A historic announcement by the Federal Housing Finance Agency revealed several policy changes on appraisal flexibility, loan repurchase alternatives, and advance pricing notifications as part of FHFA efforts to further achieve accessibility in homeownership as well as reduce lender risks.
FHFA can now enable more uses for appraisal waivers, from allowing an 80 percent traditional waiver to a 90 percent loan-to-value and all the way up to 97 percent for inspection-based waivers. In this regard, first-time low-to-moderate buyers will find it easier to purchase homes without full appraisals, hence potentially lower upfront costs. Naa Awaa Tagoe, Deputy Director of FHFA, indicated that this is not an expansion of credit availability but instead a set of incentives to make homeownership more efficient and affordable, and improves appraisal accuracy and eliminates bias issues through incorporating data from FHA appraisals in their datasets.
The FHFA has also continued an existing Freddie Mac pilot, providing for an option for fee-for-cure for loans that do not pass minor quality. This would enable the sale of defective but performing loans and make lenders take these defective loans either for participation in the annual program or the payment of fees for curing defects only, thus increasing options for lenders and spreading some financial cost of small matters. All the approved lenders will begin in early 2025, while fees will be based on defects’ occurrence. In respect to this, applause comes for the industry leaders, which further include the Mortgage Bankers Association. The loan quality gets sustained, but no heavy loan burden lies in the form of a loan repurchase.
Lastly, the FHFA mandated that Fannie Mae and Freddie Mac shall provide at least 60 days’ advance notice to any increase in guarantee fees above one basis point. Such a change will enable lenders to better plan pricing strategies as well as manage pipeline risks. The transparency of the fee adjustments is expected to reduce uncertainty in the market, paving the way for fairer pricing by borrowers and smooth operations by lenders.
These updates collectively enhance the commitment of FHFA to accessible homeownership and lending stability while responding to calls for reform from industry groups. It is looking to broaden appraisal waivers, provide alternative repurchase options, and ensure pricing clarity in its efforts to ease some of the challenges lenders and buyers face in an increasingly dynamic housing market.
