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The desktop appraisal process that was temporarily implemented at the start of the pandemic will become permanent, the Federal Housing Finance Agency said yesterday.
Fannie Mae and Freddie Mac will incorporate desktop appraisals into their selling guides for many new purchase loans starting in early 2022, the FHFA said in a statement. The FHFA began allowing the government-sponsored enterprises to use desktop appraisals in March 2020 as one of several temporary flexibilities put in place to respond to the COVID-19 pandemic.
The FHFA said the decision to make desktop appraisals permanent came after reviewing data collected about the loan flexibilities and receiving input from a Request for Input process and public listening session on appraisal-related policies, practices and processes.
The policy change was first announced by FHFA Acting Director Sandra Thompson at the Mortgage Bankers Association Annual Convention and Expo in San Diego.
“The housing market is always changing, and we need to ensure that our structures and systems grow and evolve with it by fully using all the appropriate tools and available information,” Thompson said, according to the text of her prepared remarks. “With desktop appraisals, an appraiser brings their valuation expertise to information that has already been made available to them, such as through listings. This can help each appraiser complete more loans in a day, and it can also help rural communities more readily obtain a necessary appraisal when the borrower is purchasing a property.”
Thompson added that making desktop appraisals an established option for originating Fannie Mae and Freddie Mac loans should allow lenders, borrowers, and appraisers to take advantage of the efficiency gains and continue to make the mortgage finance system more effective.
The FHFA also announced yesterday that Fannie Mae and Freddie Mac in the coming months would expand certain eligibility requirements for their RefiNow and Refi Possible refinance programs aimed at assisting low-income borrowers.
The RefiNow and Refi Possible programs established earlier this year are limited to borrowers with current income at or below 80 percent of the area median income. The income threshold will soon be adjusted to include incomes at or below 100 percent of AMI, allowing more moderate-income borrowers to participate, the FHFA. The GSEs will also modify other requirements to address certain operational frictions for lenders, according to the statement.
“Through our monitoring of the effects of the pandemic on different borrowers, we identified a concerning trend: while many borrowers have taken advantage of the opportunity provided by the past year’s low interest rates to refinance their mortgage, segments of the population are at risk of being left behind,” Thompson said in yesterday’s speech. “We know through our long experience, including the Great Recession, that for those struggling with a mortgage, a meaningful payment reduction is the single greatest predictor of successful performance.”
Thompson said the FHFA found a drop in the share of refinance loans made to borrowers below 100 percent of AMI during the refinance boom, noting that these borrowers could most benefit from the effects of refinancing but were at risk of “being left on the sidelines during a generational opportunity to lock in more sustainable monthly payments.”
“Expanding eligibility for low- and moderate-income families to refinance their mortgage and lower their monthly payments, together with leveraging desktop appraisals to reduce inefficiencies in the mortgage process, are meaningful steps towards overcoming barriers to affordable and sustainable homeownership,” Thompson said in the statement. “Today’s actions demonstrate that FHFA will continue to act purposefully and in dialogue with its stakeholders to minimize market disruption and ensure its regulated entities operate in a safe and sound manner.”
