Appraisal waivers: What lenders should know

This is the first post in our blog series about appraisal waiver programs. Check out part two and part three.

As the real estate and mortgage industries work to modernize the home valuation process, Fannie Mae and Freddie Mac continue to offer new alternatives to the traditional home appraisal. The introduction of inspection-based appraisal waivers offers an increasingly positive impact to both lenders and consumers. 

How do appraisal waiver programs work, who can act as a property data collector for appraisal waiver programs, and how can lenders take advantage of these new programs? We’ll dive into the details to help lenders gain the confidence to take advantage of this new valuation innovation. 

What is an appraisal waiver?

Appraisal waivers shorten the valuation process by allowing buyers to skip the appraisal. Instead of ordering an in-person appraisal, lenders can use an automated underwriting system to determine what a home is worth. Automated underwriting systems use comparable sales and past sales data from the home to determine its value and ensure that a home is not priced too high or too low. 

Appraisal waivers have pros and cons. While these waivers can save buyers the time and cost associated with ordering a traditional appraisal, the challenge is that not all buyers will qualify for an appraisal waiver when applying for a mortgage loan.

Inspection-based appraisal waivers — filling the gaps in traditional waivers

For many years, there have only been two options for lenders — a traditional appraisal or an appraisal waiver. Now, Fannie Mae and Freddie Mac offer inspection-based appraisal waivers. These new appraisal waivers allow lenders to take a risk-based approach to the appraisal process while still saving money and time.

Like appraisal waivers, inspection-based appraisal waiver programs combine highly advanced analytics that use historical valuations and current market data to generate a value for the home. But inspection-based appraisal waiver programs also include a standardized physical inspection of the property that is completed using modern mobile technology to validate the condition of the home.

How do inspection-based appraisal waivers work?

Lenders can obtain an inspection-based appraisal waiver for qualified loans in three steps:

  1. Submit the loan to a GSE automated underwriting system, such as Fannie Mae’s Desktop Underwriter® or Freddie Mac’s Loan Product Advisor®.
  2. The GSE’s automated underwriting systems will determine if a loan is eligible for an inspection-based appraisal waiver.
  3. If eligible, order a data collection from an approved provider. A qualified property data collector will visit the property to conduct the inspection and verify the property’s features and condition. The results are submitted to the GSE and delivered back to you. 

Benefits of inspection-based appraisal waivers

Inspection-based appraisal waivers provide home buyers with a faster and less-biased valuation process at a reduced cost. Historically, appraisals have been a source of uncertainty when buying a home — making it difficult to confirm a closing date. Lenders who instead opt for inspection-based appraisal waivers can consistently rely on quick turnaround times. 

Because inspection-based appraisal waivers remove the human aspect of determining the property value, there is virtually no risk that conscious or unconscious bias will impact the loan process. 

What is property data collection?

Property data collection is a crucial part of the inspection-based appraisal waiver process. It is intended to standardize the collection of value-influencing property characteristics. 

During the property data collection process, data collectors are required to identify and photograph all structures and rooms on a property — documenting any upgrades, damages, additions, conversions, and site features on a property. Data collectors will also take note of all building materials and utilities present.

In addition, property data collectors generate an ANSI-aligned floor plan that includes gross living area (GLA) calculations. Data collectors can do this manually or use a collection tool such as CubiCasa®.  

Once the property data collection is finished and the collector has gathered all the necessary information, the data is submitted to the GSE and delivered to the lender.

Who can collect property data for Freddie Mac’s ACE+ PDR solution and Fannie Mae’s Value Acceptance + Property Data program?

The qualifications and requirements for property data collectors vary slightly between Freddie Mac’s ACE+ PDR and Fannie Mae’s Value Acceptance + Property Data. 

Freddie Mac’s ACE+ PDR requires that the data collection is completed by a trained property data collector. Data collectors can be non-appraisers, appraisers, or appraiser trainees. If a property data collector is not an appraiser, they must be trained in all aspects of property data collection using the Freddie Mac property data set. The training must include instructor led or online training and an exam to ensure the proficiency of the property data collector. 

Read Freddie Mac’s Automated Collateral Evaluation (ACE) page to learn more about the ACE+ PDR data collection requirements.

For Fannie Mae’s Value Acceptance + Property Data, the data collection can be performed by a trained and vetted property data collector and must adhere to Fannie Mae’s Property Data Standard. Read Fannie Mae’s Value Acceptance + Property Data Fact Sheet to learn more.

Both GSE’s mandate that data collectors:

  • Perform the data collection on site
  • Are independent and unbiased, and
  • Must certify that they have no present or prospective interest or bias with respect to the transaction or the property and no present or prospective personal interest or bias with respect to the participants in the transaction

Real Estate Agents: A great option for property data collection

While many different labor forces can be used to perform property data collection, Clear Capital uses licensed real estate agents. Real estate agents are a great choice for property data collection services because they are trained in real estate and must meet state licensing and monitoring requirements.

Real estate agents are accustomed to providing excellent customer service to consumers and are more flexible to the scheduling demands of homeowners. After being certified to perform property data collection services, our panel of real estate agents — armed with a guided mobile technology experience — deliver battle-tested quality property data collections.  

Using technology for property data collection

When collecting property data, collectors are required to collect photos throughout the property while completing a full inspection. Using new real estate technology tools like CubiCasa can make this process much more efficient.

CubiCasa allows a user to scan a home’s floor plan in five minutes. Once scanned, the user can receive a full, 3D, ANSI-aligned floor plan in as little as six hours. 

Clear Capital provides data collectors on our panel with our mobile data collection application, ClearInsight™. ClearInsight provides a guided data collection experience that includes a seamless integration with CubiCasa. Once the data collector completes the inspection and submits the data, our technology enables automated and human-based review to ensure consistent quality.

Take advantage of GSE modernization programs today

Appraisal waiver programs like Freddie Mac’s ACE+ PDR and Fannie Mae’s Value Acceptance + Property Data are great solutions for consumers and lenders alike. They save the time and cost associated with a traditional appraisal and allow buyers to receive a home loan faster.

Get started with GSE modernization programs today with Clear Capital’s Universal Data Collection™ (UDC™). UDC meets the data standards for both Freddie Mac’s ACE+ PDR and Fannie Mae’s Value Acceptance + Property Data, enabling lenders to easily implement and scale inspection-based appraisal waiver programs nationally.

Learn more about UDC or email to get started today!

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