FHFA looks to modernize GSE appraisals

The Federal Housing Finance Agency has opened a 60-day request for input on possible adjustments to the government-sponsored enterprises' appraisal practices.

Announced Monday, the request seeks comments on appraisal form design and the Uniform Appraisal Dataset, automated models and waivers, fair and unbiased valuations, and the overall modernization of the process. The end goal is to skirt risk while improving originations and loan quality for Fannie Mae and Freddie Mac.

"Modernizing the appraisal process has the potential to create a more streamlined and accurate collateral valuation process. But if modernization is not properly adopted, it could have negative unintended consequences," FHFA Director Mark Calabria said in a press release. "Today's RFI will improve FHFA's understanding of how the enterprises can improve the appraisal process while at the same time ensuring they don't take on unintended or inappropriate levels of risk."

In adherence to social distancing measures, the FHFA relaxed appraisal guidelines for GSE underwriting back in March. In further reaction to COVID-19, the enterprises suspended bulk sales along with limiting representation and warranty relief for appraisals in May.

The potential appraisal modifications from the RFI would ensure updated valuation procedures for handling the coronavirus in 2021. Additionally, the changes will help the housing finance system adapt to the increasingly digitized post-pandemic world.

The FHFA has been busy in the lead-up to the year's end. Notably, the agency extended the end date for multifamily forbearances, proposed Fannie Mae and Freddie Mac have living wills along with bank-like liquidity rules, and extended its foreclosure moratorium all in the past four weeks.

The GSE appraisal questions will be open to feedback in the Federal Register until Feb. 26, 2021.