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    Lending Technology | 3 min read

    Desktop and Hybrid Appraisals: A Digital Revolution for Lenders

    In January 2022, Fannie Mae announced they will be accepting remote desktop appraisals for eligible loan transactions.

    To qualify for a Desktop Appraisal, the property must:

    • Be the primary residence of the owner
    • Be classified as a one-unit property, which does not exclude properties with an accessory dwelling unit (ADU) or units existing within a planned unit development (PUD)
    • Have a loan-to-value (LTV) ratio less than or equal to 90%
    • Be classified as a purchase transaction, to include new construction
    • Receive an Approve/Eligible recommendation from Fannie Mae’s Desktop Underwriter & Originator system

    Industry adjustments to social distancing restrictions (including eased federal guidelines) paired with a desire to reduce costs and increase the efficiency of the appraisal process led to the increased adoption of alternative valuation products among lenders during the COVID-19 pandemic.

    Fannie’s recent announcement points to the fact that remote desktop and hybrid appraisals are here to stay. In this two-part blog series, we’ll discuss the benefits and challenges presented by these alternative appraisal options.

    What’s the definition of a desktop appraisal?

    A desktop appraisal is a property appraisal that is conducted remotely by a licensed appraiser using market research, tax records, MLS records, and other available digital resources to guide their valuation decision. As the name implies, an appraiser can conduct a desktop appraisal without ever leaving their computer.

    What’s the definition of a hybrid appraisal?

    A hybrid appraisal is a valuation of a property completed by an appraiser remotely using digital research and records. Like desktop appraisals, hybrid appraisals must be completed by a licensed or certified appraiser. Unlike desktop appraisals, they can include the assistance of a credible third-party, such as a real estate agent, property inspector, or a real estate appraiser.

    A hybrid appraisal is conducted like a desktop appraisal, but the appraiser is also armed with additional information from a third party to help them determine the home’s value. These resources might include:

    • Photographs of the exterior and interior of the house by a third party
    • A property inspector or real estate appraiser’s interior inspection
    • Driving by the outside of the house and getting interior inspections from a credible source
    • Getting a tour of the interior via video chat with the homeowner

    Hybrid appraisals are an elegant solution to social distancing guidelines and they also tend to speed up the appraisal process, especially in rural areas or markets where there is an appraiser shortage. It also offers greater flexibility on the part of the appraiser.

    Why are Fannie and Freddie allowing new desktop and hybrid products in 2022?

    Industry adjustments to a global pandemic necessitated drastic changes for lenders. In a very short period of time, financial institutions across the country discovered that alternative valuation products provided an elegant and cost-effective alternative to the traditional appraisal process.

    Related Reading: Alternative Appraisal Options During Coronavirus Disruptions

    Some of the reasons Fannie and Freddie are continuing to allow desktop and hybrid valuations in 2022 and beyond include:

    1. Appraisal Modernization

    In allowing remote desktop and hybrid appraisals, industry stakeholders are taking steps to modernize the appraisal industry by adopting new policies and procedures and utilizing evolving technology to gather data for the subject property, comparable sales, and the market.

    This means appraisers will need to embrace these technologies and get on board with the digital revolution that is taking place in the industry. Many believe the use of digital research tools and resources will help modernize the appraisal process.

    2. Flexibility

    In March 2020, citing the extraordinary circumstances that the country was facing with the ongoing spread of the coronavirus, the Federal Housing Finance Agency announced they would be directing Fannie Mae and Freddie Mac to ease their standards for both property appraisals.

    These flexibilities were implemented very quickly and bolstered the industry’s ability to pivot during a crisis.

    3. Saving Time and Increasing Appraiser Bandwidth

    A huge spike in demand for appraisals over the past several years coupled with a dwindling appraiser population means it can take much longer to complete an appraisal today than it did prior to the pandemic.

    Leveraging desktop and hybrid appraisal approaches enables appraisers to do more in less time, relieving the bottleneck by using available technology (and in some cases an alternative workforce) to complete their assignments.

    These alternative appraisal options have similar risk performance compared to traditional appraisals and support modern digital transformation in the mortgage origination process.

    There are, however, challenges related to obtaining floorplan information remotely to use in desktop appraisals. In the second part of this blog series, we’ll take a deep dive into this industry issue.

    Accurate property value information is key to minimizing lending risk. For efficient, accurate valuation options that keep your financial institution fully compliant, rely on SWBC’s suite of valuation services.

    Click here to learn about SWBC Lending Solutions' Valuation options.

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    Lending Technology

    Chuck Mureddu

    Chuck Mureddu has more than 30 years of combined mortgage lending experience, including appraisal management, institutional risk, loss mitigation, and whole loan exit and securitization strategies. As the Chief Valuation Officer for SWBC Lending Solutions, Chuck is responsible for all valuation policy and process, quality assurance, and regulatory compliance.

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