Last year, the two largest sources of American mortgage financing — federally backed Fannie Mae and Freddie Mac — began accepting home-purchase loans that carried no formal property appraisal, according to a commentary in the <em>Washington Post</em>. Instead, the valuations supporting the mortgages were performed by Fannie and Freddie in-house, using proprietary analytics and deep stores of property data. Only highly select loans were eligible for appraisal waivers, primarily those with sizable down payments (20 percent and up) plus previous appraisals on file. Buyers, refinancers and lenders were not permitted to request waivers: Fannie and Freddie were the ones that identified eligible properties and offered waivers at the application stage. Both companies had introduced the no-appraisal concept earlier for refinancings. The expansion to home-purchase loans was a big deal, though, because they’re considered riskier than refinancings, where borrowers’ credit and equity are well established and known to lenders.
