Freddie Mac recently announced that it has expanded the use of appraisal waivers through its Automated Collateral Evaluation. The expansion will include condominium purchases and refinances, according to a bulletin from Freddie Mac.
The move brings Freddie in line with Fannie Mae, which extended property inspection waivers for appraisals to condominium transactions in May.
Freddie’s bulletin announced updates to:
- Property eligibility and appraisal requirements – including eligibility of condominium units for automated collateral evaluation;
- Condominium project requirements;
- Maximum number of financed properties; and
- Implementation of Freddie Automated Servicing Transfer (FAST) and rebranding of our servicing-released executions.
“As part of our continued focus on leveraging big data and advanced analytics to bring greater efficiencies to the loan origination process, we are expanding eligibility for automated collateral evaluation (ACE) appraisal waivers to include Mortgages secured by Condominium Units,” the bulletin states. “As a result, mortgages secured by condominium units that qualify for ACE may receive relief from representation and warranties related to the property’s value, condition and marketability, providing sellers with greater purchase certainty.
“Additionally, we are updating the Guide to specifically state that to qualify for an ACE appraisal waiver, the mortgage must receive a Loan Product Advisor Risk Classification of Accept,” the bulletin continued.
With regards to comparable sales selection, the bulletin states that it is updating the comparable sales selection requirements for properties located in new subdivisions, units in new Planned Unit Developments (PUDs) or units in recently converted or New Condominium Projects to provide flexibility when the new subdivision or project has no contract sales.
“The appraiser may now develop an appraisal report with all comparable sales from outside the new subdivision or project,” the bulletin says. “However, the appraiser must comment on the marketability of the new development or project and justify and support the use of the comparable sales from outside the new subdivision or project. We are also clarifying that the appraiser may use comparable sales that are older than 12 months as long as the appraiser can justify and support such use in the appraisal report.”
Previously, when a condominium unit mortgage was secured by a detached condominium unit in a condominium project with a mix of attached, detached and/or semi-detached units, sellers were required to review the project under one of the following project review types for these mortgages:
- New Condominium Projects
- Established Condominium Projects
- Streamlined reviews
- Reciprocal reviews
“In response to seller feedback, we are expanding the availability of the detached condominium projects review type to condominium unit mortgages secured by detached condominium units in a project with a mix of attached, detached and/or semi-detached units,” the bulletin stated. “Sellers may use the detached condominium projects review type for projects that are comprised solely of detached units and now may also use this project review type for mortgages secured by detached condominium units in projects with a mix of attached, detached and/or semi-detached units.”
For changes to the maximum number of financed properties, for second home and investment property mortgages, Freddie currently limits the number of 1- to 4-unit financed properties that a borrower individually is, and all borrowers collectively are, obligated on to six (including the subject property and the borrower’s primary residence).
In response to seller requests, Freddie Mac said it was increasing the maximum number of financed properties permitted to 10 provided that, when the number of financed properties is greater than six.