In its March newsletter, Fannie Mae provides important updates to specific matters pertinent to appraisers, specifically hybrid appraisals, property data collection (PDC) and manufactured homes.
Regarding hybrid appraisals, recently Fannie Mae announced value acceptance + property data as the newest solution in its valuation spectrum. Similar to the desktop appraisal solution Fannie announced last year, this is part of the journey to better align collateral solutions to loan-level risks using data and technology.
“We assess and communicate eligibility of loan applications for value acceptance + property data through Desktop Underwriter (DU),” Fannie wrote in its newsletter. “Loans that qualify have lower loan-to-value (LTV) ratios where we have high confidence in the value but where we need the lender to verify that the property characteristics meet our Selling Guide requirements. The next step for the lender is PDC, which requires a trained and vetted third party to visit the house and observe the physical characteristics as we prescribe in our property data standard.
“As underwriting progresses, it is not unusual for loan parameters to evolve. If certain parameters change (such as an increase in the proposed loan amount), the loan may no longer qualify for value acceptance + property data, meaning the lender must obtain an appraisal instead,” the newsletter went on to say. “If the PDC has already taken place, it makes sense to give the property data to the appraiser rather than send the appraiser to make a redundant visit to the home. This combination of using property data obtained through our standardized process to inform an appraiser who does not personally visit the property is what we mean by a hybrid appraisal. We have been testing hybrid appraisals in a pilot program for several years, but this is the first use case in our Selling Guide.”
Fannie Mae also addressed diversifying into PDC, a concept not new to appraisers. It is similar to the observations made by appraisers when visiting the subject property to perform a traditional appraisal.
In March, Fannie announced a new collateral risk management solution called value acceptance + property data. For certain lower-risk loan applications, the PDC will provide updated information on the property and help lenders verify that it meets its Selling Guide requirements.
“To ensure consistent and thorough PDC, we have created a formal property data standard that prescribes a robust set of property data and exhibits. It includes property characteristics in digital format, a comprehensive set of photos, and a dimensioned floor plan showing gross living area calculations and room layout,” Fannie Mae said. “We’ve worked with technology providers who have developed mobile applications that guide the collector through the process. We have tested our property data standard on several hundred thousand loans during the past several years, leading to iterative improvements in the standard, the apps, training, and quality control. Appraisers are generally well qualified to perform PDC. Diversifying your business may be as simple as signing up with a technology provider, learning to use their app, and starting to receive orders. One potential benefit is that it allows appraisers who enjoy field work to specialize in that while eliminating their liability related to developing an opinion of value.”
Fannie Mae now allows the financing of older single width manufactured homes. Prior to the policy change in December 2022, its manufactured home property eligibility requirements specified a single width manufactured home could be no older than 10 years, measured from the manufacture date on the HUD data plate to the effective date of the original appraisal.
“We updated our property eligibility criteria to remove this policy and align our age requirement with other manufactured home loan products that allow financing of manufactured homes manufactured on or after June 15, 1976,” Fannie said. “By requiring some site-built comparables, we aim to ensure that appraisers bracket construction quality and give lenders a more complete view of the impact of quality in the marketplace.”