Adopting an appraisal modernization workflow can create cost and time savings for lenders and their borrowers. With the announcement of the new Uniform Property Dataset (UPD), it’s never been easier for lenders to adopt appraisal modernization methods. Read on to find answers to commonly asked questions about these programs and learn how you can get started modernizing appraisals at your company.
What does appraisal modernization mean?
Appraisal modernization — also known as valuation modernization — refers to the ongoing efforts of the government sponsored enterprises (GSEs) to enhance existing collateral valuation methods and develop new methods that bring efficiencies for lenders and borrowers — while maintaining high standards of risk management. This modernization leverages technology, data analytics, and new methodologies to make appraisals more accurate, efficient, and transparent.
The latest release of the Uniform Property Dataset contains all required, conditionally required, and optional data elements for GSE property data collection and supports a full interior and exterior property data collection, including images and floor plan of the subject property.
Valuation modernization and Uniform Property Dataset (UPD)
The GSEs have released valuation modernization methods that balance traditional appraisals with alternative methods, including automated solutions that could speed up processing times, lower costs, and enhance collateral risk management using data analytics.
Freddie Mac’s ACE+ PDR (automated collateral evaluation plus property data report) and Fannie Mae’s Value Acceptance + Property Data are the latest in valuation modernization.
Instead of ordering a traditional appraisal, lenders can use a GSE automated underwriting system, such as Freddie Mac’s Loan Product Advisor® (LPASM) or Fannie Mae’s Desktop Underwriter® (DU®) to determine if a loan is eligible for an inspection-based appraisal waiver.
Read on to learn more about valuation modernization methods available to lenders.
Valuation modernization FAQs for lenders
1. How do inspection-based appraisal waiver programs work?
If a loan is eligible for an inspection-based appraisal waiver, a lender may then order a property data collection.
To obtain an inspection-based appraisal waiver for qualified loans, follow these steps:
- Submit the loan to LPA or DU.
- LPA or DU will determine whether a loan is eligible for an inspection-based appraisal waiver.
- The GSE’s automated underwriting systems will determine if a loan is eligible for an inspection-based appraisal waiver.
- If eligible, order a property data collection from a verified provider. A trained and qualified property data collector must visit the property to collect information about the property’s features. This information is digitally submitted to Freddie Mac’s bACE API (Beyond ACE application programming interface) and/or Fannie Mae’s Property Data API and delivered back to you for underwriting.
2. What are the benefits of using inspection-based appraisal waivers?
Using inspection-based appraisal waivers can save lenders time and money — savings that can be passed on to borrowers. When using Clear Capital’s Universal Data Collection® (UDC®) for the property data collection, lenders could spend less than half of what they would spend on a traditional appraisal and enjoy turn times averaging three days.
3. What is the UPD?
The UPD is a unified data standard for Freddie Mac’s ACE+ PDR and Fannie Mae’s Value Acceptance + Property Data that helps enhance data quality and consistency in property data collection. The UPD consists of all required, conditionally required and optional data elements for GSE property data collection and supports a full interior and exterior data collection, with images and floor plan of the subject property.
4. What is a property data collection or a property data report?
During an on-site property data collection process, property data collectors are required to identify and photograph all structures and interior rooms on a property, consistent with GSE published standards — documenting any upgrades, damage, additions, conversions, and site features on a property. Property data collectors will also take note of building materials and utilities present and use a tool like CubiCasa to generate an ANSI-aligned floor plan that includes gross living area (GLA) calculations.
Once the property data collection is finished and the collector has gathered all the necessary information, the data is submitted to Freddie Mac’s bACE API and/or Fannie Mae’s Property Data API and delivered to the lender.
5. Who can perform property data collections?
Freddie Mac and Fannie Mae require data collectors to be trained and background-checked professionals. Clear Capital employs licensed real estate agents to perform property data collection. Real estate agents are a great choice for property data collection because they are trained in real estate and must meet state licensing and monitoring requirements.
Clear Capital employs a number of checks to eliminate conflicts of interest. We always ensure that the real estate agent performing the data collection is not involved in the sale or purchase of the property.
6. Do lenders need to review the property data collection?
Yes, lenders are responsible for the accuracy of the property data report and must also include property data reports as part of their quality control (QC) sampling.
7. How do hybrid and desktop appraisals work?
With hybrid and desktop appraisals, the appraiser relies on a property data collection to complete the appraisal. A hybrid appraisal requires a physical inspection of the property by a third party. A desktop appraisal can be completed without a physical inspection, but can include consideration of a third-party inspection.
8. What are the benefits of using a hybrid or desktop appraisal?
Both hybrid and desktop appraisals may take less time than a traditional appraisal. Lenders who use these valuation modernization methods enjoy quicker turn times that can be passed on to borrowers. Hybrid and desktop appraisals can also potentially lower cost to borrowers.
9. Will appraisers accept hybrid and desktop appraisal assignments?
Yes! Clear Capital works with more than 5,000 appraiser partners who perform hybrid and desktop assignments. To date, we’ve completed more than 240,000 hybrid and desktop appraisals.
Why is appraisal modernization important?
- Data-driven approach — Modernized collateral valuation methods use data-driven solutions supported by Freddie Mac and Fannie Mae with the goal of providing more consistent and objective valuations.
- Speed and efficiency — The traditional appraisal process can be time-consuming, often taking several days or even weeks. Modern technology can expedite this process, delivering results faster and allowing for quicker loan closing.
- Cost-effectiveness — Modernized collateral valuation methods can reduce costs by removing the need for a traditional appraisal. This can result in savings for both lenders and borrowers.
- Transparency — Enhanced data analytics and digital reporting tools offer greater transparency into how property values are determined, which can build trust among stakeholders.
To start modernizing valuations at your company, get in touch with us. We’d love to discuss how inspection-based appraisal waivers, hybrid appraisals, and desktop appraisals can save you and your customers time and money. Email sales@clearcapital.com, call 530.550.2525, or learn more about our appraisal modernization tools.
