Beginning in March 2022, Fannie Mae and Freddie Mac began to accept desktop appraisals as a permanent fixture. This means that a licensed appraiser will be allowed to complete the home appraisal without physically visiting the property. Instead, they will leverage data that can be made available to via third parties (homeowner, realtor, builder, etc.) and through public sources.
While desktop appraisals should enable faster (and potentially cheaper) approaches compared to the traditional appraisal, there are many caveats that lenders and appraisers should be aware of.
This guide from Fannie Mae provides initial details and guidelines for how desktop appraisals will work. There’s quite a bit to unpack here, as well as a few things that we’re awaiting clarity on, but we’ve summarized the key takeaways below, and in this LinkedIn video from our CEO.
To dive even further into the topic, be sure to watch our webinars on desktop appraisals. The first outlines desktop appraisal rules and regulations, while the second revisits desktop appraisals one month in from when the GSEs began to accept the appraisals on a permanent basis.
Here are 5 things lenders and appraisers should know about desktop appraisals:
1. Loan eligibility for desktop appraisals
Not all loans are eligible for desktop appraisals. The loan must be for a purchase transaction, one-unit principal residence, where the loan-to-value (LTV) ratio is less than or equal to 90%. On top of this, the loan file must also be approved by Fannie Mae’s Desktop Underwriter (DU).
2. The use of floor plans in desktop appraisals
A floor plan with interior walls is required. These floor plans typically don’t exist out in the wild, so an onsite inspection will often still need to occur. This inspection might be able to be done by someone other than an appraiser, such as the homeowner, realtor, builder, etc. We cover the topic of floor plans and third-party data collection further in depth in another blog post.
NOTE: These floor plans and measurements may need to abide by ANSI standards starting April 1, 2022. This is something that we are awaiting further clarification on.
3. Appraiser discretion for desktop appraisals
The appraiser must have sufficient information to develop a credible report. The appraiser has the discretion to reject the order if they don’t feel comfortable with the data available to them. This means that getting high quality data to the appraiser for the floor plan and other property characteristics will be very important.
4. Verification methods for desktop appraisal data collection
Any data (including potentially the floor plans mentioned above) that is provided by third parties with a financial interest in the sale or financing of the property (homeowner, realtor, builder, etc.) MUST be verified by a disinterested source. This could include maps, assessor data, or virtual inspection technologies. It will be important to accommodate any validation and verification processes that will be required by the appraiser, the lender, or both.
5. Desktop appraisals are optional
When permissible, ordering a desktop appraisal is optional for the lender. The lender or borrower always has the option to request that a traditional appraisal is obtained, regardless if a desktop or some other form of appraisal relief is offered.
As this initiative moves forward, it will be of interest to see the frequency of eligibility for desktop appraisals, and, when eligibility is offered, how often requests for desktop appraisal are actually fulfilled. Either way, this is important progress in the industry that will pave the way for further modernization and alternative products. For more insight on desktop appraisals, view our March 2022 webinar with Fannie Mae and Freddie Mac on the subject or you can view the ultimate desktop appraisal FAQ post that includes insight from subject-matter experts from Fannie Mae and Freddie Mac.
How can Reggora help? Our goal is to make it easy for lenders and appraisers to adopt desktop appraisals, and we’re currently working closely with Fannie Mae, Freddie Mac, and our appraiser and AMC partners to understand the nuances and provide guidance to the industry. If you have questions about leveraging desktop appraisals and what you should do to prepare, please contact your Reggora customer success team or reach out to our sales team here.
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