Jackson residents may be interested to hear that government mortgage lenders Freddie Mac and Fannie Mae have both issued statements that they will no longer require appraisals on some of the mortgages they back. This will save buyers who qualify for this waiver money and streamline the residential real estate closing process.
Back in December 2016, Fannie Mae began a program in which “property inspections” on as many as 10 percent of refinance loans would not need an appraisal. On June 19, 2017 Freddie Mac did the same. For loans that qualify, automated valuation models will be used instead of in-person appraisals. Borrowers, if they choose, still have the option to get an in-person appraisal. However, this is not a requirement if they qualify for the new waiver program.
Not everyone is a fan of these changes. For example, according to a representative from the Appraisal Institute, a previous homeowner could have, either for better or worse, made changes to his or her home that may not be reflected through an automated valuation. In addition, if a homeowner refinances an already existing mortgage, if there is no appraisal, lenders have no access to their track records.
All of this being said, for Fannie Mae homes to qualify for the waiver program, they must be one-unit pieces of property (condominiums included) that are either the borrower’s primary or secondary place of residence, and that have a maximum of an 80 percent loan-to-value ratio. This means that not many people — under five percent — will be able to waive the appraisal requirement. For Freddie Mac homes, beginning in September, in order to qualify for the waiver program, a home must be the borrower’s primary residence, must be a one-unit, single-family home and must have a maximum of an 80 percent loan-to-value ratio.
While these new rules may be welcome news for borrowers, borrowers may still have many questions about whether they qualify for a Fannie Mae or Freddie Mac appraisal waiver. Therefore, they may want to seek the advice of an attorney, who can provide honest advice so borrowers can make informed decisions.
Source: San Francisco Chronicle, “Fannie, Freddie to waive appraisals on some purchase loans,” Kathleen Pender, Aug. 22, 2017