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Making Sense of PIW-Eligible Loans for Your Borrowers

Many of our clients are still sorting out the GSEs’ new Property Inspection Waiver (PIW) guidelines, which have recently been expanded to include some purchase loans. For most lenders, this was good news. But it also brings up important issues that lenders need to consider when working with borrowers—and especially when selecting a valuation provider.

First, a few facts about PIWs to keep in mind: Fannie Mae and Freddie Mac anticipate PIW offers will be issued on about 5 to 10 percent of all conventional purchase transactions. Inspections can only be waived on single unit homes, second homes and condominiums, and they must have no more than an 80 percent LTV ratio. And of course, borrowers must have the option of getting a full appraisal.

Borrowers who are eligible for loans with PIWs may pass on getting an inspection to save money. But some borrowers are uncomfortable not having any sort of reassurance on the value of the home. One option in between a full appraisal and nothing at all is an independent opinion of value. 

Here are three reasons to consider an independent opinion of value on loans that are eligible for a waiver:

Peace of Mind. How can borrowers be assured that the value of the home they are buying or refinancing is accurate? Obviously, a PIW saves borrowers plenty of money, so many borrowers are tempted to take it. On the other hand, some borrowers will want to know whether the property they want to buy is in line with its price. After all, a purchase of a home usually represents the single largest acquisition for the borrower.

Borrowers can get these answers with a valuation review that combines data analytics and human oversight, and they can get it at far less cost than a full appraisal. At some point, consumers may be able to access these tools themselves. Either way, lenders that are committed to protecting their customers may want to offer options that provide peace of mind.

Data-Driven Decisions. Fannie Mae has a ton of data about appraisals, but valuation experts have access to many other sources of data, including multiple listing service and data and pending sales and local sources. They also have knowledge of the market. Professional appraisers are experts at putting all of this information together and applying data analytics to determine a fairly accurate opinion of value, even if they are not able to inspect the property in person. They can also make these decisions extremely fast and at far less cost than a full appraisal.

At Valuation Partners, we use real time data and data analytics to develop a wide array of valuation products that help lenders reduce risk and meet investor requirements, whatever they may be. Our Market$en$e reports, which help lenders identify and understand unusual Collateral Underwriter results, are a prime example of how data-driven decisions can be made quickly and economically.

Human Intelligence. We’ve said it before and we’ll say it again—technology, and data and data analytics can only do so much. Whether a valuation includes a visual inspection or not, human expertise is still a critical component of a quality value determination.

To date, no amount of automation or artificial intelligence has been able to duplicate the analytical expertise of a skilled appraiser. Valuation experts are trained not only on how to interpret data, but how to weigh the milieu of variables and property characteristics involved with determining a quality valuation.

Any time there are changes in appraisal requirements, we have a solution to help lenders work with those changes. Among the business units of The William Fall Group, we have an amazingly broad array of skills, technology and valuation products and services to leverage. As it applies to PIWs, we’ll have some news to announce soon from our newly acquired Summit Valuation Solutions subsidiary that will give clients more options for handling valuations in which waivers apply.

Until then, if you’d like to learn more about how we can help you, drop us a note at info@valuationpartners.com. We’d love to hear from you!