Freddie Mac: Proposal intended to help appraisers

Jan 06, 2017

The below is an excerpt from Valuation Review - Appraisal Technology News
January 2, 2017 Edition  |  Mike Holzheimer, Editor | 

View the full article as it appeared in Valuation Review 

Valuation Review - Appraisal Technology NewsFreddie Mac announced Oct. 24 that it will add new capabilities to its Loan Advisor Suite which will offer lenders the ability to use an automated appraisal alternative to replace traditional appraisals on some loan applications. 

The new capabilities are designed to take costs out of the loan origination process, but the announcement sent much concern through the appraisal industry, causing fears about the waiving of selected appraisals. 

One of the many concerns appraisers have regarding the future of the industry is whether or not their services will be needed at all when it comes to appraising property. 

The significant majority of mortgage loans will continue to require a traditional appraisal,” Freddie Mac Public Relations Director Lisa Tibbitts told Valuation Review.


However, this appraisal alternative will provide another option for loans on properties that can be easily valued using data and models, enabling appraisers to focus their attention on more complex and unique properties where their valuable expertise is most needed. 

“We believe our no-cost appraisal alternative increases the efficiency of the mortgage process and will reduce costs for lenders and borrowers,” Tibbitts added. “There are different organizations that track the cost of mortgage loan production, one of them being the Mortgage Bankers Association (MBA). 

And by that measure, we know that the cost of producing a mortgage loan has more than doubled since before the financial crisis.” The new capabilities that will be available in spring 2017 include: 

  • A no-cost automated appraisal alternative;
  • Automated borrower income verification;
  • Automated borrower asset verification, and;
  • Automated assessment of borrowers without credit scores.

In addition to these capabilities, according to a press release by Freddie Mac, Loan Advisor Suite expects to broadly offer collateral representation and warranty relief in early 2017.

It’s intended to significantly relieve mortgage lenders from the risk of loan repurchase because of appraisal defects. Currently, Freddie Mac offers collateral representation and warranty relief in select circumstances. In looking at the big picture, Tibbetts said, this proposal is designed to assist appraisers and enhance their overall strengths in valuing property. The proposal does not suggest that all appraisals will be waived, or that appraisers somehow will be replaced by technology. Tibbitts could not stress enough one very important philosophy that she hopes everyone will keep in mind as the launch date for this proposal draws nearer.

“Freddie Mac believes the appraisers are absolutely the lynchpin of the housing market,” she said. “However, at the same time, we believe that combining 40-plus years of historical data with advanced analytics, and tools that we have through Loan Advisor Suite will increase appraisal accuracy and reduce risk for both lenders and Freddie Mac.”

Read the full article » Freddie Mac Loan Advisor Suite’s current features

Category: News