Industry Insights

Fannie Mae & Freddie Mac’s New Appraisal Independence Requirements: What Lenders Need to Know

Fannie Mae just issued a clarification to their shared appraisal independence policy with Freddie Mac. The agencies now explicitly prevent LO’s, Brokers, and anyone compensated by loan volume/loans closed (or even managed by someone who is) from having any influence on the appraisal provider selection process. 

Specifically, lenders can no longer:

  • Allow LO’s (including third party brokers) to pick AMC’s on an order by order basis
  • Allow LO’s (including third party brokers) to pick their favorite AMC’s for broad order allocation
  • Important: Anyone compensated based on loan volume and/or closed loans, or even managed/supervised by someone compensated in this way, can’t do it either
  • Allow brokers to order directly from an AMC, even if they are approved by the wholesale lender

Now, these requirements aren’t exactly new. The agencies never intended to allow these LO selection workflows but, previously, the policy was written in a way that was vague enough to make some lenders feel comfortable using them. And for good reason. LO’s obviously want their clients orders to be managed professionally, completed quickly, etc. Leaders want the same thing, and want to keep their top producers happy, so they adopted these selection processes — often at the individual branch level. 

Now that Fannie Mae has issued this clarification, lenders need to make sure their branches comply with it if they want to continue delivering loans to these GSE’s. Lenders found in violation of these requirements at worst risk losing their “Seller” status and at best run the risk of repurchasing loans. 

Fortunately, modern appraisal order management solutions like Reggora automatically ensure compliance. Even better, they eliminate the frustration LO’s have with the appraisal process: no visibility into each of their orders, no idea if/when an order’s status changes, fee escalations and re-disclosures that upset their borrowers (and realtors), and more.

A solution like Reggora automatically ensures compliance with this update in two ways, both of which are configurable down to the branch level. You can choose the method that works for you and customize it to your liking. Specifically, we can:

  1. Automatically allocate orders based on the performance of the AMCs you work with (this sends each order to the AMC most likely to deliver the best performance on each order). Performance KPI’s are turn time, revision rate & fee escalation rate. If you’re interested in allocating orders based on performance, which is where the industry is headed (particularly in light of this update made by the GSE’s), The Appraisal Marketplace might be the right fit for you.
  2. Automatically allocate orders to AMCs based on custom scoring criteria you decide upon

In addition to these workflows, we can also ensure wholesale lenders have a compliant workflow in place for their brokers to order appraisals. Specifically, Reggora allows all of your brokers to order an appraisal within your desired wholesale portal. It’s no longer compliant to allow brokers to place orders directly with AMC’s (like many do today), so we make it easy for them to order an appraisal and have the order run through your order allocation workflow (by performance, by geography, weighted, etc).  

As always, there’s more than a few nuances in this update for you to sort out. If you need help adjusting to these requirements, or just have a few clarifying questions, book a complimentary GSE appraisal compliance evaluation with me. I will review Fannie Mae’s update and how it impacts your team. This private consultation will help you:

  • Determine if you’re compliant with Fannie Mae & Freddie Mac’s guidelines
  • Learn how our lenders remain compliant & the pros/cons of each approach
  • See how our lenders keep high-performing LO’s happy with appraisal performance, while meeting the GSEs requirements
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Fannie Mae & Freddie Mac’s New Appraisal Independence Requirements: What Lenders Need to Know