Freddie Mac Single-Family Chief Appraiser Scott Reuter shared information about the government-sponsored enterprises’ (GSE) ACE+ PDR (automated collateral evaluation plus property data report) offering, which was effective July 2022. Reuter answered several FAQs about loan eligibility as it relates to Freddie Mac’s guidelines.

“Freddie Mac is committed to developing new valuation options and enhancing existing ones,” Reuter said. “Our goal is to purchase loans supported by the most reliable and appropriate valuation methods available to mitigate risk associated with default. The property data report provides additional information about the condition of the subject property and allows lenders and borrowers to continue to benefit from originating loans without an appraisal, while ensuring we purchase loans secured by properties that meet Freddie Mac property eligibility requirements.”

Reuter noted that when a loan is eligible for ACE+ PDR, it’s indicated in the Loan Product Advisor (LPA) feedback certificate.

As to who can perform a property data collection and whether Freddie Mac has specific requirements for these individuals, the property data collector can be a non-appraiser, appraiser or appraiser trainee, but must meet certain requirements and have the appropriate qualifications.

Additionally, Reuter said a list of AMCs, including those that provide data collectors, and software partners that are developing support for the Freddie Mac PDR dataset is available on its website. Freddie Mac continually updates this list as additional providers are verified, he said.

But can the property data collector be someone associated with the lender or an employee of the lender?

The answer is yes, provided the person is appropriately trained and meets the independence requirements in Single-Family Seller/Servicer Guide (Guide) Bulletin 2022-24.

Additionally, property data collectors must undergo background checks. Lenders or their authorized third party must ensure the property data collector has passed a background check as documented in their procedures. The property data collection must be done on-site through interior and exterior physical data collection of the subject property – it can’t be done virtually.

“For each ACE+ PDR loan delivered to Freddie Mac, the loan file must include a PDF report that uses the Freddie Mac PDR dataset and the necessary certifications, signature(s), floor plan and photographs. The signed PDR must also be retained in the loan file. The PDR cannot be submitted to the Uniform Collateral Data Portal (UCDP),” Reuter said.

Additionally, when delivering loans to Freddie Mac, lenders must follow specific instructions as outlined in the Bulletin.  

Reuter also mentioned that Freddie Mac isn’t requiring a specific form or format for the PDR; however, it must be completed and submitted using the Freddie Mac dataset. The PDR data collection date must be on or before the note date of the loan but can’t be more than 12 months prior to the note date.

“The lender must review the PDR and assess the information and photographs to determine whether the subject property condition meets Freddie Mac’s property eligibility requirements,” Reuter said. “If the condition of the subject property meets the definition for condition rating C5 or C6 or the quality of the subject property meets the definition for quality rating Q6, the loan is not eligible for sale to Freddie Mac unless the deficiencies resulting in a C5, C6 or Q6 rating have been remedied prior to delivery. Condition and quality of construction are defined in Guide Exhibit 36, Condition and Quality Ratings and Level of Updating Definitions.”

Regarding the updating of tools lenders use to assess completed PDRs, Freddie Mac is developing and testing an application programming interface (API) that will provide feedback messaging to help lenders assess PDRs, make any necessary updates/changes and more conveniently submit the PDRs to Freddie Mac.

Also, a property data collector may complete the PDR and specify required repairs or require an inspection by a professional (i.e., roofing inspector, plumber, etc.) when the property data collector can’t determine whether repairs are needed.

There are characteristics or conditions for a subject property that could require an upgrade from an ACE+ PDR offer to a traditional appraisal or, when appropriate, a hybrid appraisal. Reuter pointed out the following characteristics or conditions:

• Adverse site conditions or external factors (i.e., extreme slope, erosion, sink hole, wetlands, substantial junk or trash, failing structure, easements, encroachments, environmental conditions or land uses).
• The building status is “proposed.”
• Zero bedrooms and/or zero bathrooms above grade.
• A measured above grade gross living area of less than 400 square feet.
• External obsolescence (i.e., adjoins to an industrial site, landfill, airport, power lines, major utility, commercial site, railroad tracks or major highway).
• Mixed-use (i.e., altered or modified specifically to support or facilitate any non-residential or income producing use).

We also wanted to know whether an appraisal upgrade will be required due to the existence of external obsolescence that does not immediately adjoin the subject property.

“No,” Reuter answered. “An appraisal upgrade will only be required due to external obsolescence that is either directly next door, behind or across the street from the subject property. A data collector is only required to capture those external characteristics that immediately adjoin the site.”

When an upgrade to an appraisal is required and a hybrid appraisal is completed by an appraiser, the appraiser uses the data in the PDR, but the appraiser must ensure the information they present on the hybrid appraisal is accurate and reliable. If the appraiser notes any inconsistencies or areas of concern, they can contact the property data collector to discuss and verify the information and may adjust the information on the hybrid appraisal based on their research. If the appraiser can’t reconcile the information sufficiently to produce a credible report, the lender must obtain an interior and exterior inspection appraisal (Form 70 or Form 465).

Finally, we asked whether an appraiser completing a hybrid assignment on Form 70H, or 465H is required to be located in the market area of the subject property.

“The appraiser must be geographically competent,” Reuter said. “More specifically, the appraiser must be able to truthfully certify that they have experience appraising the same type of property in the market area.”

For more answers on ACE+ PDR, visit Freddie Mac’s frequently asked questions.