Prior to 2016, every mortgage required an appraisal. That changed, however, in 2016 when Fannie Mae started to offer “Property Inspection Waivers” or “PIWs.”
In 2017, both Fannie and Freddie started to offer PIWs for both refi’s and purchases.
I blogged about this in early 2018, pointing out two things:
- PIWs are less common than most people think because of the requirements; and
- some lenders pretend that PIWs are something unique that they offer when PIWs are really 100% dependent upon Fannie/Freddie algorithms.
I am touching on this again because PIWs are becoming more common simply because the PIW requirements are getting met more often.
APPRAISAL WAIVER REQUIREMENTS
- No appraisal waiver will be granted unless a prior appraisal for the subject property can be found in Fannie’s and Freddie’s databases.
- The prior appraisal must have a “low CU” score (or no “overvaluation flag”), and it must be over 120 days old.
- For refinances to get an appraisal waiver, the borrower must be in the Fannie/Freddie databases. This is not the case for purchases.
- Purchases up to 80% LTV for most primary residences.
- Refinances up to 90% LTV, for most primary residences.
- Refinances up to 75% LTV for investment properties.
- Borrowers must be very clean and strong from an underwriting perspective before appraisal waivers are granted.
- Former appraisals and borrowers (for refinances) must be in Fannie/Freddie databases already (as mentioned above)
- THIS IS THE MAJOR ONE: Appraisal waivers sometimes disappear at the 11th hour if a borrower’s credit or income changes during the financing process. We have seen several instances where income changes from the time of pre-approval to contract time, and the income changes knocked us out of appraisal waiver range because the algorithm requirements are so tight.
Final Point: As the Fannie/Freddie databases get fuller and fuller of past appraisals and borrowers alike (and as long as markets remain somewhat stable), we will see more and more appraisal waivers. PIWs will also migrate outside of Fannie and Freddie too, as lenders learn to mine data better and better.
Founder/Broker | JVM Lending
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