Appraisal Waivers Saved over $2B since 2017 - Per Freddie

[glenn walker]

It's the

Who cares if predatory lenders have less stress due to not having an appraisal done?

The WAIVER is a mortgage lender wet dream - even in the old days , the best the mortgage brokers could do was try to pressure the appraiser -now the mortgage lender writes the target value they need for the loan !! ( as long as it fitsi n the secret fannie or Freddie AVM range - nobody sees it outside their own realm, correct?

It's the buyers who have less stress. They aren't worried some goof ball is going to screw up their purchase.

 

[alebrewer]

A borrower saving a few hundred dollars using a WAIVER instead of an appraiser does not make homes more affordable.

How does it increase liquidity? ( and to whom?)

Their stated goal is NOT appraiser subsidy (or at least I haven't found that in their Purpose statements). Their goal is to provide liquidity to the housing market and home affordability (similar, but not quite the same).

As to your second question: by securitizing loans. Maybe a quick primer on the secondary market would be beneficial?

 

[J Grant]

AI Overview


In recent discussions, some have raised concerns that Fannie Mae appraisal waivers could potentially put buyers "underwater" on their mortgages
.
Here's why this concern exists and what it means:

• Underwater Mortgage: An underwater mortgage (also called an upside-down or negative equity mortgage) occurs when the amount owed on the loan is greater than the current market value of the home.
• Appraisal Waivers: Fannie Mae offers appraisal waivers (Value Acceptance) where, for eligible transactions, they accept the lender-submitted property value without requiring a traditional appraisal. This relies on Fannie Mae's database and analytics to determine the minimum level of collateral due diligence needed.
• Potential Risk: Critics of appraisal waivers argue that without an independent valuation from an appraiser, the accepted value might be inflated, leading buyers to borrow more than the home is truly worth. If home values then decline, these buyers could find themselves underwater, owing more on the mortgage than the property is worth.
• Historical Context: In the lead-up to the 2007-2008 housing crisis, there were many appraisal waivers issued, and it was later discovered that a significant portion of Fannie Mae and Freddie Mac loans had received such waivers. This raises concerns that loosening these requirements could lead to similar issues.

My comment: The original WAIVER rollout in COVID-19 for origination loans had stiffer borrower qualifications with 20% down. Now it is 10%. Then it went to 5% down, and FHA loans can qualify for a waiver ( I believe) with 3% down. What could possibly go wrong?

 

[J Grant]

AI Overview


Yes, Fannie Mae offers waivers and enforcement relief that can help lenders mitigate their repurchase risk related to breaches of representations and warranties
. These waivers don't eliminate the underlying representations and warranties, but rather limit when and how Fannie Mae will enforce them.
Here's a breakdown of how it works:

• Representations and Warranties (R&W): When lenders sell mortgage loans to Fannie Mae, they make assurances about the loan's characteristics, underwriting, and compliance with guidelines. Breaches of these R&Ws can lead to Fannie Mae requiring the lender to repurchase the loan (buyback) or pay a make-whole amount.
• Waivers and Enforcement Relief: To increase certainty for lenders and potentially streamline the loan origination process, Fannie Mae offers programs that provide relief from certain R&Ws.
  • Limited Waiver of Underwriting R&Ws for DU Loans: If a loan receives an "Approve/Eligible" recommendation from Fannie Mae's Desktop Underwriter (DU) system on the final submission, Fannie Mae grants a limited waiver of certain underwriting R&Ws, according to Fannie Mae. This means Fannie Mae won't require the lender to represent and warrant that the loan complies with the guidelines regarding eligibility and borrower creditworthiness, provided certain conditions are met.
  • Enforcement Relief for Breaches of Certain Underwriting and Eligibility R&Ws: For conventional loans acquired by Fannie Mae on a flow basis, lenders can be relieved of their obligation to remedy breaches of certain R&Ws related to underwriting and eligibility if the loan meets specific criteria. This framework changes whether and how Fannie Mae will enforce the R&Ws after a loan achieves relief.
  • Value Acceptance (Appraisal Waiver): Fannie Mae may offer value acceptance, where an appraisal waiver is granted for certain transactions, thereby relieving lenders of some R&Ws related to collateral value. This can be based on the use of automated valuation models (AVMs) and property data, according to the Federal Housing Finance Agency - OIG.

