Fannie Mae and Freddie Mac's efforts to provide representation and warranty relief to lenders that perform automated data validations before loans close will improve mortgage credit risk assessment and lower costs for lenders and borrowers, according to Fitch Ratings.
The new tools allow Fannie Mae and Freddie Mac to assess valuations on new loans with greater confidence by referencing local property and prior appraisal details. Lenders receive representation and warranty relief by using the technology, and some borrowers will be able to waive the need for a new appraisal.
The introduction of the Uniform Collateral Data Portal, where lenders digitally submit appraisal reports for conventional mortgages to Fannie Mae or Freddie Mac, has served as the primary catalyst for the evolving process of appraisal valuation.
Information submitted through the UCDP is collected and tracked in a growing database that has amassed over 20 million appraisals.
In addition to new approaches in appraisal valuation, Fannie Mae set forth techniques to directly verify borrower income and assets via Equifax. This provides rep and warrant relief for vendors and supports both lenders and borrowers with shorter processing times and less required paperwork.
Freddie Mac differs from Fannie Mae in that it has not yet implemented third-party direct verification of income or assets. It plans to offer waivers on income and asset data in the third and fourth quarter of this year.