There have been a lot of changes with the GSE's (Fannie/Freddie) regarding Appraisals this past year, so I wanted to take a moment to describe what has changed (and what hasn't).
Here is a simple flowchart that shows what both Fannie and Freddie are doing with Appraisals now:
Option 1: Appraisals Waivers: The Property Inspection Waiver is being retired. and will be replaced by ACE (Freddie) and Value Acceptance (Fannie)
The Property Inspection Waiver (PIW) is the old name and is being retired. Freddie Mac calls their full waiver Automated Collateral Eligibility (ACE) and Fannie Mae calls their full waiver Value Acceptance. There is no appraisal needed when ACE or Value Acceptance shows up in AUS. Value Acceptance and ACE have no fees and both GSE’s accept the value entered in the loan file.
Option 2: Appraisal Waiver Plus a Property Data Report (or PDR)
This is something new that was introduced this past year by both Fannie and Freddie. A property data report is a collection of property data by a third party that enters the subject property, inputs the data into a system, which is then put in a report and given back to the lender. The GSE's do not require a licensed appraiser to conduct the data gathering. Both GSE's combine the waiver(s) mentioned above (ACE or Value Acceptance) with the property data report.
If LP or DU determine that the loan is eligible for ACE + PDR or Value Acceptance + Property Data, then loan operations will need to order a Property Data Report (PDR) in the same manner that they would order an appraisal product. Full fees will apply similar to a full appraisal initially. This is because it is possible that after the ACE + PDR or Value Acceptance + Property Data is received, there may be things that LP or DU do not like with the Property Data Report and may then require a Hybrid Appraisal. If this occurs, then there will need to be a new order placed by loan operations for a Hybrid Appraisal and the value on the Hybrid Appraisal will now be used for loan purposes. It is possible that the fee for ACE+PDR and a Hybrid Appraisal will be similar or slightly more than a full appraisal which is the reason why we are leaving full appraisal cost fees for all products except ACE or Value Acceptance until the end of the process. Again, the borrower will only pay actual costs up to what was disclosed. We do not want to under-disclose and incur unnecessary tolerance cure fees.
It should be noted that currently the number of Property Data Collection orders with the GSE’s is rather minimal (2% +/-), so we have not seen a large volume of these orders.
Option 3: Desktop Appraisals
No changes to note.
Option 4: Full Appraisals
No changes to note.
Fees
The only product that will not incur a fee is the Automated Collateral Eligibility and the Value Acceptance. Encompass will continue to identify when a full Value Acceptance or ACE is present. Just as it has in the past, Encompass will set the file accordingly, and the Appraisal Fee will be quoted as $0 in these cases if an appraisal is not ordered.
All other products will continue to show the full “appraisal fee” by Lodestar and if need be, the fee will be revised at closing (remember, borrowers are only charged actual appraisal costs if we over-disclose and if we under-disclose, then the company would incur a tolerance cure fee).
AUS
When reviewing DU, currently the report will show a green checkmark as Eligible in cases that a ‘Value Acceptance’ or ‘Value Acceptance + Property Data’ exists – example below. The findings need to be reviewed to determine which one is applicable. The Eligible indicator should not be relied on an assumption that an appraisal is not needed. Again, Encompass does assist with determining the results, but at this time, this indicator reflects as Eligible for both results.
PROPERTY DATA COLLECTION ORDERS WILL BE ASSIGNED TO AN APPRAISAL MANAGEMENT COMPANY AS FANNIE MAE HAS ONLY APPROVED 6 AMC’S TO PERFORM THE PROPERTY DATA COLLECTION. THE CURRENT FEE FOR A PROPERTY DATA COLLECTION IS $225.
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