Fannie Mae and Freddie Mac each have announced that they will begin waiving appraisal requirements on a limited number of home-purchase loans they back, which will save hundreds of dollars and speed closings for qualified buyers but strike a blow to appraisers .
Fannie started waiving the need for what it calls “property inspections” on certain refinance loans in December. At the time, Fannie said up to 10 percent of refinance loans could qualify for the waiver. Freddie quietly followed suit on some refis on June 19. Instead of using human appraisers on these loans, the government agencies are relying on automated valuation models.
Waiving them on purchase loans is a much bigger threat to taxpayers and appraisers, said Ken Chitester, a spokesman for the Appraisal Institute. “The previous owner could have made changes — good or ill — to the property” that would not show up on an automated valuation, he said. Also, when borrowers refinance an existing loan, lenders can see their track record. That’s not always true on purchase loans, which is why “it’s important to have an appraisal as part of good risk management.”
For buyers, there’s little downside. They can still get an appraisal if they want peace of mind, but won’t have to if they qualify for a waiver.
