Appraisals and ValuationsMortgage

Proposed VA appraisal law looks to even the playing field

The piece of legislation would allow for desktop appraisals, and in some circumstances, wave appraisals all together

A piece of legislation introduced in the Senate in mid-May could streamline the appraisal process for VA loans. The legislation would modernize the Department of Veteran Affairs‘ appraisal requirements by allowing desktop appraisals, and in some circumstances, waving appraisals all together. Currently, all VA appraisals must be performed in-house.

If passed, the legislation, introduced by Sen. Dan Sullivan of Alaska and Congressman Mike Bost of Illinois, would address a long-standing gripe that VA appraisal requirements are both lengthy and costly.

Bost said in a statement that the VA appraisal requirements are a strain on veterans trying to compete in a hot housing market and that this legislation would make VA borrowers more competitive.

“VA home loans have given millions of veterans and their families the opportunity to purchase a home. Yet, on average, veterans wait longer and pay more during the closing process due to VA’s out-of-date appraisal requirements,” said Bost. “This bill will make sure that veterans are not unfairly disadvantaged during the home buying process and allow for a modern, digital appraisal process, which will get them into their new home faster.”

In March 2022, the Federal Housing Finance Agency (FHFA) made hybrid appraisals a permanent fixture. Both Fannie Mae and Freddie Mac now allow appraisals to be conducted remotely, using public records such as listings and tax appraisals, for purchase loans.

Meanwhile, the Department of Housing and Urban Development (HUD)recently extended its timeline for allowing desktop appraisals for certain transactions impacted by the pandemic. The policy now expires on December 31, 2022.

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The Mortgage Bankers Association supports the legislation.

Last week, Mark Jones, CEO of Amerifirst Home Mortgage and a member of the MBA, testified before the House subcommittee on Economic Opportunity, and encouraged the subcommittee to align VA’s appraisal processes with other housing entities.

“[The MBA urges the subcommittee to] consider directing the VA to not only modernize and streamline its current processes, but also align them with those of the FHA and the housing Government Sponsored Enterprises — Fannie Mae and Freddie Mac — to the greatest extent possible,” he said.

Jones also expressed concern with future increases to VA home loan funding fees.

“MBA urges Congress to ensure that these funding fees are set at levels commensurate with the risks associated with VA-guaranteed home lending — and to conduct oversight and analysis of past funding fee increases rather than levying further increases,” he said.

Jones added that past funding fee increases may have put the funding fee schedule into “misalignment with the actual risk profile of veteran borrowers.”

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