Big GSE Changes For Lenders, Borrowers

Fannie Mae changed its requirements for appraisal alternatives, a way to help reduce costs for borrowers, while Freddie Mac expanded access to repurchase loans.

For purchase loans for primary residences and second homes, the eligible LTV ratios for Value Acceptance will increase from 80% to 90% and Value Acceptance + Property Data will increase from 80% to the program limits. Both options are designed to match the risk of the collateral and the loan transaction.

Value Acceptance (previously known as appraisal waivers) and Value Acceptance + Property Data (aka inspection-based appraisal waivers) are two key components of the company’s valuation modernization options.

Fannie Mae says the changes are part of its ongoing efforts to offer a balance of traditional appraisals and appraisal alternatives to confirm a property’s value.

The changes will take effect in Q1 2025.

“Fannie Mae is on a journey of continuous improvement to make the home valuation process more effective, efficient, and impartial for lenders, appraisers, and secondary mortgage market participants while maintaining Fannie Mae’s safety and soundness,” said Jake Williamson, SVP of Single-Family Collateral & Quality Risk Management. 

“Responsibly increasing the eligibility for valuation options that leverage data- and technology-driven approaches can also help reduce costs for borrowers.”

Fannie Mae estimates the use of appraisal alternatives on loans it has acquired saved mortgage borrowers more than $2.5 billion since 2020.

At the same time, the Federal Housing Finance Agency revealed that all approved lenders now have access to a fee-based alternative to repurchase Freddie Mac’s performing loans with defects.

It will also require the GSEs to give 60 days’ notice before raising guarantee fees by more than one basis point.

“In today’s challenging housing market, Freddie Mac is committed to enhancing our processes and reducing costs,” said Sonu Mittal, SVP and head of Single-Family Acquisitions at Freddie Mac. 

“Today’s announcements are part of making good on our commitment to be part of the solution and build upon the progress we already made with lenders and industry partners over the past year. We know lenders will continue doing their part to keep improving loan quality.”

The move expands a pilot program launched earlier this year.