Fannie Mae updated its Selling Guide on Wednesday to include more options for property valuations, saying that they are “moving away from implying that an appraisal is a default requirement.” Those options include value acceptance (formerly appraisal waivers), value acceptance plus property data and hybrid appraisals.
“We are on a journey of continuous improvement to make the home valuation process more efficient and accurate. As such, we are transitioning to a range of options to establish a property’s market value, with the option matching the risk of the collateral and the loan transaction,” Fannie Mae states in its release. “The spectrum balances traditional appraisals with appraisal alternatives.”
Importantly, both the value acceptance (appraisal waiver) and the value acceptance plus property data receive “automatic value certainty with rep and warrant relief.” A traditional appraisal, hybrid and desktop options get value certainty and rep and warrant relief based on a Collateral Underwriter Score of 2.5 or lower.
Key to the new options are Fannie Mae’s Property Data API, by which Fannie “has established a property data standard and API to collect data and images consistently,” according to its website. “The process encourages the use of emerging technologies to capture property information, imagery, and floor plans.”
For the new value acceptance plus property data option, third parties are authorized to do that collection at the property site as long as lenders verify that they have a background check, have been “professionally trained” and are competent to do that collection. This data can only be submitted through the Property Data API.
Kenon Chen, executive vice president of strategy and growth at Clear Capital, said it is exciting for the industry to have the new option of value acceptance plus property data, because “this is a standardized data collection done at the property, which brings objective, transparent data into the whole process. I think that not only drives this program, but paves the way for a better appraisal process when an appraisal is needed.”
Fannie Mae’s website states: “This new option reduces cycle times and may reduce borrower costs, promotes safety and soundness by obtaining a current observation of the subject property, and provides operational simplicity and certainty at time of loan application.”
The standardized set of data that’s now required to be submitted through the API includes floor plans — a data set that has vexed appraisers, lenders and regulators for years.
“In a traditional appraisal process, there are a variety of methods to get the data. Someone could be using tape measures and a clipboard, and then photos are taken,” Chen said. “This creates a new data standard and requires the use of technology to capture the whole home. The whole home has to be scanned to produce a digital floorplan.”
And getting faster certainty on a home’s valuation is a clear win for borrowers, Chen said. “In today’s market, which is very purchase-driven, we are now looking at a couple-day process here, which is faster and less expensive for the borrower. And they get the value certainty up front, which gives them confidence in their purchase decision.”
Desktop Underwriter will be updated April 15 to support these updates.
Congratulations to Fannie Mae for recognizing the importance of choice in the appraisal process. Choice will invigorate innovation and competition, resulting in better and less costly appraisal products.
This is precisely what Fannie Mae has provided seller-banks, in authorizing their acceptance of an alternative to the monopoly of costly and unnecessary title insurance.
Customer Choice, Innovation and Competition should drive every aspect of the real estate market.
So when all the appraisers are gone, will loan officers, real estate agents and buyers and sellers accept our new overlords Fannie Mae and Freddie Mac dictating home values? Good luck finding an appraiser for the odd ball property after Fannie drives us all out of business.