For the last year, Fannie Mae and Freddie Mac have been accepting thousands of home purchase loans without a formal appraisal, instead relying on their own data-based evaluations. While this new trend has been saving borrowers millions of dollars in appraisal costs, it is being met with concern by appraisers and other real estate professionals. Critics of appraisal-free mortgages believe that letting these companies rely on their own data instead of the experience of trained professionals can lead to inaccurate evaluations that can hurt both homebuyers and the housing market in general.
Lenders, such as United Wholesale Mortgage, anticipate up to 10% of their loans this year will depend on automated valuation models rather than traditional appraisals. Two advantages this brings to the closing process are lower fees for purchasers and quicker closings. However, whether these advantages outweigh the lack of “boots on the ground” professionals who can discover problems that software doesn’t detect, such as animal damage to the interior, is a question each consumer will have to answer for themselves.
Read more at The Washington Post: Fannie and Freddie approve thousands of loans with no formal appraisals