VA Updates Circular on Valuation Practices for COVID-19

The VA recently published updates to Circular 26-20-13, which allowed for the expanded use of exterior inspections during the VA appraisal process.  In addition to clarifying certain terms and the effective date of the Circular, the current update adds a substantive provision for water system accessibility for repair inspections. 

Under the new provision, well water testing is waived for refinances if the home is already encumbered by a VA loan.  If testing is suspended due to COVID-19, veterans seeking a purchase or refinance on properties unencumbered by a VA loan, must sign a disclosure stating they are aware that testing cannot be done at that time.  The lender is still responsible for completing the test within 180 days.  The veteran must also take responsibility to install a filtration system if the water test fails.

In addition to this new provision, the update clarifies the effective date of the Circular, and adds the term “financed loan amount” to the sections regarding exterior only appraisals and desktop appraisal valuations.  The update defines “financed loan amount” as the “unpaid principal loan amount.”

The Circular was effective on April 10, 2020, and applies to all loans closed on, or after March 13, 2020.  The Circular is scheduled to be automatically rescinded April 1, 2021.