Fannie/Freddie appraisal waivers are 100% dependent upon their algorithms.

Appraisal waivers were “green-lighted” by Fannie–Freddie 2016, but many lenders still required complete appraisals and disregarded the waiver.

 The appraisal landscape evolved in 2019 in response to Covid, and Fannie Mae adopted more flexible options. i.e., the max LTV was raised to 80% from 60% Max. LTV.

Fannie also increased the availability of inspection-based waivers, desktops, and “hybrids” to address appraiser scarcity and modernize the process. 

Appraisal waivers are becoming more common as the Fannie/Freddie databases become more complete with past appraisals and borrowers alike.

IF markets remain somewhat stable, waivers will become more common. 

 Which appraisal your buyer gets depends on several factors.

 Eligible Transactions

Purchases up to 80% LTV for most primary residences
Refinances up to 90% LTV for most primary residences

Refinances up to 75% LTV for investment properties

 Appraisal Waiver Requirements

  1. No appraisal waiver will be granted unless a prior appraisal for the subject property can be found in Fannie’s and Freddie’s databases.

  2. The prior appraisal must have a “low CU” score (or no “overvaluation flag”) and NOT be over 120 days old.

 Borrower Requirements

For refinances to get an appraisal waiver, the borrower must be in the Fannie/Freddie databases. This is not the case for purchases.

Borrowers must have 720+ Ficos, low DTI (debt-to-income ratios), more than two years on the job, and no past BKs or judgments currently on their credit reports.

Appraisal waivers CAN disappear at the 11th hour if a borrower’s credit or income changes significantly during the escrow process. 

An experienced MLO must caution (and repeatedly re-affirm) that the borrowers must postpose all credit purchases until AFTER COE!

What are the other Appraisal Alternatives?

3) Full Appraisal—Lenders most commonly demand full appraisals, which involve an appraiser visiting the property for an interior and exterior inspection.

The appraiser then analyzes market data and comparable sales to write an appraisal report and appraised value. However, the market’s current appraiser shortages can lead to delays in rural areas. 

 4) Inspection-Based Appraisal Waiver – 

Inspection-based waivers do not give an appraised value as the Fannie/Freddie algorithm has already calculated the value.

 A certified property inspector performs an inspection-based model to ascertain that the home is in sound condition. Instead of producing an appraisal report, these data collectors write a “property data collection” report listing many data points about the property.

Desktop Appraisals –

Desktop appraisals are done by an appraiser entirely using online data without an in-person inspection and aren’t significantly cheaper or faster than complete appraisals. 

These might suit rural areas with limited appraisers available, but there are concerns about accuracy since the appraiser never sees the property.

Desktop appraisers, for example, can often overlook high-quality remodeling, updating, curb appeal, or landscaping that can significantly increase a property’s value.