisals made in connection with the servicing of FHA’s forward or reverse mortgage portfolios now permit exterior-only or desktop-only appraisals. Appraisals must be reported on the existing Acceptable Appraisal Reporting Forms by property and assignment type, and must include a signed certification indicating whether the appraiser did or did not personally inspect the subject property, along with the extent of the inspection. Each of these options have required protocols outlined below.
When an Appraisal Update and/or Completion Report (Form 1004D) Part B is required as evidence of the completion of required repairs, the FHA will permit a letter signed by the borrower affirming the work was completed with further evidence of completion such as:
On April 1, 2020, the FHA released a Mortgagee Letter (2020-06) regarding loss mitigation options for single-family borrowers affected by the COVID-19 national emergency in accordance with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
The exclusion of the COVID-19 national emergency from FHA’s PDMDA guidance in Handbook 4000.1 is effective immediately. Any mortgages using FHA’s PDMDA loss mitigation options (i.e., forbearance and standalone partial claims) must convert those options to loss mitigation options listed in the mortgagee letter. Mortgagees must implement all procedures set forth no later than Apr. 30, 2020. Outlined below are the sections changed in the handbook:
The mortgagee must not deny these home retention options to borrowers experiencing an adverse impact on their ability to make on-time mortgage payments due to the national emergency and satisfy the loss mitigation criteria set forth:
Any borrower who is granted a forbearance and is otherwise performing as agreed, is not considered to be delinquent for purposes of credit reporting. The FHA requires servicers to comply with the credit reporting requirements of the Fair Credit Reporting Act (FCRA); however, the FHA encourages servicers to consider the impacts of the national emergency on borrowers’ financial institutions and any flexibilities a servicer may have under the FCRA when taking any negative credit reporting actions.
Upon request of borrower currently in a home equity conversion mortgage, the mortgagee must delay submitting a request to call a loan due and payable. The initial extension period may be up to six months and an additional six months can be granted if needed.
Should you have any questions on recent FHA guidance, contact one of our specialists in our Financial Institutions Group below:
Heather Feltner | Lending and Compliance Specialist | email@example.com
Lindsey Becker | Internal Audit and Compliance Manager | firstname.lastname@example.org
Jeni Butler | Senior Compliance Specialist | email@example.com
Marcia Baker | Senior Compliance Specialist | firstname.lastname@example.org
Debbie Rodriguez | Senior Compliance Specialist | email@example.com
Joe Zito | Shareholder | firstname.lastname@example.org
Heather Feltner, Lending and Compliance Specialist – Financial Institutions Group
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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