 

[glenn walker]

AI Overview


In recent discussions, some have raised concerns that Fannie Mae appraisal waivers could potentially put buyers "underwater" on their mortgages
.
Here's why this concern exists and what it means:

• Underwater Mortgage: An underwater mortgage (also called an upside-down or negative equity mortgage) occurs when the amount owed on the loan is greater than the current market value of the home.
• Appraisal Waivers: Fannie Mae offers appraisal waivers (Value Acceptance) where, for eligible transactions, they accept the lender-submitted property value without requiring a traditional appraisal. This relies on Fannie Mae's database and analytics to determine the minimum level of collateral due diligence needed.
• Potential Risk: Critics of appraisal waivers argue that without an independent valuation from an appraiser, the accepted value might be inflated, leading buyers to borrow more than the home is truly worth. If home values then decline, these buyers could find themselves underwater, owing more on the mortgage than the property is worth.
• Historical Context: In the lead-up to the 2007-2008 housing crisis, there were many appraisal waivers issued, and it was later discovered that a significant portion of Fannie Mae and Freddie Mac loans had received such waivers. This raises concerns that loosening these requirements could lead to similar issues.

My comment: The original WAIVER rollout in COVID-19 for origination loans had stiffer borrower qualifications with 20% down. Now it is 10%. Then it went to 5% down, and FHA loans can qualify for a waiver ( I believe) with 3% down. What could possibly go wrong?

For someone who claimed AI and technology would take years to replace most residential appraisers, your using it to do all your research it seems and you trust it's results. Lollapalooza

 

[J Grant]

In a move that could have broader implications for the housing finance industry, government-sponsored enterprise Fannie Mae has introduced Day 1 Certainty, a new initiative to provide its lender clients with freedom from representations and warranties on key aspects of the mortgage origination process.

Starting immediately, lenders that use Fannie Mae’s Desktop Underwriter (DU) automated underwriting tool will get rep and warranty relief on automated income verification.

“Starting right now, today, we’re providing that freedom,” said Timothy J. Mayopoulos, president and CEO of Fannie Mae, during the Mortgage Bankers Association’s 2016 Annual Conference and Expo in Boston. “If you validate income through Desktop Underwriter, you can be certain from Day 1 that we will not ask you to repurchase a loan because the income calculation was incorrect.

“But we’re going further than that,” Mayopoulos continued. “Starting on Dec. 10, validation services for assets and employment status will also deliver freedom from reps and warrants, as well.”

In a related development, FormFree Holdings Corp., a provider of automated verification software, announced that it is the first “designated vendor” for asset verification through the Fannie Mae DU Validation Service, a component of the Day 1 Certainty initiative

 

[glenn walker]

In a move that could have broader implications for the housing finance industry, government-sponsored enterprise Fannie Mae has introduced Day 1 Certainty, a new initiative to provide its lender clients with freedom from representations and warranties on key aspects of the mortgage origination process.

Starting immediately, lenders that use Fannie Mae’s Desktop Underwriter (DU) automated underwriting tool will get rep and warranty relief on automated income verification.

“Starting right now, today, we’re providing that freedom,” said Timothy J. Mayopoulos, president and CEO of Fannie Mae, during the Mortgage Bankers Association’s 2016 Annual Conference and Expo in Boston. “If you validate income through Desktop Underwriter, you can be certain from Day 1 that we will not ask you to repurchase a loan because the income calculation was incorrect.

“But we’re going further than that,” Mayopoulos continued. “Starting on Dec. 10, validation services for assets and employment status will also deliver freedom from reps and warrants, as well.”

In a related development, FormFree Holdings Corp., a provider of automated verification software, announced that it is the first “designated vendor” for asset verification through the Fannie Mae DU Validation Service, a component of the Day 1 Certainty initiative

Year 2016 ?

 

[J Grant]

Their stated goal is NOT appraiser subsidy (or at least I haven't found that in their Purpose statements). Their goal is to provide liquidity to the housing market and home affordability (similar, but not quite the same).

As to your second question: by securitizing loans. Maybe a quick primer on the secondary market would be beneficial?

I thought their goal was risk management - lol
I am aware their goal is notan appraiser subsidy. I was making a comment.
I still fail to see how saving a few hundred bucks on an appraisal solves home affordability. Especially since the lender and RE agent fees are in the thousands and tens of thousands of $.

 

[alebrewer]

I still fail to see how saving a few hundred bucks on an appraisal solves home affordability. Especially since the lender and RE agent fees are in the thousands and tens of thousands of $.

Of course it doesn't. It's a teaser. For folks who don't understand how mortgages work, though, that's quite a headline - F/F saves borrowers BILLIONS in appraisal fees (which is technically true).

 

[djd09]

Waivers save time and emotional stress on everyone involved in the transactions and that's a cost that can't be quantified in dollars. When we don't have to deal with goofy appraisers our lifes and mental health are significantly improved.

The last old VA appraiser I had to let into a property was a bad dream nightmare and I was wondering if he would not F up anything or die inside the house.

I swear if he had died I was going to drag his body outside dial 911 so I didn't have to disclose a death in the house. Lmaooooo

just like the blue man...the AMC is your friend