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Enhanced Property Inspection Waiver benefits lenders, homeowners

Fannie Mae's Day 1 Certainty initiative went fully into effect Saturday, Dec. 10. 
12/15/2016 12:26:02 PM

Fannie Mae's Day 1 Certainty initiative went fully into effect Saturday, Dec. 10. The program was created to make the mortgage origination process more streamlined and simple, according to a press release from Fannie Mae.

"Day 1 Certainty is a major step forward in helping our customers transform the mortgage origination process," Timothy J. Mayopoulos, Fannie Mae's president and chief executive officer, said in a press release. "Ultimately, we want our customers to have the confidence to lend, so that more qualified borrowers have access to affordable mortgage credit. … I am proud of the positive change we're making for our customers and the housing finance system."

One of the most significant changes brought by Day 1 Certainty is the Enhanced Property Inspection Waiver. This is offered through the entity's Desktop Underwriter program and will allow lenders to forgo appraisal for qualified conforming mortgages, Fannie Mae explained. The PIW will pull information from the program's Collateral Underwriter as well as from Fannie Mae's database of appraisal reports - more than 20 million in total.

How to qualify for the new PIW

The PIW program will benefit qualifying homeowners seeking to refinance their:

  • Principal and secondary homes.
  • Investment properties.
  • Condominiums and other one-unit properties.

It also applies in situations such as:

  • Loan case files with approve/eligible recommendations.
  • Limited cash-out refinances up to a 90 percent LTV/CLTV for principal and secondary homes.
  • Limited cash-out refinances up to 75 percent on investment properties.
  • Cash-out refinances up to a 70 percent LTV/CLTV for principal residences.
  • Cash-out refinances up to 60 percent for second homes or investment properties.

Aside from these guidelines, the property to be refinanced must have already had an appraisal with the same lender, and it needs to be accessible in Fannie's Uniform Collateral Data Portal, the San Francisco Chronicle reported. The data portal has been collecting information on properties for about 4 ½ years. This means that a property appraised more than 4 ½ years ago wouldn't have been added to the database and therefore would not qualify.

Relieving appraisers and appraisal costs

Fannie Mae expects the PIW to benefit about one-quarter of all Fannie Mae-backed refinances, or about 10% of all loans through the government-sponsored enterprise, according to MReport. Currently, about 3% of all Fannie Mae-backed loans are issued a PIW.

The San Francisco Chronicle pointed out that this rule comes at a time when the housing industry has been strapped for qualified appraisers to help move along the refinance origination process. In some of the nation's hottest housing markets, homeowners are waiting as long as two months to get an appraisal.

Zach Dawson, Fannie Mae's director of credit risk, noted that the new PIW regulations won't have a large effect on appraisers, "given how busy appraisers are right now."

"This is a very effective and a very responsible alternative," Dawson added.

In today's real estate environment, not only are appraisals difficult to arrange and accompanied by a long wait time, but they can also be pricey. Depending on where a property is located and how complicated the appraisal is, it could cost anywhere from a couple hundred dollars to more than a thousand, according to Bankrate.

Homeowners trying to refinance their residential mortgage know that there is a complicated process that has to unfold before reaping the benefits of the new loan. But with Fannie Mae's new rules, lenders and homeowners alike may find that process is now a little bit quicker, easier and more affordable.

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