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Fannie Mae’s Selling Guide Announcement from 3/1/23 communicated a variety of updates. This blog is a two-part series to discuss in more detail two of the areas covered: Valuation Modernization and Lender Quality Control Updates. Also related is our recent blog, Appraisal Modernization is Now!
The modernization of anything should include more flexibility and more reliance on tools versus people. This holds true for the changes Fannie Mae has been making with regard to appraisal requirements. An appraisal is no longer the default option, good news for lenders and borrowers alike who benefit from both time and expense savings. In lieu of desktop or traditional appraisals, three more flexible appraisal options use data and technology to validate a lender-provided appraisal value. It’s as easy as 1-2-3.
- Submit the loan to Desktop Underwriter.
- Determine eligibility option:
- Value acceptance* (formerly known as appraisal waivers) which uses data and technology to accept a lender-provided value.
- Value acceptance plus property data* where lenders can use third party authorized Property Data Collectors to submit property data (images, floor plans or other types of property data) using Fannie Mae’s Property Data API.
- Hybrid appraisal** where lenders can submit the property data to an appraiser to perform an enhanced version of a desktop appraisal when the loan loses eligibility in DU for value acceptance + property data due to a change in qualifying loan characteristics.
- Provide attestation letter to confirm completion of repairs or alterations if identified with the value acceptance + property data option.
Effective: Lenders may take advantage of completion alternatives immediately. Desktop Underwriter® (DU®) will be updated the weekend of April 15, 2023, to support these updates.
* Value acceptance and value acceptance plus property data receive automatic value certainty with rep and warrant relief.
** Value certainty with rep and warrant relief from a CU® score of 2.5 or lower.
Lender may obtain a desktop or traditional appraisal report as specified by DU.
From a quality standpoint, a few things to note for your loan quality reviews. If you are outsourcing QC or using technology to complete loan audits, make sure the appraisal test set is updated to include property data tests. Your review should also ensure that accurate data has been entered into DU and that the loan program qualifies for the new valuation guidance versus a full appraisal. Also, with some of the new documentation requirements, check for attestation letters for properties requiring repairs. And, if there is a change in qualifying loan characteristics and a hybrid appraisal is needed, check that a Form 1004 Hybrid is included with the loan file. This form requires the same exhibits as traditional appraisals with the inclusion of a floor plan conforming to the ANSI standard.
It is important to note that when using hybrid appraisal, the data collector’s work should be continually evaluated. Ensure that they are trained and vetted through an annual background check. Fannie Mae has identified a list of six service providers and will be evaluating additional services providers to update the Value Acceptance + Property Data Service Providers list periodically. Your quality reviews should also check that an approved data provider was used.
Finally, on the subject of valuation modernization, back in May 2021 the Collateral Risk Assessment replaced Field Reviews. Having a tool that conforms with the Fannie Mae Collateral Underwriter® (CU®) 1033 Form facilitates the ease of completing the Collateral Risk Assessment, documenting deficiencies, and automating reporting to streamline the audit process while delivering quality results.
Remember, the modernization of anything should include more flexibility and more reliance on tools versus people. LoanLogics has the technology to take advantage of this concept.
