Enhanced Property Inspection Waiver (PIW), Fannie Mae

Enhanced Property Inspection Waiver (PIW), Fannie Mae 

What could possibly go wrong!? Wasn’t it less than a decade ago that our tax dollars provided $189 billion to Freddie Mac and Fannie Mae because their poor financial condition rendered them unable to fulfill their mission without our tax dollars via government intervention?

No inspection on many properties being refinanced, no problem. The physical conditions of those properties couldn’t possibly have changed, could they? Heck, without inspection, the improvements may no longer even exist. There is a word that comes to mind as I consider writing this article……. Crazy!

On December 10, 2016 Fannie Mae rolled out a Christmas present for the appraisal community that has sent Scrooge like ripples through the industry. We are hearing from some folks that as much as 50% of their business has disappeared overnight. That’s the day Enhanced Property Inspection Waivers (PIW) went into effect for those lenders that have Desktop Underwriting (DU).

This article will provide some of the background details as well as some things that you may do with your skill sets to offset these initial losses in business.

Why did Fannie Mae take these steps?

During 2016, in some parts of the country appraisers routinely provided appraisal turnaround times of 3 to 4 weeks, with no daylight in sight.

Fannie Mae wanted to streamline the lending process on properties being refinanced.

Faster loan process. Without having to request and review an appraisal, the enhanced PIW speeds up the steps in loan origination.

Reduced uncertainty. With a PIW, the marketability of a home or investment property is no longer dependent on the lender to enforce.

Lower origination costs. Without the extra costs associated with appraisals, a PIW can save consumers money.

How PIW works according to Fannie Mae:

Property inspection waiver (PIW) is an offer to waive the appraisal for certain refinance transactions.

PIW offers are issued through Desktop Underwriter® (DU®) using Fannie Mae’s database of more than 20 million appraisal reports in combination with proprietary analytics from Collateral Underwriter® (CU™) to determine the minimum level of property valuation required for loans delivered to us.

How it works.  When a DU loan casefile receives a PIW offer and it is exercised by the lender, Fannie Mae accepts the value estimate submitted by the lender as the market value for the subject property and provides relief from enforcement of representations and warranties on the value, condition, and marketability of the property.

The lender is required to represent and warrant that the data (other than the value estimate) submitted to DU is complete and accurate, and lenders must order an appraisal if they have reason to believe that the property’s current market value should be confirmed. For example, a property located in an area impacted by a recent disaster should always have an appraisal.”

For homeowners to be eligible to request a waiver, they must have a Fannie Mae-approved loan that they are seeking to refinance. For those looking to receive a lower interest rate or change the term of the loan by refinancing, the loan-to-value (LTV) ratio can be no greater than 90% for primary and second homes.

On a cash-out transactions, the maximum LTV for the waiver is 70%.

For investment properties, the LTV must be 75% or lower for rate/term transactions. To take cash out, a 60% LTV is required for the waiver.

For both primary and second homes, as well as investment properties, a previous purchase appraisal is necessary.

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