Fannie Mae’s Appraisal Alternative: What Mortgage Brokers Need To Know

Appraisal alternatives can be useful for originators to have in their tool kit in a purchase-driven market

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Senior Managing Director

The agencies’ efforts to “modernize” appraisal options and provide borrowers with more alternatives to full appraisals create yet another opportunity for mortgage brokers to deliver an exceptional customer experience to homebuyers. Fannie Mae was the latest to announce changes to property valuations, which expanded their range of options for establishing a property’s market value.

Their focus is to reduce turn times related to appraisals, provide speed to certainty, and lower the cost to consumers. They call their efforts “valuation modernization,” while Freddie Mac uses the term “appraisal modernization.” This is what mortgage brokers need to know:

What has changed?

Fannie Mae DU messaging for appraisal waiver was updated to display “Value Acceptance”
Fannie Mae introduced a new alternative to full appraisals, “Value Acceptance + Property Data,” also known as “Value Acceptance + PDC”

Value Acceptance + PDC

When “Value Acceptance” with property data messaging is received from DU, it will provide a property value, and you will have the option to arrange for property data collection instead of ordering a full appraisal.

Key points:

Available on purchase and refinance transactions for one-unit properties, including condos, that meet loan eligibility requirements
PDCs are not appraisals: they are an alternative to full appraisals
Requires full exterior and interior on-site inspections
DU provides the property value, and PDCs provide insight into the condition of the property
It is possible to lose value acceptance on DU if loan terms change during the loan process

PDCs require on-site inspections, where an inspector goes to the property to collect data and photos. They inspect the exterior and interior, but unlike an appraisal, they do not collect property market data, nor do they provide a value estimate.

DU has already accepted the value, and the inspector reports on the property’s condition and will determine if repairs are needed. That is the only job of the inspector. They are not there to render an opinion of value. The only purpose of the PDC is to collect data and provide information about the condition of the property.

The only purpose of the PDC is to collect data and provide information about the condition of the property.

PDC Benefits

Meeting appraisal contingencies can be quicker with these appraisal alternatives, which can be useful for originators to have in their tool kits as they compete for business in a purchase-driven market. It can also help strengthen their referral network. For borrowers, the cost savings of PDCs could be up to hundreds of dollars when compared to the cost of an appraisal. In competitive situations where appraisal contingencies need to be waived, Value Acceptance + PDC can also provide early assurance for homebuyers.

Ordering PDCs

Fannie Mae only has a handful of Appraisal Management Companies, or AMCs, certified to deliver PDCs. Wholesale lenders who have aligned with Fannie Mae’s updates are working with certified AMC partners to take these orders for their mortgage brokers.

Overall, it is exciting to see the industry pushing to create a more streamlined mortgage process. While we have much more to do, let’s continue to move the needle and innovate toward greater accuracy, increased speed in loan decisioning and reduced costs for consumers