GSEs Appraisal-Free Purchase Mortgages
On August 18, 2017, both Freddie Mac and Fannie Mae, collectively the Government Sponsored Entities (GSEs), announced they would allow for the use of their proprietary automated valuation tools in lieu of traditional appraisals for some purchase loan transactions.
Freddie Mac will utilize their automated collateral evaluation (ACE) to determine home value by using data from multiple listing services and public records as well as their own data of historical home values to determine collateral risks. Homes must have an 80% or lower loan to value, be a one unit single-family residence, and the borrower’s primary residence. Prior appraisals on the property are not required. Lenders will find out if a property is eligible for ACE by submitting the loan data through Freddie Mac's Loan Product Advisor®. Freddie Mac does not have an estimate for how many loans will be affected. ACE will be available for qualifying home purchase loans on September 1, 2017.
Fannie Mae will allow lenders to receive a Property Inspection Waiver (PIW) on certain one-unit principal residence and second home purchase transactions with loan to value ratios up to 80%. Home value is determined through Fannie Mae's data based valuation methods. Unlike Freddie Mac, Fannie Mae will require that the property in question have a prior appraisal in electronic format that has been analyzed by Fannie Mae's Collateral Underwriter®. Lenders must submit the loan data through Fannie Mae's Desktop Underwriter®. Fannie Mae anticipates no more than 5% of loans will be affected, but that could change in the future. PIWs for purchase loans are available immediately.