At the 2024 Mortgage Bankers Association (MBA) Annual Convention and Expo in Denver, the Federal Housing Finance Agency (FHFA) has announced a pair of upgrades aimed at modernizing the process of making property valuations, including the expansion of eligibility for appraisal waivers and inspection-based appraisal waivers.
Appraisal waivers (also known as “value acceptance”) can shorten the appraisal process because eligible buyers can skip an in-person home appraisal in favor of a valuation from automated underwriting system data. Inspection-based waivers are similar, though they also require a property inspection by a trained data collector who isn’t necessarily a licensed appraiser.
Beginning in the first quarter of next year, the maximum loan-to-value (LTV) ratio of purchase mortgages eligible for appraisal waivers will rise from 80% to 90%, while the maximum LTV of purchase mortgages eligible for inspection-based waivers jump from 80% to 97%.
The cost savings of eschewing the traditional valuation from a licensed appraiser is passed along to the borrower; Fannie Mae estimates that the use of such appraisal alternatives on loans it has acquired has saved borrowers more than $2.5 billion since early 2020.
Bob Broeksmit, president and CEO of the MBA, noted that the organization “support[s] the expansion of appraisal waivers, which will lower costs for moderate-income first-time buyers.”
The FHFA also announced that, jointly with the U.S. Department of Housing and Urban Development (HUD), it is releasing new appraisal data from single-family mortgage applications submitted to the Federal Housing Administration (FHA).
The addition of that data will expand the scope of the FHFA’s Uniform Appraisal Dataset (UAD), which is used to evaluate appraisals for potential errors or bias. Previously, the UAD only included appraisals of properties for loans that would be acquired by Fannie and Freddie.
“Publishing appraisal data that goes beyond loans backed by Fannie Mae and Freddie Mac provides a more complete picture of home valuation trends and reinforces our commitment to accuracy, transparency, and fairness,” said FHFA Director Sandra L. Thompson. “Offering the public access to appraisal data for FHA-insured loans will bolster policymakers’ efforts to identify and address potential inaccuracy, bias, and discrimination in the broader mortgage market.”
“Far too many families face unfair racial or ethnic bias when they get their home appraised. To truly eliminate this form of discrimination, we need accurate, up-to-date data on the appraisal market,” said Adrianne Todman, acting secretary of HUD. “Today, we take a major step forward, working with our partners at FHFA to make public data that is both current and comprehensive on home appraisals.”