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Freddie Issues Guidance to Lenders on VVOEs & Appraisals

Updated: Mar 31, 2020

Freddie's announcement mirrors the Fannie accommodations:

  • Temporary changes to our credit underwriting requirements, which allows potential homebuyers to provide alternative documents in lieu of a 10-day preclosing employment verification. This includes obtaining verification via e-mail from an employer, a recent year-to-date paystub from the borrower or a bank statement showing a recent payroll deposit.

  • Temporary changes to our property valuation requirements, allowing us to utilize appraisal alternatives to reduce the need for appraisers to inspect the interior of a home for eligible mortgages.

  • An expansion of our Automated Collateral Evaluation eligibility, which will allow us to appraise more borrowers.

  • An extension of the deadline for certain annual reporting requirements.

Highlights also include updates emphasizing:

Employed income – 10-day pre-closing verification

To provide flexibility during the COVID-19 pandemic, the Seller may obtain the following in lieu of obtaining the 10-day pre-closing verification (PCV) permitted in Guide Section 5302.2(d):

  • An e-mail directly from the employer's work e-mail address that identifies the name and title of the verifier and the Borrower's name and current employment status, or

  • Year-to-date (YTD) paystub from the pay period that immediately precedes the Note Date, or

  • An asset account statement evidencing the payroll deposit from the pay period that immediately precedes the Note Date

While the Guide permits obtaining the 10-day PCV after the Note Date but prior to delivery to Freddie Mac, Sellers are encouraged to confirm the Borrower's employment prior to the Note Date.

Continuance of income

...Freddie Mac recommends that Sellers practice additional due diligence to ensure that accurate Borrower information is obtained and that the Borrower's ability to repay the Mortgage is not negatively impacted. As an example of additional due diligence for a self-employed Borrower, Sellers are encouraged to attempt to verify that the Borrower's business is operational closer to the Note Date than permitted under the current Guide requirements (e.g., within 15 days instead of 120 days).

Property Valuations

...when a Seller cannot obtain an appraisal with an interior inspection as a result of the COVID-19 pandemic, Freddie Mac will accept either an appraisal with an exterior-only inspection or a desktop appraisal (as described below) in lieu of the interior and exterior inspection appraisal required under Section 5601.5(a).

There may be instances where there is insufficient information about the property for an appraiser to complete an appraisal assignment with a desktop appraisal or an appraisal with an exterior-only inspection. In these instances, the Mortgage will not be eligible for sale to Freddie Mac until the appraiser has sufficient information to complete the desktop appraisal or an appraisal with an exterior-only inspection, or an appraisal with an interior and exterior inspection is obtained.

Full details on the announcement can be found at Bulletin 2020-05

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