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FOS Blog

25 Mar
2020

Fannie Mae & Freddie Mac Requirements

Fannie Mae & Freddie Mac Requirements – Flexibility & Alternatives For Employment & Income Verifications

In the wake of COVID-19 Fannie Mae and Freddie Mac are working in conjunction to offer temporary measures to provide lenders with clarity and flexibility regarding the changing work environment.  Fannie Mae and Freddie Mac have both listed alternatives for financial institutions regarding verbal verification of employment, income practices, and appraisal flexibilities.  The following are alternatives financial institutions can utilize during the upcoming weeks, and possibly months, to ensure they are still meeting selling requirements and have adequate information to support the borrower’s ability to repay the loan:

  • Verbal Verifications of Employment (VVOE) – Since a majority of United States businesses have moved to a remote working environment during this time, the following alternatives can be utilized:
    • Written verification of employments can be obtained within the same timeframe as a VVOE. This includes an email from the borrower’s employer from their work email address.
    • Paystubs should be received, including year to date income from the pay period immediately preceding the note date.
    • Bank statements evidencing the borrower’s payroll deposit from the pay period immediately preceding the note date.
  • Income
    • Financial institutions should practice additional due diligence to ensure the most recent information related to income is obtained.
    • They are to ensure lapses in income will not negatively affect the borrower’s ability to repay the loan due to the disruption of employment or self-employment due to COVID-19.
    • Financial institutions should verify that self-employed borrower businesses are operational within 15 days of the note date instead of the usual 120 days.
  • Temporary appraisal requirement flexibilities
    • When interior inspections are not feasible, financial institutions can obtain a desktop appraisal or exterior-only appraisal. Both Fannie Mae’s and Freddie Mac’s websites include requirements for information that must be included in both the desktop and exterior-only appraisals.
    • Appraisal waivers are to be accepted by financial institutions when evidenced within the requested Desktop Underwriter.
    • Modified appraisal language developed by Fannie Mae and Freddie Mac is to be utilized with desktop and exterior-only appraisal reports, which can be found on both of their websites.

Financial institutions are encouraged to visit their investors’ websites to ensure they are following their investors’ guidelines put in place during these ever-changing times.

For additional information contact the author nreifsneider@fosaudit.com.

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