We have a loan in which the FNMA DU Findings indicated the subject is eligible for a Property Inspection Waiver. The Approve/Eligible results were achieved prior to a hurricane and declaration by the Federal Emergency Management Agency (FEMA) that the county where the subject property resides has been declared a natural disaster. The property did not sustain any damage due to the natural disaster, as evidenced by the consumer and a drive-by inspection by the Loan Officer. Can we move forward with the closing utilizing the PIW?
Sadly, the answer is no. Once the natural disaster has occurred, FNMA revokes offers of the Property Inspection Waiver ("PIV"). They do so by following the declared areas as set forth by FEMA. If the loan has not closed and funded prior to the occurrence and is located in the disaster-impacted area, FNMA will only accept the loan for delivery if a full appraisal is prepared after the disaster occurred to ensure it has not been damaged by fire, wind, falling or rising water, or other causes of loss and destruction. If a property is located in a condo or co-op project, both the condition of the unit and the condition of the building in which the unit is located must be assessed. Loan case files must be resubmitted to DU for refreshed AUS results.
In the case where the loan has closed but has not been delivered to FNMA, the lender must determine if the condition of the property has materially changed since the note date. The lender may exercise the appraisal waiver if the condition has not materially changed.
In any event, the lender is expected to make prudent and reasonable actions to determine whether the conditions of the property may have materially changed. The lender is ultimately responsible for determining if an inspection of the property and/or a new appraisal is necessary to supports its representations.
Lenders should use the following criteria when determining if the mortgage loan can be delivered to Fannie Mae -
- If the property has been damaged and the damage does not affect the safety, soundness, or structural integrity of the property and the repair items are covered by insurance, the lender may deliver the mortgage to Fannie Mae. In these circumstances, the lender must obtain documentation of the professional estimates of the repair costs and must ensure that sufficient insurance proceeds are available for the borrower's benefit to guarantee the completion of the repairs.
- If the property was damaged and the damage is uninsured or the damage affects the safety, soundness, or structural integrity of the property, the property must be repaired before the mortgage loan is delivered to Fannie Mae.
- FNMA DU may not be current in relation to disaster-affected areas and could return allowable PIW AUS results. The lender, again, is responsible for determining if the subject property has been affected and how best to support and defend the collateral supporting the mortgage loan.
Brandy George, Six Sigma
Director/Underwriting Operations Compliance
Executive Director/LCG Quality Control