Selling Guide

Published June 3, 2020

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B4-1.4-10, Appraisal Waivers (06/03/2020)


This topic contains information on appraisal waivers, including:


For certain loan casefiles, DU offers an appraisal waiver – an option to waive the appraisal requirement. For loan casefiles that are not eligible for an appraisal waiver, DU will require an appraisal reported on the appropriate appraisal report form for the type of property being appraised.

Prior Appraisal Requirements

In order for an appraisal waiver to be considered, a prior appraisal must be found for the subject property in Fannie Mae’s Collateral Underwriter (CU) data. DU will compare the address for the subject property to the property addresses found in CU. DU will use the information from the prior appraisal to determine if the loan casefile is eligible for the appraisal waiver. In some cases, the prior appraisal may not be acceptable. For example, if a CU “Overvaluation Flag” was issued on the prior appraisal, or the appraisal could not be scored, that prior appraisal will not be used and an appraisal waiver will not be offered on the new loan casefile.

Eligible Transactions

The appraisal waiver offer will be considered for the following transactions:

  • one-unit properties, including condos;

  • principal residence and second home transactions;

  • investment property refinance transactions;

  • certain purchase, limited cash-out, and cash-out refinance transactions; and

  • DU loan casefiles that receive an Approve/Eligible recommendation.

Ineligible Transactions

The following transactions are not eligible for an appraisal waiver:

  • construction and construction-to-permanent loans;

  • two- to four-unit properties;

  • HomeStyle Renovation and HomeStyle Energy loans;

  • leasehold properties;

  • community land trusts or other properties with resale restrictions, which include loan casefiles using the Affordable LTV feature;

  • co-op units and manufactured homes (including MH Advantage properties);

  • DU loan casefiles that receive an Ineligible recommendation;

  • transactions using gifts of equity;

  • transactions where either the purchase price or estimated value provided to DU is $1,000,000 or more; and

  • Texas Section 50(a)(6) loans.

Note: DU may offer an appraisal waiver on a recently constructed property (i.e., new construction) when there is an existing “as is” prior appraisal for the subject property. For example, an appraisal of the subject property may have been performed for a different lender or borrower, but that loan did not close. The lender may execute the appraisal waiver offer when the loan meets all other eligibility criteria for the transaction.

Furthermore, the lender may not exercise an appraisal waiver offer and must order an appraisal if one or more of the following applies:

  • DU was unable to identify ineligible criteria in the list above (for example, Texas Section 50(a)(6) loans);

  • the lender is required by law to obtain an appraisal (see A3-2-01, Compliance With Laws);

  • the lender is using rental income from the subject property to qualify the borrower; or

  • the lender believes that an appraisal is warranted based on additional information the lender has about the property or subsequent events.

Note: The lender may not exercise an appraisal waiver offer if an appraisal is obtained for the transaction.

See B5-7-02, High LTV Refinance Underwriting, Documentation, and Collateral Requirements for the New Loan for additional information about high LTV refinance appraisal waivers.

Representations and Warranties

When a loan casefile is eligible for an appraisal waiver and the waiver is exercised by the lender, Fannie Mae accepts the value estimate submitted by the lender as the value for the subject property. See A2-2-06, Representations and Warranties on Property Value for more information.

Rural High-Needs Appraisal Waiver

In selected rural high-needs areas, Fannie Mae may offer appraisal waivers through DU for certain transactions. This appraisal waiver may be combined with other loan products, such as HomeReady.

The rural high-needs appraisal waiver offer will be considered for the following transactions only:

  • loan casefiles that receive an Approve/Eligible recommendation;

  • purchase transactions;

  • one-unit principal residence properties (excluding manufactured homes);

  • borrowers with income at or below 100% of the area median income; and

  • LTV ratios up to 97% and CLTV ratios up to 105% with a Community Seconds.

The following are ineligible for the rural high-needs appraisal waiver:

  • cash-out or limited cash-out refinances;

  • second homes and investment properties; and

  • all other transactions that are ineligible for an appraisal waiver as listed above.

The following table provides the requirements related to the home inspection. These requirements must be met for the lender to exercise the rural high-needs appraisal waiver.

The lender must
obtain a home inspection to determine the property condition. The inspection report must be retained in the loan file and made available to Fannie Mae upon request.
review the inspection report to verify the property condition. The content of the inspection report must be sufficient for the lender to determine whether the property is safe, sound, and structurally secure. Any issues that compromise safety, soundness, or structural integrity must be repaired before loan delivery.
obtain an affidavit signed by the borrower(s) confirming that they received a copy of the property inspection report, read the report, and were notified of any lender-required repairs.
confirm that the purchase contract contains an inspection contingency that offers the borrower(s) enough time to cancel the contract without penalty if they so choose, should the inspection reveal an issue with the property.
confirm that the inspector has liability insurance.
use a professional inspector that meets the state license and education requirements for those states that regulate inspectors.

Note: In states that do not have inspector licenses, inspectors that are professionally accredited members in good standing of a nationally recognized property inspection organization must be used. The national organization must require education, testing, and adherence to a code of ethics and to standards of practice.

represent and warrant that the property is safe, sound, and structurally secure and that the property is not in C6 condition. See A2-2-06, Representations and Warranties on Property Value and B4-1.3-06, Property Condition and Quality of Construction of the Improvements for additional information.

Exercising an Appraisal Waiver

A lender may only exercise an appraisal waiver if

  • the final submission of the loan casefile to DU resulted in an appraisal waiver offer,

  • an appraisal is not obtained for the transaction, and

  • the appraisal waiver offer is not more than four months old on the date of the note and the mortgage.

Lenders that elect to exercise the appraisal waiver must include SFC 801 at delivery. Lenders may not adversely select against Fannie Mae in determining which appraisal waiver offers to accept. Fannie Mae may monitor the lender’s exercise of appraisal waiver offers and delivery of loans to Fannie Mae, and may take appropriate measures if adverse selection is identified.

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