Fannie Mae updated its guidelines regarding property inspections in the aftermath of a natural disaster. The waivers that grant lenders Day 1 Certainty safe harbors now will be available for 120 days after a disaster. This potentially means that fewer appraisals will be needed, according to Fannie Mae.
“Currently, the Selling Guide describes the policies that apply to the use of a property inspection waiver (PIW) for loans in process (not closed or closed, but not delivered) where the property is located in a disaster area,” Fannie Mae said. “With this update, we are providing additional clarity regarding PIW offers on a property after a disaster has occurred. After a disaster occurs, if we receive an acceptable appraisal on a property in a disaster area, that property becomes eligible for a PIW on a future transaction.
“Lenders may exercise these future PIW offers in accordance with the requirements of B4-1.4-10, Property Inspection Waivers,” Fannie added. “For example, lenders may already be receiving PIW offers on properties impacted by Hurricane Sandy, and in the coming months, will receive offers on properties impacted by Hurricanes Harvey and Irma, if an appraisal performed on those properties post-hurricane was submitted to Fannie Mae.”
As for the effective dates involved, lenders, according to Fannie, should feel comfortable exercising these waivers as long as they meet standard PIW requirements
B4-1.4-10, Property Inspection Waivers (05/01/2018) Introduction topic contains information on property inspection waivers (PIWs), including:
- Overview
- Prior Appraisal Requirements
- Eligible Transactions
- Ineligible Transactions
- Representations and Warranties
- Exercising a PIW
“For certain loan casefiles, DU offers a PIW – an option to waive the appraisal requirement. For loan casefiles that are not eligible for a PIW, DU will require an appraisal reported on the appropriate appraisal report form for the type of property being appraised,” Fannie states. “In order for a PIW to be considered, a prior appraisal must be found for the subject property in Fannie Mae’s Collateral Underwriter (CU) data. DU will compare the address for the subject property to the property addresses found in CU. For refinance transactions, a borrower name match between the loan casefile and the prior appraisal must also be found.
“DU will use the information from the prior appraisal to determine if the loan casefile is eligible for the PIW. In some cases, the prior appraisal may not be acceptable,” Fannie further added. “For example, if a CU ‘Overvaluation Flag’ was issued on the prior appraisal or the appraisal could not be scored, that prior appraisal will not be used and a PIW will not be offered on the new loan casefile.”
When a loan casefile is eligible for a PIW and the waiver is exercised by the lender, Fannie Mae accepts the value estimate submitted by the lender as the value for the subject property. See A2-2.1-06, Representations and Warranties on Property Value (03/28/2017), or for more information and the most current version go to the online version at https://www.fanniemae.com/singlefamily/originating-underwriting.
A lender may only exercise the PIW if:
- The final submission of the loan casefile to DU resulted in a PIW offer
- An appraisal is not obtained for the transaction, and
- The PIW offer is not more than four months old on the date of the note and the mortgage.
“Lenders that elect to exercise the PIW must include SFC 801 at delivery,” Fannie Mae said. “Lenders may not adversely select against Fannie Mae in determining which PIW offers to accept. Fannie Mae may monitor the lender’s exercise of the PIW offers and delivery of loans to Fannie Mae, and may take appropriate measures if adverse selection is identified.”