Expanded rules for appraisal waivers take effect on purchase transactions starting the first quarter of 2025. Announcements were made on October 28, 2024 by Fannie Mae and Freddie Mac, as well as the Federal Housing Finance Agency (FHFA) who stated the policy action “builds upon the long-running success of appraisal waivers, which have helped more borrowers—particularly first-time and low-to-moderate income borrowers—benefit from cost savings and reduced closing times.”
The new rules apply to both appraisal waivers and inspection-based waivers, which leverage property data collected by a trained and vetted professional. Maximum loan-to-value (LTV) for appraisal waivers on home purchases will increase from 80% to 90%, and LTVs for inspection-based appraisal waivers will increase from 80% to 97%.
Fannie Mae appraisal waivers are now known as Value Acceptance, and the 2025 changes apply to both primary residence and second home purchase transactions. Value acceptance means that the lender accepts the value indicated from the Desktop Underwriter® offer. Value Acceptance + Property Data is an inspection-based appraisal waiver, and property data collection consists of a visual observation of the interior and exterior areas of the subject property. Only a single visit to the property is required to complete this process. Lenders are able to search for an approved data collector in the geographic area from Fannie Mae’s service providers list.
Freddie Mac appraisal waivers are available through the Automated Collateral Evaluation (ACE) option for applications submitted through Loan Product Advisor.® Lenders must indicate the sales contract price or estimated property value for refinances, and the ACE algorithm determines acceptability of the value (or sales price) as the basis for underwriting the loan. LPA feedback may indicate the requirement of an ACE+PDR, in lieu of a traditional appraisal, consisting of an Automated Collateral Evaluation (ACE) and a Property Data Report (PDR). The PDR information is physically collected on-site by a trained property data collector, which includes photographs. Lenders can locate a provider on the collateral valuation dashboard.
LOS configuration
Fannie Mae’s Valuation Acceptance + Property Data Readiness Lender Resource includes a number of detailed checklists, outlining steps lenders can implement for 2025 readiness. An initial key step is the configuration of the Loan Origination Systems (LOS) for ordering, tracking, and receiving property data collection from valuation service providers. Lenders need to ensure that the LOS system is modified to include the correct automated underwriting message codes and identifiers applicable to property data collection.
Staff training
Lenders must ensure that originators, processors, and valuation staff members receive training regarding appraisal waivers and other acceptable valuation methods. Personnel must take extra steps to confirm that property information provided by the borrower (or real estate agent, builder, etc.) is accurate and up to date. Data which cannot be validated may impact acceptance for any type of appraisal waiver, according to the Enterprises.
Lenders are obligated to request a traditional appraisal based on supplemental information or facts that are later received about the property which would deem the transaction ineligible for a waiver. Based on new information received or other factors, automated underwriting feedback may indicate the requirement for a hybrid appraisal report (Fannie Mae Form 1004 Hybrid or Freddie Mac Form 70D). It is important that personnel inform borrowers of any potential appraisal costs, as well as ensure compliance to any required “change of circumstance” re-issuance of the Loan Estimate (LE).
According to Fannie Mae’s readiness resource guide, staff training needs to include the topics listed below.
- Differences between valuation acceptance (appraisal waiver) vs. value acceptance + property data.
- How and when they can order a property data collection for an eligible case file.
- How and when a hybrid appraisal may need to be ordered.
- How to identify and manage repair items.
- How and when processors, underwriters, and quality control analysts should review property data collections.
Property data collector independence requirements
Fannie Mae requires Sellers to adopt written policies, procedures, disciplinary rules, and training programs to ensure compliance with property data collector independence requirements. Additionally, Sellers must also ensure that any third parties, including property data collection companies, service providers, or correspondent lenders, are also in compliance with procedures. Fannie Mae publishes guidance for lenders which sets forth standards to safeguard the independence, objectivity, and impartiality of data property collectors and other independent parties throughout the property data collection process. Lenders should confirm that their service provider network can provide property data collections and other options, such as hybrid appraisals and field services.
Post-funding quality control
Freddie Mac issued new guidance on November 6, 2024, Property data collections and seller oversight. The guidance highlights important objectives for quality control, and states that Sellers must include a targeted review of Property Data Reports (PDR) as part of its quality control sampling. Appraisals completed using a hybrid process must also be included in the quality control sampling. QC policies and procedures need to include the following steps:
- Require property data collectors to undergo periodic background checks that include criminal background checks;
- Require property data collectors to complete comprehensive training on preparing an accurate and thorough PDR;
- Require property data collectors to comply with the same customer service standards or code of conduct with which employees and/or contractors of the Seller, or its authorized third party, must comply;
- Include a process to continuously evaluate property data collectors, including monitoring and documenting performance to identify and remedy any recurring deficiencies and discontinuing the use of chronically underperforming property data collectors; and
- Include a process for providing continuing education when appropriate (e.g., in the event of significant changes to the UPD, the property data collection process, etc.)
Anna i has authored over 45 fair lending compliance handbooks and educational resources.
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