In October, at least three new tools that would improve how appraisals are being done were introduced to the market. Add to that the more relaxed guidelines like property inspection waivers by Fannie Mae and Freddie Mac, relying less on human appraisers.
The easing of rules and more automation could mean a less costly and better mortgage experience for borrowers. Valuations or appraisals on homes remain a key ingredient in making loans. They ensure that homes are not overvalued or undervalued – a scenario risky for both borrowers and lenders.
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More Tools to Improve the Appraisal Process
These companies that provide real estate insights and analytics and dabble into mortgage finance unveiled their respective products that aim to enhance the way appraisals are made.
- CoreLogic’s Appraisal Xcelerator – a digital tool that streamlines the process of scheduling appraisals among the lender, borrower, real estate agent, and appraiser. This technology, according to one company executive, will shorten the scheduling interaction among the parties above, thus reducing turnaround times and enhance overall customer experience.
- First American’s Smart Valuations – an offering that banks on reducing turnaround times by 16% to 20%, improve quality and cost-efficiency of appraisals as well. In propping up the product, the company points to larger housing markets where appraisals could take months to finish.
- HouseCanary’s Agile Appraisal™ – a product for residential appraisers, it mainly cuts the time needed to make standardized and reliable appraisals to five days. Through its regression technology, appraisers can address issues, e.g. property, location, time characteristics for a faster and more accurate appraisal.
No Appraisals From Fannie and Freddie
Fannie Mae and Freddie Mac have gradually introduced changes to their mortgage guidelines. One significant enhancement is waiving property appraisals on certain loan transactions.
Under Desktop Underwriter® 10.1, Fannie Mae is offering property inspection waivers, as expanded, on purchase (primary and second homes up to 80% LTV) and refinance (limited cash-out, cash-out) transactions.
Particularly, an appraisal may be waived on such transactions if the subject property has a prior appraisal that can be pulled from Fannie Mae’s property database. In case of refinance loans, the prior appraisal must be associated with at least one borrower of the loan to be refinanced.
Freddie Mac did follow Fannie Mae’s appraisal waivers. On its version, a loan can be considered without an appraisal if it’s a purchase or no cash-out refinance.
The loan must secure a single-family one-unit property that is either owner-occupied or second home with a total LTV of less than or equal to 80%.
The decision of Fannie and Freddie to veer away from appraisals is a welcome development for borrowers of conventional loans conforming to their standards.
While the appraisal waivers don’t apply to all loans, at least, some mortgage borrowers get relief from paying related fees and waiting for property valuations to finish for their loans to close.
As new technologies are unfolding and guidelines are loosening, it’s only a matter of time before lenders become creative with mortgage products that cater to all sorts of borrowers, stated income loans included.