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With the go-ahead from federal regulators and the acquiescence of appraisers, mortgage giants Fannie Mae and Freddie Mac are expanding programs that rely on automated valuation models instead of appraisals to include homebuyers with less than 20% down payments. We are preparing to do so.
Fannie and Freddie estimate that the appraisal forgiveness program, previously available only for mortgages with loan-to-value ratios up to 80 percent, has already saved borrowers more than $4 billion in appraisal costs.
This program not only saves borrowers the cost of hiring an appraiser, but also allows many lenders to offer same-day mortgage approval with automatic asset, income, and employment verification.
Sonu Mittal
“We have been working to develop new technology features that simplify the mortgage loan process and reduce costs for both borrowers and lenders,” said Sonu Mittal, an executive at Freddie Mac. statement.
“Despite a very challenging housing environment, for the past six consecutive quarters, more than half of Freddie Mac’s purchased loans have been to first-time homebuyers.The innovations we are announcing today: It is essential to building on this record and removing obstacles faced by prospective home buyers.”
Freddie Mac announced Monday that it plans to make mortgages with loan-to-value ratios (LTV) up to 90 percent eligible for automatic collateral evaluation.ace“), up from 80% today.
If automatic valuation is supported by the real estate data report (seeAce+PDR), LTV can rise up to the program limit for the product type, meaning some low-income borrowers qualify for Freddie Mac. Available at home The loan program allows you to make a down payment of just 3% when you purchase a home, and you don’t have to pay an appraisal fee.
fannie mae said on monday We plan to make a similar adjustment in the first quarter of 2025.acceptance of value” and “Accepting values + property data” Evaluation Waiver Program.
Fannie Mae estimates that the use of automated appraisals (in some cases, combined with inspections that do not result in a full appraisal) has saved borrowers more than $2.5 billion since the beginning of 2020.
freddie mac says The company’s ACE program saves borrowers an estimated $1.63 billion in appraisal fees, and the default rate for 3.26 million ACE loans made from May 2017 to June 2023 is lower than the interest rate on appraised loans. It is said that it was lower than that.
Freddie Mac says, “While ACE reduces the number of required appraisals, the majority of loans will still require appraisals.” This includes all loans on real estate over $1 million. Website FAQ. “ACE allows appraisers to focus more of their efforts on complex properties.”
But the Appraisal Foundation, which sets standards and qualifications for real estate appraisers, warned that expanding Fannie & Freddie’s appraisal exemption program poses risks to consumers and the market.
Kelly Davids
“Appraisals performed by qualified appraisers in accordance with the rigorous standards and ethical guidelines of the Uniform Standards of Professional Appraisal Practice (USPAP) help consumers and the broader economy by ensuring reliable results in real estate transactions. ,” said Foundation President Kelly. Davids said in a statement to Inman.
“The increase in appraisal exemptions poses an increasingly higher level of risk to individual homeowners and buyers, as well as to the market.Safety and soundness protections such as USPAP and real estate appraiser qualification standards The further we move away from policy, the more risks we face, leading to economic disasters like those we’ve seen in the past.”
Fannie & Freddie’s regulator, the Federal Housing Finance Agency (FHFA), approved the expansion of the appraisal waiver program “after careful consideration and analysis,” and said Fannie & Freddie has appropriate risk controls in place. He said that is required.
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“To be clear, the expansion of assessment exemption eligibility does not constitute an expansion of credit facilities and will allow more first-time homebuyers, particularly low- and moderate-income first-time homebuyers, to qualify for appraisal exemption. ”, FHFA Deputy Director Hey, oh my, Tagoe said. Monday at the Mortgage Bankers Association annual conference.
FHFA too announced on Monday The company announced it is now including appraisal data from the Federal Housing Administration (FHA) in its reports. Unified evaluation dataset (UAD) is an appraisal database derived from over 68 million appraisal records.
sandra thompson
“Publishing valuation data beyond Fannie Mae and Freddie Mac loans provides a more complete picture of home valuation trends, ensuring accuracy, transparency, and fairness,” FHFA President Sandra Thompson said in a statement. It strengthens our commitment to gender equality.”
“Providing public access to FHA-insured loan rating data strengthens policymakers’ efforts to identify and address potential inaccuracies, bias, and discrimination in the broader mortgage market.” It will be done.”
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