Unlike a full appraisal, a desktop appraisal is completed by a licensed appraiser without a physical inspection of a property. Working remotely, an appraiser uses public records such as property listings and tax records to provide an appraised value. Using technology and available information, an appraiser can complete a desktop appraisal in less time than it takes to complete a full appraisal, and generally at a lower cost to the borrower.
The GSEs began allowing the use of desktop appraisals in 2020 as temporary flexibility in response to the COVID-19 pandemic when appraisers needed to be able to perform valuations during lockdown periods.
Fannie Mae and Freddie Mac (the “GSEs”) recently released additional information regarding the implementation of desktop appraisals for specific types of loan transactions.
Fannie Mae issued release notes for an upcoming Desktop Underwriter update that states that loans submitted on or after March 19, 2022, will have the option of using a desktop appraisal under certain conditions. Loans must be for a purchase transaction, secured by a one-unit principal residence, have a loan-to-value ratio of 90% or less, and receive an Approve/Eligible recommendation in Desktop Underwriter.
Fannie Mae also issued a Fact Sheet that broadly details appraiser and lender responsibilities and steps for loans utilizing desktop appraisals. Appraisers must use Form 1004 and may use data from various parties and from secondary data sources such as public records and the internet. The desktop appraisal must include a floor plan with interior walls and include sufficient data to provide a credible report. Additionally, any data provided by an interested party to a sale must be verified by a disinterested source.
Freddie Mae issued a guide to Loan Product Advisor Feedback Messages, as their system will begin providing feedback on whether a loan is eligible for a desktop appraisal, effective March 6, 2022. The guide provides new message codes and text related to eligibility for use of a desktop appraisal.
The GSEs previously announced in October 2021 that they would be updating their Selling Guides to allow for permanent use of desktop appraisals for certain purchase loans after temporarily allowing their use from March 2020 until May 2021 due to COVID-19 lockdowns.
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