Agencies update appraisal policies, offer new data insights

The Federal Housing Finance Agency (FHFA) announced updates to Fannie Mae and Freddie Mac (the Enterprises), introducing new strategies aimed at enhancing efficiency, reducing costs, improving access to sustainable credit, and addressing affordability challenges.

Specifically, FHFA has broadened eligibility for appraisal waivers and inspection-based appraisal waivers, expanded eligibility for Freddie Mac’s performing loan repurchase pilot program, and is advancing notice of certain price increases for the Enterprises. The U.S. Department of Housing and Urban Development (HUD) also joined FHFA to release new appraisal data on single family mortgages within FHFA’s Uniform Appraisal Dataset (UAD). The data includes both annual appraisal-level data as well as quarterly aggregate statistics, expanding the scope of the dataset to include FHA-insured loans in addition to loans acquired by the Enterprises. According to the National Association of Real Estate Brokers (NAREB), this data empowers housers to monitor appraisal practices and any discriminatory outcomes in housing and lending. A new paper from NAREB, using the newly available data, shows that while the appraisal gap is improving in some cities, it continues to be a widespread issue nationwide.

“We couldn’t have done this study previously,” said NAREB President Dr. Courtney Johnson Rose. “With the new data, we can analyze what is happening in Black communities. NAREB thanks the Biden-Harris Administration, the PAVE task force, and FHFA for providing us with these tools to better understand and address the problems. We now have more transparency. NAREB can work with the mortgage and appraisal industries to identify and implement solutions. But it all starts with the data.”

Fannie Mae also announced changes to its appraisal alternatives, specifically the Value Acceptance and Value Acceptance + Property Data programs, effective first quarter of 2025. The eligible loan-to-value ratios for these options will increase from 80% to 90% for primary residences and second homes, aligning with the risk of the collateral involved. Since early 2020, these alternatives have reportedly saved mortgage borrowers over $2.5 billion.

“Fannie Mae is on a journey of continuous improvement to make the home valuation process more effective, efficient, and impartial for lenders, appraisers, and secondary mortgage market participants while maintaining Fannie Mae’s safety and soundness,” said Jake Williamson, Senior Vice President of Single-Family Collateral & Quality Risk Management at Fannie Mae. “Responsibly increasing the eligibility for valuation options that leverage data- and technology-driven approaches can also help reduce costs for borrowers.”

Further, Freddie Mac announced new initiatives aimed at supporting first-time homebuyers. The Enterprise has developed technology enhancements to streamline the mortgage process and reduce costs for both borrowers and lenders, introducing LPA Choice, an upgrade to its Loan Product Advisor system, which provides tailored purchase requirement information and actionable feedback to lenders. Additionally, Freddie Mac is expanding its appraisal alternatives, making automated collateral evaluations available to more borrowers and ultimately promoting cost savings. 

“We have been working to create new technology features that simplify the mortgage process and reduce costs for both borrowers and lenders,” said Sonu Mittal, SVP and head of Single-Family Acquisitions at Freddie Mac. “Despite the very challenging housing environment, for the past six consecutive quarters more than half of the loans Freddie Mac purchased have been to first-time homebuyers. The innovations we are announcing today are vital to building on this record and helping remove obstacles facing prospective homebuyers.”

Housing measures on ballots across nation

This week’s election will see housing initiatives on ballots across the United States, ranging from rent control to housing bond measures, as states and localities look for solutions to the growing affordable housing crisis. In Baltimore, voters are choosing whether or not to authorize $20 million for planning, developing, executing, and operating their Affordable Housing Program. In Los Angeles, residents will vote on whether or not to replace an existing quarter-cent sales tax with a new half-cent sales tax to support affordable housing. Other municipalities in California and New Jersey will consider rent control measures. Enterprise Community Partners and Wells Fargo recently released a white paper, alongside Ivory Innovations and Terner Labs, that examines case studies on how local governments can foster environments conducive to housing innovation. It offers nine studies illustrative of how local governments can address their housing issues.

“While the federal government has a critical role in funding, enabling, and scaling housing solutions, the governance system in the United States has also uniquely empowered local governments to lead on housing through their authority over zoning and land use policy, as well as spurring innovation through local funding and programmatic support,” the paper reads.

Presidential candidates Kamala Harris and Donald Trump have both discussed housing affordability throughout their campaigns and established it as a key issue to be addressed by the next administration.

“Housing is the number one political issue this election,” said Vice President of State and Local Government Affairs for the National Association of Home Builders, Karl Eckhart. “We have all got to get together and make the solution.”

Treasury unveils national plan for financial inclusion

The U.S. Department of the Treasury (Treasury) unveiled a new national strategy for financial inclusion that aims to enhance consumer access to financial products and services and address persisting economic disparities across the country. The inaugural National Strategy for Financial Inclusion in the United States includes key objectives for strengthening financial security and promoting access to safe and affordable credit, expanding equitable savings and investments, improving inclusivity of financial products and services, and fostering trust in the financial system. The strategy was informed by research and engagement with a variety of stakeholders throughout 2023.

“Today’s release marks the nation’s first ever strategy on financial inclusion and reflects the Vice President’s leadership on expanding access to capital, credit, and economic opportunity,” said National Economic Advisor Lael Brainard. “This financial inclusion roadmap marks a major step forward in charting a clear path to improving access to banking, credit, savings, and other financial products in underserved communities—to ensure every American has the financial tools to build wealth.” 

FHFA simplifies AHP funding process

The Federal Housing Finance Agency (FHFA) announced a simplified application process for nonprofits and other applicants seeking funding from Federal Home Loan Banks (FHLBanks) for affordable housing projects under the Affordable Housing Programs (AHP). This new streamlined approach, issued through an Advisory Bulletin, addresses recommendations gathered during roundtables and listening sessions held as part of FHFA's comprehensive review of the FHLBanks on their 100th anniversary. The updated process reduces compliance requirements and removes uncertainties for project sponsors about their AHP award amounts.

“FHFA is simplifying the process of applying for AHP funding to expand the number of project sponsors and improve the FHLBanks’ ability to address affordable housing needs in their districts,” said FHFA Director Sandra Thompson. “Today’s Advisory Bulletin demonstrates FHFA’s focus on ensuring that the FHLBank System remains a cornerstone of support for affordable housing.”