Fannie Mae, Freddie Mac to add desktop appraisals to systems in March

Fannie Mae and Freddie Mac have announced the dates when they’ll follow up on their regulator’s promise to make one of the appraisal flexibilities introduced amid the pandemic a permanent part of their operations.

The two major government-related mortgage investors will add desktop appraisal messaging to their automated underwriting systems in March. Freddie’s system feedback will indicate whether or not desktop appraisals can be submitted starting on March 6. Fannie plans to roll them out as part of an update to its AUS during the weekend of March 19.

AUS acceptance of desktop appraisals at both government-sponsored enterprises will be subject to restrictions based on the loan-to-value ratios of the mortgages involved. Fannie may otherwise allow them on single-unit purchase loans with a complete subject property address if they meet other typical eligibility criteria.

Several types of collateral will be ineligible, including second homes, condominiums, cooperatives, manufactured housing, and properties that either are being used for investment or have resale restrictions.

Some mortgage products also will be ineligible, including loans for community lending like HomeReady, and financing used for energy-related improvements or other types of renovations.

Appraisers have had mixed feelings about broader use of automation out of concern some forms could possibly result in less accurate valuations.

“Some of the flexibilities provided during COVID, like desktop appraisals have longer term merit, for instance, typical properties where reliable [multiple listing service] data is available,” said Jody Bishop, the 2022 president of the Appraisal Institute, in an emailed statement.

The GSEs’ announcements related to desktop appraisals will help provide new parameters for their use and, “from the appraiser’s perspective, the scope of work likely will not change much,” Bishop said.

However, fewer appraisal alternatives have been used in the purchase market, so it could take awhile for some stakeholders to get used to desktop appraisals’ more programmatic use there.

“It likely will take time for lenders and appraisers to adopt desktops in full,” said Bishop, noting that the institute has been offering training related to this topic.