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FHFA Issues Request for Input on Appraisals

On December 28th, 2020, the FHFA, the conservator for Fannie Mae and Freddie Mac, issued a request for input on appraisal-related policies, practices and processes for loans to be deliverable to the GSEs.

The RFI requests industry comment on methods to modernize the appraisal process, the uniform appraisal dataset (UAD) and appraisal design form, the use of automated valuation models (AVMs), and valuation differences by borrower and neighborhood ethnic makeup. The RFI us available here.

The stated goal of the RFI is to ensure that GSE appraisal policies not lead to competitive practices that could erode GSE safety and soundness.  Specifically, FHFA is looking for activities that may be used to manipulate automated underwriting system results or result in the adverse selection of a GSE with less stringent appraisal requirements.

One suggestion for appraisal modernization in the RFI called a ‘hybrid appraisal,’ in which an appraiser, home inspector, or even a realtor visits the property and collects data for one of the GSE’s automated underwriting system and collateral tool (Freddie Mac’s Loan Collateral Advisor and Fannie Mae’s Collateral Underwriter).  If warranted, the automated underwriting system will also require a desktop appraisal from a licensed appraiser using the data already collected.

A second suggested step is to redesign and update the UAD and appraisal form to align with the current MISMO version, add recommended new data points and delete unnecessary ones, and update the form to have the same look and feel of the new GSE loan application and federal Loan Estimate and Closing Disclosure.  This portion of the RFI has been in process for some years, and is ongoing.

The RFI also requests input on policy updates to allow appraisal waivers on GSE-eligible loans, and potential methods to address concerns about undervaluation of residential property in minority communities.

Comments are due to FHFA on or before February 26, 2021.

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In this blog post concerning legal and regulatory matters of interest to the mortgage industry, Sandler Law Group (SLG) provides general information and industry observations that are not motivated by or concerned with a particular past occurrence or event, or a specific existing legal problem of which SLG is aware. Nothing published herein is intended to constitute legal advice and the use of the blog post by a reader shall not give rise to an attorney-client relationship with SLG. SLG expressly disclaims any representation of accuracy or reliability as to the content of this blog post, as well as any obligation to maintain such content over time or to ensure it is free from errors. Brad Cope is the attorney responsible for the SLG content of this blog post. Unless otherwise noted, the attorneys of SLG are not certified by the Texas Board of Legal Specialization.

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