Fannie Mae wants to get mortgages in people's hand in a speedier manner, and as a result, it is testing so-called hybrid home appraisals in which the appraiser doesn't actually visit the house.
Citing unnamed sources, National Mortgage News reported that Fannie Mae is requesting appraisers use local market data and details about the specific property to come up with the home value. These hybrid appraisals are quicker for the lenders and cost less for the mortgage borrowers than getting an appraisal in which the appraiser visits the home. National Mortgage News noted that sources said Fannie Mae is currently involved in a pilot, although it declined to comment on the efforts.
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The move on the part of Fannie Mae comes at a time when mortgage rates are rising, home property values are increasing and price wars are breaking out in certain parts of the country. With many first-time buyers looking to purchase a home during the spring selling season, they could be priced out of the market because of the current conditions. Offering a lower-cost option for appraisals could help these borrowers get into a new home.
Still, if the appraiser isn't entering the home, it could raise questions about the quality of the data and the accuracy of the appraisal. After all, the quality of the appraisal will be based on the expertise of the home inspector.
Testing hybrid appraisal isn't the only way Fannie Mae has been helping would-be borrowers get into a new home. The Wall Street Journal recently reported that Fannie Mae and Freddie Mac have been doing things such as backing loans by lenders that pay down a buyer's student loans and making it easier for self-employed borrowers to get a mortgage. In the summer, Fannie Mae raised the debt-to-income limit on mortgages to 50%, which is higher than the 45% industry norm. Freddie Mac is also beginning to follow suit, noted The Wall Street Journal.
As a result of the higher debt-to-income levels, the Urban Institute said that there were 100,000 new mortgages that otherwise would not have been issued. The percentage of borrowers with high debt-to-income ratios and low credit scores that have Fannie Mae-backed loans went to 25% in the first two months of 2018 from 19% a year ago.