This piece originally appeared in the March 2022 edition of MReport magazine, online now [1].
As the mortgage industry continues its march toward a fully digital and streamlined mortgage process, there’s exciting recent news from Fannie Mae and Freddie Mac that will help usher in a new area for collateral valuation.
Effective March 19, 2022, lenders will now have access to use Desktop Appraisals instead of the full, traditional appraisal for the majority of purchase loans.
Instead of requiring the appraiser to physically visit and inspect every property, the Desktop will empower the appraiser to focus their valuable time on what they do best: analysis and value conclusion.
The new 1004/70 Desktop from the GSEs represents a big step forward for the industry and will lead to major benefits for consumers and appraisers alike.
Pandemic-Driven Changes, Evolved
During the initial months of the pandemic, the government-sponsored enterprises (GSEs) introduced a temporary “COVID-19 Desktop,” which enabled appraisers to perform appraisals without entering the home.
Instead, they were able to rely solely on public data sources such as data from the Multiple Listing Service (MLS) or public records.
These Desktops were performed by thousands of appraisers across the country, offered helpful health and safety benefits to consumers and appraisers, and ultimately were analyzed by the GSEs and considered to be of a high enough valuation quality that a more permanent option could be introduced.
The new 1004 Desktop appraisal guidelines introduced into Fannie Mae and Freddie Mac’s Selling Guide expand upon those prior temporary guidelines.
Below are the specifications of the new 1004 Desktop guidelines:
- A purchase transaction must have a loan-to-value (LTV) ratio less than or equal to 90%.
- It must be a one-unit, principal residence.
- The 1004 Desktop must include a detailed floor plan with interior walls and gross living area (GLA) calculations.
The most important difference when comparing new guidelines to the initial COVID-19 Desktop is the introduction of the floorplan requirement. This requirement will ensure that appraisers have access to a detailed view of the property’s flow, so they can fully understand marketability and functional utility despite never having visited the inside of the property. And, the floorplan doesn’t have to be produced by the appraiser themselves. In fact, it is better from an efficiency standpoint if the appraiser stays focused on value conclusion. So, how will an appraiser get their hands on a floorplan that meets the GSE requirements for the Desktop?
Thankfully, there are emerging technology tools that enable anyone with a smartphone—even an untrained homeowner—to perform a quick scan of a home and receive back an accurate and detailed floorplan that meets all GSE requirements.
It is arguably better if these floorplans are captured up-front during the initial home listing process. But no matter when the floorplan is captured, the end result saves the borrower both time and money—with the appraisal turnaround time being reduced by as much as 50%.
What Lies Ahead
The 1004 Desktop workflow—paired with modern technology—will offer benefits that stand to impact the appraisal profession for many years to come. With the new guidelines, appraisal turnaround time can be shortened, and thus help to ease appraiser capacity constraints. And when it comes to expanding the profession, desktop appraisals provide a real opportunity to extend the careers of appraisers who either can’t or would rather not go into the field, as well as those who may wish to shift their focus to in-office work.
Overall, the newly announced Selling Guide change presents an unprecedented opportunity for mortgage lenders to drive efficiencies and deliver faster closings.
The impact of this new desktop appraisal framework is likely to be seen by professionals across the entire mortgage industry, as well as by borrowers who are looking to fulfill their dreams of homeownership. It’s an exciting time to be a part of the appraisal process.