Summary
To protect the health of inspectors by respecting current social distancing measures, several federal financial agencies will temporarily defer real estate-related appraisals and evaluations for up to 120 days after closing of residential or commercial real estate loan transactions. Fannie Mae and Freddie Mac are allowing exterior inspections and desktop appraisals.
Addressing the Problem
Lenders have had trouble scheduling the required appraisals and inspections required to close residential or commercial real estate loans issued by federal banking agencies due to social distancing guidelines. To protect the health of inspectors and to ensure needed loans to creditworthy households and businesses will not be delayed any more than is necessary, federal financial agencies have issued a rule to temporarily defer real estate-related appraisals and evaluations for up to 120 days after closing of residential or commercial real estate loan transactions. This has been instituted because social distancing directives have created difficulties for lenders to obtain required appraisals on a timely basis.
Transactions involving acquisition, development and construction of real estate are excluded from this interim rule. These temporary provisions will expire on Dec. 31, 2020, unless extended by the federal banking agencies.
How are States Impacted?
New construction and development will still be inspected according to the existing appraisal schedules, but existing structures will have their inspections delayed by up to 120 days. This means that the health and welfare of citizens is still protected by ensuring new buildings are built according to safety codes, but existing structures can still be financed quickly to facilitate economic development.
Action by the Federal Government
Federal agencies that have approved the deferment:
- Office of the Comptroller of the Currency (OCC)
- Board of Governors of the Federal Reserve System (FRB)
- Federal Deposit Insurance Corporation (FDIC)
- National Credit Union Administration (NCUA)
- Consumer Financial Protection Bureau (CFPB)
Fannie Mae and Freddie Mac have also issued guidance providing temporary flexibility in the appraisal standars for loans that they purchase, including allowing exterior inspections and desktop appraisals.
What is the Expected Outcome?
The changes will ensure that residential and commercial real estate loans will be issued as quickly as possible during the state of emergency. The deferred, exterior and/or remote inspections will protect the health of inspectors and the people who would otherwise be required to be present during an inspection.
Resources for State Leaders: