Appraisal waivers: What underwriters should know

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

As mortgage underwriters, you understand that a timely appraisal is paramount to a smooth loan approval process. But what if you could skip a traditional appraisal entirely? Well, with the introduction of inspection-based appraisal waivers to the market, you can! 

This blog post discusses what an inspection-based appraisal waiver is, how these programs benefit underwriters, and how you can easily get started with these programs to streamline and expedite your underwriting.

What is an appraisal waiver?

Appraisal waivers shorten the valuation process by skipping the traditional appraisal. Instead of ordering an in-person appraisal, lenders can use an automated underwriting system to determine what a home is worth using comparable sales and past sales data from the home to determine its value.

Fannie Mae and Freddie Mac now offer inspection-based 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?

Qualified data collectors visit a subject property 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.

Benefits of inspection-based appraisal waiver programs for underwriters

Inspection-based appraisal waivers create efficiency for underwriters and reduces the likelihood of human error.

The traditional appraisal process requires underwriters to ensure the accuracy of a property’s features along with the condition and value of the property. With inspection-based appraisal waivers, a property’s value is already accepted by the GSE. The data collection is only needed to validate the features and condition. Data collection is solely fact-based whereas appraisals introduce the art and science of determining a value.

Historically, appraisals have been a source of uncertainty in the loan process — making it difficult to confirm a closing date. Forgoing a traditional appraisal removes the time and cost associated with it. Underwriters can use data collected by a qualified property data collector to underwrite the collateral. 

Using an inspection-based appraisal waiver is up to 50% faster than using a traditional appraisal. And it’s more affordable, giving way to savings that can be passed on to the consumer.

Freddie Mac’s new Beyond ACE (bACE) API feedback messages are also a game-changer for lender underwriting and quality control staff. The messages have the potential to turn the previously open-ended PDR review process into a more data-driven, targeted one. Underwriting and quality control staff can more efficiently underwrite property conditions and eligibility. This is analogous to using Uniform Collateral Data Portal® (UCDP®) results when performing a review of a traditional appraisal.

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 here or email to get started today!

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