Whether it’s adjusting your business model, mastering new technologies, or finding strategies to gain the next market advantage, Inman Connect New York will prepare you to take the next step. The Next Chapter is about to begin. Be a part of it. Join us and thousands of real estate leaders Jan. 22-24, 2025.
With a green light from their federal regulator and a side eye from housing inspectors, mortgage giants Fannie Mae and Freddie Mac are preparing to expand programs that rely on automated rating models instead of tests to allow participation by home buyers who put less than 20 percent down.
Fannie and Freddie estimate that the appraisal waiver programs — previously only available for loans with loan-to-value ratings of up to 80 percent — have saved borrowers more than $4 billion in appraisal costs.
In addition to saving borrowers the cost of hiring an appraiser, these programs have enabled many lenders to offer same-day mortgage approvals with automatic verification of assets, income and employment.
Sonu Mittal
“We’ve been working to create new technology features that simplify the lending process and lower costs for both borrowers and lenders,” Freddie Mac CEO Sonu Mittal said in a statement.
“Despite the extremely difficult housing climate, for six consecutive quarters more than half of Freddie Mac’s first-time mortgages have been outstanding. The new things we are announcing today are important to build on this record and help remove barriers facing those looking to buy a home.”
Freddie Mac said Monday it plans to make loans with loan-to-value ratios (LTVs) of up to 90 percent eligible for the automatic collateral assessment (“ACE”), up from 80 percent today.
If auto-rating is supported by location data reports (“ACE + PDR”), LTVs can go up to program limits for the product type. That means some low-income borrowers who qualify for Freddie Mac’s Home Possible loan program will be able to put 3 percent down on a home purchase and pay no appraisal fees.
Fannie Mae said Monday it will make similar changes in the first quarter of 2025 to its “Value Acceptance” and “Value Acceptance + Property Data” deferral programs.
Fannie Mae estimates the use of automated appraisals — in some cases in conjunction with default appraisals in full appraisals — has saved borrowers more than $2.5 billion since the start of 2020.
Freddie Mac says its ACE program has saved borrowers an estimated $1.63 billion in fees, and that the default rate of 3.26 million ACE loans from May 2017 to June 2023 was below the rate of pre-screened loans.
“ACE reduces the number of appraisals required, but most loans will still require an appraisal” — including all loans on properties valued at $1 million or more, Freddie Mac said on the FAQ website. “ACE allows inspectors to focus their efforts on complex structures.”
But the Appraisal Foundation, which sets standards and qualifications for home appraisers, has warned that the proliferation of Fannie and Freddie’s plans to withdraw appraisals poses risks to consumers and the market.
Kelly Davids
“Appraisals performed by certified appraisers in accordance with the strict standards and ethical guidelines of the Uniform Standards of Professional Appraisal Practice (USPAP) provide important protections to consumers and the broader economy by ensuring reliable results in the real estate transaction,” Foundation President Kelly. Davids said in a statement sent to Inman.
“The increase in the rate of appraisal withdrawals brings a higher level of risk to individual homeowners and buyers as well as to the market. Moving away from safety and health protections like USPAP and the Property Inspection Qualification Criteria increases the risk that has led to the type of economic disasters we’ve seen in the past.”
Fannie and Freddie’s regulator, the Federal Housing Finance Agency (FHFA), said it signed off on the extension of the loan waiver programs “after careful consideration and consideration,” and that Fannie and Freddie will have to establish appropriate risk management controls.
Naa Awaa Tagoe
“To be clear, the expanded eligibility for the appraisal waiver does not include an expanded credit box, but rather will allow more first-time homebuyers, and especially low- and moderate-income first-time homebuyers, to see the benefits associated with the appraisal waiver. ,” FHFA Deputy Director Naa Awaa Tagoe said Monday at the annual conference of the Mortgage Bankers Association.
FHFA also announced Monday that it is now integrating appraisal data from the Federal Housing Administration (FHA) into the Uniform Appraisal Dataset (UAD), an appraisal database drawn from more than 68 million appraisal records.
Sandra Thompson
“Publishing analytical data beyond loans sponsored by Fannie Mae and Freddie Mac provides a more complete picture of home appraisal trends and reinforces our commitment to accuracy, transparency and fairness,” FHFA Director Sandra Thompson said in a statement.
“Giving the public access to FHA-insured loan appraisal data will strengthen policymakers’ efforts to identify and address potential unfairness, bias, and discrimination in the broader mortgage market.”
Get Inman’s Mortgage Brief Newsletter delivered to your inbox. A weekly roundup of all the world’s biggest mortgage news and foreclosures delivered every Wednesday. Click here to register.
Email Matt Carter
